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After a lot of retail day traders lost their shirts in the dot-com crash, FINRA made a rule restricting pattern day trading to those with over 25K in their acco

After a lot of retail day traders lost their shirts in the dot-com crash, FINRA made a rule restricting pattern day trading to those with over 25K in their accounts. I wouldn't be surprised to see a similar rule for options trading come out of this.

cactus2093 6y ago
It seems ridiculously patronizing to try to lock people that aren’t already rich out of legitimate investment opportunities while other types of gambling like lotteries remain perfectly legal.
- xmprt 6y ago
  I'm not a fan of lotteries either but when someone plays a lottery, they have fair odds of winning. With trading, most of the time, they will lose and someone with millions in the bank will win.
  - cactus2093 6y ago
    What? You have a much higher chance of making money buying a stock than you do of winning the lottery. If you’re talking about “Most of the time”, most of the time you will lose the lottery, but make money on buying a stock, on average at the overall rate of return of the market as a whole.
    - imtringued 6y ago
      You don't get a market return from day trading. The only way you can make money off of day trading is by providing liquidity and the amount of liquidity needed in a market is limited by volume. It's easy for commercial investors to push out retail traders because they can provide more liquidity. Retail investors (aka people buying stocks as investment) are unaffected by that limit.
      - qeternity 6y ago
        > You don't get a market return from day trading. The only way you can make money off of day trading is by providing liquidity and the amount of liquidity needed in a market is limited by volume. This isn't true in the slightest. Market makes might favor liquidity providing strategies but the vast majority of day traders do not. Retail day traders are trading lower volumes and do not move markets. They are much more advantaged in this respect (although they typically lack the informational edge of pros). > It's easy for commercial investors to push out retail traders because they can provide more liquidity. This just also isn't true at all. Everything has a price, including liquidity and as a perfectly fungible good, it doesn't matter who the seller is. Exchanges operate on price-time priority so if you provide liquidity at a better price, or before someone else, then it doesn't matter how big you are or how much you provide (within the context of vanilla ETPs relevant to day trading).
  - qeternity 6y ago
    > I'm not a fan of lotteries either but when someone plays a lottery, they have fair odds of winning. You do realize that lotteries have negative expected value right? That means that the net losses of losers exceed the net gains of winners...it's the epitome of unfair. > With trading, most of the time, they will lose and someone with millions in the bank will win. This just sounds like someone with an anti Wall Street chip on their shoulder. In most industries, the "winners" have millions in the bank...that's how they got the millions.
  - ac29 6y ago
    For every $1 spent on state lotteries, only about $0.65 is paid out as prizes [0]. Contrast that with something like roulette, which isnt particularly high EV for a casino game. It pays out about $0.95 for every $1 wagered. [0] https://fivethirtyeight.com/features/what-percentage-of-state-lottery-money-goes-to-the-state/ https://fivethirtyeight.com/features/what-percentage-of-stat...
- drewcoo 6y ago
  Well "ridiculously patronizing" is a way to see laws. People can always look after themselves. Another way to look at laws is that they protect the public from the predatory forces that we can't seem to just outlaw outright. Because PACs get in the way of legislation for the public good. I'm sure there's some other way to look at it but I've already found at least one I agree with.
  - cactus2093 6y ago
    I’m not arguing all laws are patronizing. Some things have potential harms that are hidden, I think fda and food safety regulations are good ideas. Some things require specific knowledge to do safely, like driving a car. But regulating something where the sole requirement to access it is to just have more money, is ridiculous. If trading options is so dangerous, requiring a license might make sense. Requiring that you just be rich to do it makes no sense.
- dehrmann 6y ago
  It's specifically around pattern day trading. It's relatively high-volume trading in a low-balance margin account. This isn't what "legitimate investment opportunities look like."
- ternaryoperator 6y ago
  There are a number of types of investment for which you need to be qualified. VC funds generally require a minimum net worth before you can invest. And the rationale is the same: they are both investments in which it's possible to lose a lot of money before you make any. Discouraging people who would be greatly affected by several losses in a row has some merit.
  - cactus2093 6y ago
    The accredited investor rule is the very worst example of this. It has no merit at all, it’s just gatekeeping for the sake of it.
  - _nalply 6y ago
    Someone with low funds might be qualified to understand investment. They just don't have the means.
- csomar 6y ago
  I guess, on average, it made these people poorer. But yes it's kind of government baby-sitting its citizens.
solarengineer 6y ago
It's already applicable for Options Trading.
- BoorishBears 6y ago
  Not sure what you're talking about. There is no restriction on being able to trade options with less than 25k in an account.
  - ethhics 6y ago
    They mean that all the pattern day trading rules apply to options just the same as stocks, i.e. you cannot be an options day trader with less than 25k in the account.
    - BoorishBears 6y ago
      The comment they replied to doesn't imply that it doesn't apply to options, it's clear they're saying restrictions will be added to options plays.
      - solarengineer 6y ago
        My apologies for the very limited words that I'd used earlier. I'd indeed meant that the pattern day trade restrictions of USD 25k also applies to Options Traders who seek to day-trade Options in the U.S. This was just my observation/information-sharing, and not a disagreement with anyone.
akyu 6y ago
Bullshit rule that only serves to help market makers.

cactus2093 6y ago

It seems ridiculously patronizing to try to lock people that aren’t already rich out of legitimate investment opportunities while other types of gambling like lotteries remain perfectly legal.

xmprt 6y ago
I'm not a fan of lotteries either but when someone plays a lottery, they have fair odds of winning. With trading, most of the time, they will lose and someone with millions in the bank will win.
- cactus2093 6y ago
  What? You have a much higher chance of making money buying a stock than you do of winning the lottery. If you’re talking about “Most of the time”, most of the time you will lose the lottery, but make money on buying a stock, on average at the overall rate of return of the market as a whole.
  - imtringued 6y ago
    You don't get a market return from day trading. The only way you can make money off of day trading is by providing liquidity and the amount of liquidity needed in a market is limited by volume. It's easy for commercial investors to push out retail traders because they can provide more liquidity. Retail investors (aka people buying stocks as investment) are unaffected by that limit.
    - qeternity 6y ago
      > You don't get a market return from day trading. The only way you can make money off of day trading is by providing liquidity and the amount of liquidity needed in a market is limited by volume. This isn't true in the slightest. Market makes might favor liquidity providing strategies but the vast majority of day traders do not. Retail day traders are trading lower volumes and do not move markets. They are much more advantaged in this respect (although they typically lack the informational edge of pros). > It's easy for commercial investors to push out retail traders because they can provide more liquidity. This just also isn't true at all. Everything has a price, including liquidity and as a perfectly fungible good, it doesn't matter who the seller is. Exchanges operate on price-time priority so if you provide liquidity at a better price, or before someone else, then it doesn't matter how big you are or how much you provide (within the context of vanilla ETPs relevant to day trading).
- qeternity 6y ago
  > I'm not a fan of lotteries either but when someone plays a lottery, they have fair odds of winning. You do realize that lotteries have negative expected value right? That means that the net losses of losers exceed the net gains of winners...it's the epitome of unfair. > With trading, most of the time, they will lose and someone with millions in the bank will win. This just sounds like someone with an anti Wall Street chip on their shoulder. In most industries, the "winners" have millions in the bank...that's how they got the millions.
- ac29 6y ago
  For every $1 spent on state lotteries, only about $0.65 is paid out as prizes [0]. Contrast that with something like roulette, which isnt particularly high EV for a casino game. It pays out about $0.95 for every $1 wagered. [0] https://fivethirtyeight.com/features/what-percentage-of-state-lottery-money-goes-to-the-state/ https://fivethirtyeight.com/features/what-percentage-of-stat...
drewcoo 6y ago
Well "ridiculously patronizing" is a way to see laws. People can always look after themselves. Another way to look at laws is that they protect the public from the predatory forces that we can't seem to just outlaw outright. Because PACs get in the way of legislation for the public good. I'm sure there's some other way to look at it but I've already found at least one I agree with.
- cactus2093 6y ago
  I’m not arguing all laws are patronizing. Some things have potential harms that are hidden, I think fda and food safety regulations are good ideas. Some things require specific knowledge to do safely, like driving a car. But regulating something where the sole requirement to access it is to just have more money, is ridiculous. If trading options is so dangerous, requiring a license might make sense. Requiring that you just be rich to do it makes no sense.
dehrmann 6y ago
It's specifically around pattern day trading. It's relatively high-volume trading in a low-balance margin account. This isn't what "legitimate investment opportunities look like."
ternaryoperator 6y ago
There are a number of types of investment for which you need to be qualified. VC funds generally require a minimum net worth before you can invest. And the rationale is the same: they are both investments in which it's possible to lose a lot of money before you make any. Discouraging people who would be greatly affected by several losses in a row has some merit.
- cactus2093 6y ago
  The accredited investor rule is the very worst example of this. It has no merit at all, it’s just gatekeeping for the sake of it.
- _nalply 6y ago
  Someone with low funds might be qualified to understand investment. They just don't have the means.
csomar 6y ago
I guess, on average, it made these people poorer. But yes it's kind of government baby-sitting its citizens.

solarengineer 6y ago

It's already applicable for Options Trading.

BoorishBears 6y ago
Not sure what you're talking about. There is no restriction on being able to trade options with less than 25k in an account.
- ethhics 6y ago
  They mean that all the pattern day trading rules apply to options just the same as stocks, i.e. you cannot be an options day trader with less than 25k in the account.
  - BoorishBears 6y ago
    The comment they replied to doesn't imply that it doesn't apply to options, it's clear they're saying restrictions will be added to options plays.
    - solarengineer 6y ago
      My apologies for the very limited words that I'd used earlier. I'd indeed meant that the pattern day trade restrictions of USD 25k also applies to Options Traders who seek to day-trade Options in the U.S. This was just my observation/information-sharing, and not a disagreement with anyone.

akyu 6y ago

Bullshit rule that only serves to help market makers.