I see a ton of people on the Robinhood platform. I also see a ton of people trading with an account less than $25,000. I also see a lot get marked PDT(Pattern Day Trader) for executing more than 3 day trades within a 5 trading day span. What if I told you, you don't need Robinhood, you don't need $25,000 and you don't need to worry about how many day trades you used per week? Interested? I thought so.
In comes TastyWorks, with TastyWorks you can deposit any amount of money into the account as well as, if you set it up as a Cash Account essentially get unlimited day trading without the need to to have $25,000 in your account. You may be asking, how does that work? Let me break it down for you really quickly. With Options Trading it is a T+1 Settlement on your trades, what's that mean? It basically means that options have a next day settlement of your funds. So essentially if you close a trade on a Monday, the funds you used to enter and close the trade will be available to you on Tuesday. So how does this allow you to day trade regularly without getting PDT? I will show you. So let's say you fund your account with $2,000. So on Monday you spend $500 on a day trade. So your account goes from $2,000 in available funds down to $1,500. Then you make $100 on that trade. Great job! So now your account balance is $2,100, but that $600 you received from that trade now becomes unsettled funds. Then you enter another day trade with $500, so now your available funds to trade go from $1,500 to $1,000. You end up losing $50 on that trade and receive $450 back from the trade and your overall balance is $2,050. But, you only have $1,000 of available funds and you now have $1,050 in unsettled funds for Monday. You decide you want to allocate the remaining $1,000 to a swing trade and hold the trade into Tuesday. Tuesday is here and that $1,050 that was unsettled from your 2 day trades on Monday is now settled and available for you to trade. But, you executed a swing trade with the other $1,000 from Monday, you made a good trade and profited $200. Nice work! So now your overall balance is $2,250, but the swing trade you made $200 on is now unsettled funds so you only have the $1,050 that settled on Tuesday to trade and the other $1,200 is now unsettled funds and can't be used until Wednesday. Still following along?
So let's break down the numbers real quick.
2 Day Trades Cost = $1,000 (Unsettled Funds, will settle next day(Tuesday))
1 Swing Trade Cost = $1,000
Sold Swing from Monday for = $1,200 (Unsettled Funds, will settle next day (Wednesday))
Available Funds to Trade = $1,000 (Settled Funds from Monday's 2 Day Trades)
So now you can see, in the example above the person executed 2 day trades on Monday and the funds they used for those day trades are now available to use again on Tuesday. If this person replicated this strategy all week they could execute 2 day trades per day, allocated $500 per trade and they could execute 10 day trades for the week, all without $25,000 in their account and without a worry about getting marked as PDT. This is the magic of a TastyWorks Cash Account.
Ok, so you read the above information and you are hooked and ready to create an account. But now you need to know how do I go about creating one? Well step one is click this link: TastyWorks Account Creation. Once you click the link it should bring you to a page that looks something like this:
You want to make sure you select the Individual option and the Cash option. Then from there it is pretty straight forward to setting up your account. You will fill out all the required personal information, pretty straight forward across all stock brokers. Once you have that part done just sit back and wait for your account to be approved. Generally TastyWorks will get back to you within 1 Business Day saying your account is approved and then you will need to fund the account which can be anywhere from Instant to 3 business days for the account to be funded and then you are ready to rock and roll.
Now you may ask, ok well this is all well and good but what are the downsides or drawbacks if there are any? Well, if you are coming from Robinhood then lets talk about the fees. TastyWorks probably offers the lowest brokerage fees among all stock brokers outside of Robinhood. With TastyWorks you will pay $1 per contract that you buy to enter the trade and then $0 to exit the trade(There are some minor SEC fees to exit but in total it is usually very minor and under $1.00). TastyWorks also has a max fee of $10 per trade, so lets say you buy 20 option contracts of a trade. If you are supposed to pay $1 per contract then that should cost $20, but TastyWorks caps their fees at $10, so most you will pay is $10 for a trade. You may not like the fact that you have to pay fees but think about it this way, if you have a small account under $5,000. If you are allocating your funds properly, your trades will probably only be 1-5 contract buys so you will only be spending $1-$5 in fees per trade, not bad. Let's switch gears to the other "con" with TastyWorks. Their user interface for their app and trading platform is a little less than stellar. I recommend becoming familiar with it as the longer you use it the easier it will become. I personally just use TastyWorks to execute my trades and then use ThinkorSwim as my trading platform. I recommend you do the same or watch some YouTube videos on how to best utilize the Tastyworks Trading Platform.
Hope all this information was helpful and you now have a better understanding on why I recommend TastyWorks and how a Cash Account works. If you are interested you can create a TastyWorks account by clicking here.