Monk's Den

[Weave]

My understanding of this new SEC rule is...(it took effect 4/26)...

Lets say you had an acct with $75K. $45K was in marginable stocks and $30K was in cash. Lets assume the $45K was again marginable securities - not pennies.

Normally that would be $75K of buying power - $30K cash + $45K margin available via the $45K marginable securities. So in this account - a trader goes in and buys $50K worth of FAS/FAZ. New SEC rules say can't do that cuz FAS/FAZ is a leveraged 3X ETF. So the $50K of F's you were buying cuz you had the buying power has now changed. The $50K you were buying previously was based on $30K cash........and $45K worth of MARGIN buying power. OR - more specifically you were buying $20K on margin.....which was cool cuz you had $45K of buying power. NOW - you need $60K in margin/marginable securities cuz you were buying $20K on margin and cuz F's are 3X ETF's - you had to have 3X the margin buying power.

CDIV, EIGH, GRNO and others in the pink sheet category - many brokerages will not deem those marginable - so if you had FLD's in the same acct as the money you were F trading - those would not be marginable.

Since the Monk training said do not trade F's on margin anyway - as long as that guidance was followed - this shouldn't be an issue. If all or partial of F trading was done on margin - then yes it could effect buying power substantially. I have been F trading - and since I'm learning - doing WAY TOO MANY trades per day (i.e., mucho round trips) and I have not been effected by this at all......cuz all my F trading is via cash on hand in the account. I buy nada zip nothing via margin.

That's my understanding....open to correction of course.