What is the 390 Professional Option Order Rule? (2024)

FAQs

What is the 390 Professional Option Order Rule? ›

The rule is based on the concept of placing an average of 390 option orders per trading day in a calendar month. If a trader meets or exceeds this threshold, they are classified as a "Professional" trader. This classification can affect the fees and data subscriptions that traders are subject to.

What is the 390 Professional Orders Rule ("390 Rule")? If you average 390 option orders per day in any calendar month you may qualify as a professional trader. The "390 Rule" applies to all options orders sent to the broker for execution, not just filled orders.

If you are a trader who averages 390 option orders a day in a calendar month, you could classify as a professional trader. Effectively, placing a new order each minute of the trading day, hence the 390 in the rule's title.

An account which places 390 option orders per day on average for a calendar month is designated as a “professional customer.” This rule, adopted by the options exchanges, is designed to identify professional customers who compete with market makers that otherwise should not receive priority over retail clients' orders.

Avoid options with low liquidity; verify volume at specific strike prices. calls grant the right to buy, while puts grant the right to sell an asset before expiration. Utilise different strategies based on market conditions; explore various options trading approaches.

The rule is based on the concept of placing an average of 390 option orders per trading day in a calendar month. If a trader meets or exceeds this threshold, they are classified as a "Professional" trader. This classification can affect the fees and data subscriptions that traders are subject to.

Options can offer leverage, allowing you to control a larger position with a smaller amount of cash. This can be particularly useful for accounts under $25k.

Rule 390 contains ten specific exceptions for unique or away from the current market situations, and permits members, member organizations, and affiliated persons to trade in a foreign over-the-counter market outside of Exchange trading hours.

In spite of all the noise and hype involving customer service these days, it truly boils down to one simple, age-old truth, often referred to as the Golden Rule: "Treat others as you would want to be treated."

Time spent trading: The courts and the IRS repeatedly have maintained that to qualify as a professional trader, one must engage in the act of trading on a frequent, regular and continuous basis.

Who is a professional customer? ›

Professional Customer means a customer who possesses the experience, knowledge and expertise to make its own financial decisions and to properly assess the risks it incurs.

The most successful options strategy for consistent income generation is the covered call strategy. An investor sells call options against shares of a stock already owned in their portfolio with covered calls. This allows them to collect premium income while holding the underlying investment.

The option sellers stand a greater risk of losses when there is heavy movement in the market. So, if you have sold options, then always try to hedge your position to avoid such losses. For example, if you have sold at the money calls/puts, then try to buy far out of the money calls/puts to hedge your position.

Lack of a clear strategy: Options trading requires a well-defined strategy. If options buyers do not have a clear plan, exit strategy or risk management in place, they may make impulsive decisions that lead to losses.

The PDT essentially states that traders with less than $25,000 in their margin account cannot make more than three day trades in a rolling five day period. So, if you make three day trades on Monday, you can't make any more day trades until next Monday rolls around again.

Pattern Day Trading Rules on TD Ameritrade

Pattern day trading rules apply to those who execute four or more day trades within five business days. TD Ameritrade enforces these rules, requiring a minimum account value of $25,000.

Trading requirements

This means that neither the broker nor the affiliate (seller) can solicit others to purchase the securities, and brokers cannot be paid more than a typical brokerage commission.

If the trader fails to do so, the broker has the right to liquidate the trader's positions to cover the losses. The $25,000 minimum equity requirement protects brokers from potential financial losses in case a trader's account balance falls below the minimum.