Types of Accounts
Chapters in this video
- 0:00 Karla's roadmap from cash accounts to the big leagues
- 1:10 Cash accounts, free-riding, and the 90-day freeze
- 2:44 Pattern day trader rules: $25K, 4x buying power, 6% test
- 4:32 Prime brokerage and the executing broker relationship
- 5:20 DVP and RVP: the hostage-swap settlement
- 6:39 Fee-based vs commission accounts under Reg BI
- 7:47 Rapid-fire exam recap
What this video covers
- How a cash account works, the settlement-date payment rule, and why no margin or leverage is allowed
- What a free-riding violation is under Regulation T (Reg T), the exact 90-day freeze consequence, and what trading is still allowed during the freeze
- The two conditions that classify a pattern day trader (PDT): 4 or more day trades in 5 business days AND more than 6% of total margin-account trades
- The pattern day trading number set: $25,000 minimum equity, 4x maintenance margin excess buying power, 5 business days to meet a call, and the 90-day cash-only restriction for missed calls
- How prime brokerage centralizes custody, financing, reporting, and securities lending for institutions while executing brokers handle trades
- Why delivery versus payment (DVP) and receive versus payment (RVP) eliminate principal risk, and the exam trap that assets are custodied at a third-party bank, not the broker-dealer
- When a fee-based or assets under management (AUM) account is suitable for an active trader versus when commission-based is the right call for a buy-and-hold investor under Reg BI
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