Day Trade Buying Power Basics
Once a broker designates you as a pattern day trader, your trading requirements change. You must follow strict rules from the Financial Industry Regulatory Authority (FINRA) to continue trading.
For example, you can only make a set number of day trades every week. Additionally, you maintain a minimum equity of $25,000 in your trading account. It shouldn’t decrease. If it does, you must replenish it first, or you’ll not make any day trades. This equity is too high compared to the minimum equity of $2,000 for non-pattern day traders.
So, what is day trading buying power? Your day trade buying power changes when your equity reduces. As such, you receive a day trading margin call from your broker. Read on to understand how it affects your day trading activities.
What is Option Buying Power?
It’s the money available in your account to trade options. Hence, it’s the funds you can use to open a position. When you buy options, the amount at stake is the option’s value. Therefore, it’s the cash in your account that covers that position. When you have negative buying power, your trading account doesn’t have a sufficient balance for the positions taken.
So, what is buying power in stocks? Options buying power isn’t the same as stock buying power because the latter is the money available to trade stocks plus the margin. Note that you can only buy options using funds in your account, not margin.
Another question many beginners ask is, what is option buying power vs available funds for trading?
Generally, options buying power is the cash in your brokerage account. It’s not the same as available funds because the latter includes the money in your margin account. For example, the options buying power Webull offers doubles your trading amount because it’s the balance in your brokerage account and margins.
How to Increase Buying Power in Stocks
The ideal way is through a loan from your brokerage. It’s called a margin, and there are three types. It could be a margin buying power. This option is popular in a bearish market and doubles your trading power; hence, the ratio is 2:1.
Day traders get another type of margin called the day trading margin. Unlike the margin buying power, the loan extended to a day trader can be in the 4:1 ratio.
The other solution is the portfolio margin, which can double your buying power as high as 17:1. However, it’s hard to get it and targets traders with an account balance not less than $100,000.
Brokers with Instant Options Buying Power
An instant buying power brokerage lends you money as you wait for your ACH deposit to reflect. That’s why selecting a brokerage takes time and research to get the best. The basic requirements to open an account might appear similar. However, benefits such as instant buying power and the amount at your disposal before you receive your deposit can differentiate brokers. For example, an instant buying power Robinhood account gives you up to $1,000.
Let’s consider another offer. The Webull day trade buying power is what you have in your account to fund your trading activities. If you make deposits that day, they will not change your day trade account balance because it takes about four business days. Plus, the account balance is the money available at the start of the trading day only.
Hence, instant buying power is the best way to boost your Webull options buying power to fund any day trades you want. The process is instantaneous, depending on when you deposit into your ACH. For instance, you receive the instant Webull option buying power immediately if you deposit between 9:30 a.m. and 4:00 p.m. Eastern time. The amount received depends on many factors, including your cash balance, account type, transaction history, and deposit amount.
But how do I get crypto buying power on Webull?
The buying power Webull offers for crypto is available when you deposit into your account. However, you must also have instant buying power access for Webull to double your balance. It means there are account requirements before they give you a boost.
Margin Account Buying Power Explained
Your margin account buying power is the leverage to take more positions than your account balance can accommodate. When your account drains, your broker can loan you some money. Hence, they give you a margin call. It’s like a notice that you should add money to your account, and they want to lend it to you. As such, getting a margin account can counter potential losses. However, it also doubles your risks.
To use the margin from your broker, you have to deposit enough money into the account to fulfill the initial margin. It’s the percentage of the price you should pay from your cash account. In most cases, it’s 50%. Thus, the broker lends you about 50%.
The buying power in a standard margin account is about twice the money in your trading account. For example, if you want to buy 100 shares at $200 per share, you require $20,000 in your trading account. However, if you have a standard margin account, you only need $10,000.
Understanding Buying Power in Stocks
So, what does buying power mean in stocks? As we mentioned, it’s the money available to hold positions, including the margin you can trade stocks. It gives you an advantage when your trading account balance is running low. It’s not the same with options where you can only depend on funds in your trading account.
So, what should I do if I have cash balance but no buying power Webull? You can request a margin to increase your trading funds. There are many margin types. For example, the Webull Overnight Buying Power can double the money in your account, so you can hold a position overnight.
Therefore, having a margin account creates more investment opportunities by lowering the cash balance your account should have when initiating a position. You consult your broker to know the margins available and what requirements you have to fulfill first.