What is a day trade?
Opening and closing a trade on the same trading day
First, what is a day trade? A day trade occurs when an equity or equity options position is opened and closed on the same trading day (including pre and post-market). Day trading includes buying and then selling as well as selling short and then buying to cover. Day trading does not pertain to futures trading and does not count towards your day trade counter.
Positions held overnight ≠ Day Trade
If you hold a position overnight and close it the next day, and then open the same position that same day, then that is not considered a day trade unless you close it again that day. However, holding a position overnight, adding more to your position the next day, and then closing the entire position that same day is considered a day trade (even if you only close the portion held overnight). Continue reading below to learn more about how day trades and how to count them.
Day Trading Rules Depend on Account Types
When it comes to day trading, margin accounts are subject to Pattern Day Trader (PDT) Rules, and Cash accounts are subject to Good Faith Violations (GFV). To learn more about the limitations in each account type, please refer to the links below:
- Margin Accounts: Pattern Day Trading Rules
- Cash Accounts: Good Faith Violations
Sections
How are Day Trades Counted?
A Change in direction intraday = a day trade
Day trades occur when there is a “change in direction” after opening and closing a position in one trading day. A change in direction means entering a sell to close order after a buy to open order OR entering a buy to close order after a sell to open order. A spread must open and close as a spread to count as one day trade — otherwise, each leg counts as a day trade. Additionally, day trades also apply to the extended hour trading session. Please refer to the examples at the bottom of this article for more information.
The tastytrade desktop platform does keep a running count of day trades. Your day trade counter displays within the account header details at the top of the platform.
Multiple Margin Accounts
| Margin Accounts | Day Trade Count | Day Trade Count Total |
Sub-Account #1 | 2 | |
Sub-Account #2 | 2 | |
Primary (Identifier) Account | 4 |
Where is the Day Trade Counter Located?
Located alongside your account details
Desktop Platform:
Mobile Platform:
To view your account details tap on the account in the top left corner of the app. The account details screen will slide out from the left. The day trade counter is located below the account theta.
How to Count Day Trades in the Activity tab
You don’t have to be Sherlock Holmes to find out where you performed a day trade. You can head over to the Activity tab within the desktop platform to count your day trades. The key is to look for a single underlying that has an order to OPEN and CLOSE the same day. The screenshot below illustrates a simple case on how to do this.
Example of Counting Day Trades
Example 1 - Buying a round lot of stock, closing position with two orders
Order 1: Buy 100 ABC
Order 2: Sell 60 ABC
Order 3: Sell 40 ABC
This is 1 day trade because there was only 1 “change in direction.”
Example 2 - Establishing a stock position in two orders, closing position in one order
Order 1: Buy 60 ABC
Order 2: Buy 40 ABC
Order 3: Sell 100 ABC
This is 1 day trade because there was only 1 “change in direction.”
Example 3 - Buying a round lot of stock during normal trading hours, closing position during the extended market session (after-hours) on the same day.
Order 1: Buy 100 ABC (normal trading hours)
Order 2: Sell 100 ABC (extended market session)
This is 1 day trade because there was only 1 “change in direction."
Example 4 - Establishing a stock position with two orders, partially stock closing position.
Order 1: Buy 60 ABC
Order 2: Buy 70 ABC
Order 3: Sell 70 ABC
This is 1 day trade because there was only 1 “change in direction”.
Example 5 - Opening a vertical spread, closing as a vertical spread
Order 1: Buy 1 ABC Jan18 100 Call, Sell 1 ABC Jan18 105 Call
Order 2: Sell 1 ABC Jan18 100 Call, Buy 1 ABC Jan18 105 Call
This is 1 day trade because there was only 1 “change in direction” and the spread was opened and closed as a spread.
Example 6 - Opening a vertical spread, closing each leg individually
Order 1: Buy 1 ABC Jan18 100 Call, Sell 1 ABC Jan18 105 Call
Order 2: Buy 1 ABC Jan18 105 Call
Order 3: Sell 1 ABC Jan18 100 Call
This is 2 day trades because there was only 1 “change in direction” but the spread was not closed as a spread.
Example 7 - Opening two vertical spreads, closing each leg individually
Order 1: Buy 1 ABC Jan18 100 Call, Sell 1 ABC Jan18 105 Call
Order 2: Buy 1 ABC Jan18 100 Call, Sell 1 ABC Jan18 105 Call
Order 3: Buy 2 ABC Jan18 105 Call
Order 4: Sell 2 ABC Jan18 100 Call
This is 2 day trades because there was only 1 “change in direction” but the spread was not closed as a spread.
Example 8 - Legging into a vertical spread, closing vertical in one order
Order 1: Buy 1 ABC Jan18 100 Call
Order 2: Sell 1 ABC Jan18 105 Call
Order 3: Sell 1 ABC Jan18 100 Call, Buy 1 ABC Jan18 105 Call
This is 2 day trades because when you leg into a spread (open each leg in a separate order) it counts as two day trades since two orders had a "change in direction" when the vertical spread closed as a whole.
Example 9 - Buying 10 options in one order, multiple closing orders
Order 1: Buy 10 ABC Jan18 100 Call
Order 2: Sell 5 ABC Jan18 100 Call
Order 3: Sell 5 ABC Jan18 100 Call
This is 1 day trade because there was only one "change in direction," despite closing the 10-lot in separate orders.