Public.com app pattern day trading rules and active trader requirements. Margin buying power limits, and $25,000 minimum equity balance PDT restrictions. How many day trades does Public.com App allow on cash account.
Public Day Trading
If you trade at Public, you likely already know how easy it is to initiate trades and get in and out of the markets. The platform is setup to allow investors of virtually every experience level to try their hand at trading.
The charts are simplistic and clear, the order entry defaults to market orders, and there are even clear illustrations showing potential profit and loss for selected options strategies. There are even curated lists of trending stocks and industries to help the less informed make better investment decisions.
One thing that many newcomers might surprised by, however, is that no matter how accessible a broker makes trading, there are some universal rules that apply to every trader taking part in the markets. One of these rules is the PDT rule, also known as Pattern Day Trading. Keep reading to learn how the PDT rule affects you as a trader and how it applies to your investment activity on Public.
What is PDT?
To start, it is important to know what the PDT rule is and why it exists.
The Financial Industry Regulatory Authority, also known as FINRA, is a government-authorized agency that oversees and regulates market activity. In an effort to protect retail traders (from themselves), the agency decided to implement a rule that would restrict overtrading. The PDT rule was the result of that decision. In short, the PDT rule states that no more than four, round-trip trades can be made in a five-day trading period, if the trading account has a value of under $25K.
All brokers are obliged to follow and enforce the PDT rule, including Public.
If you have a trading account under the $25,000 threshold, you might be wondering if there is anything that you can do to circumvent the PDT rule. Or, you may just wish to know what you can do and what you can’t do while trading with the PDT rule. Here are the most important details that you should know.
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Affected Securities
At Public, virtually every security that is available is affected by the PDT rule. As there are no futures or forex products available, investors cannot use those vehicles to get around the PDT rule.
Stocks, options, ETFs, ADRs, and OTC stock trades all count towards the maximum allowable trades for each rolling fine-day period.
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Getting Around the Public PDT Rule
Although Public does not offer investment vehicles that are exempt from the PDT rule, there are still a few ways that investors can use to get around the restriction.
1. Cash Accounts - Traders can use a cash account and make trades which they pay for out of their own account balance. After selling a security, there is a two day wait for funds to clear (settle) into the account before they can be used for trading again.
2. Building Multileg Strategies – Although a bit of an advanced topic, many traders like to build multileg options strategies over the course of a trading day. With the right approach of buying and selling options contracts at different times throughout the day, it is possible to put money into the markets, and take it back out with closing out any positions.
3. Overnight Holds - Another strategy that many investors utilize involves opening positions at the end of the trading day, waiting overnight, and then selling in the morning.
How is Account Value Calculated?
The simplest way to avoid the PDT rule, however, is to make sure that there is at least $25,000 in the account. To fulfill the requirement, the $25,000 can be made up of securities, options contracts, ETF positions, and all other investment tools. As long as the total value of the account is $25,000 or more, there will be no PDT restriction.
Getting Flagged as a Pattern Day Trader
Getting flagged as a pattern day trader at Public can lead to a frozen account for three months (90 days). Placing more than four round trip trades within the restriction window will result in a flag, which will result in a warning message from Public. If a fourth trade is initiated, the account will be frozen and only closing positions becomes possible.
To unfreeze the account, traders should wait for 90-day or deposit funds into their account to bring the overall balance over the $25,000 limit.
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