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I have 100 shares of XYZ. I felt today it’s going to be Bearish Trend, so I opened a position, STO call at $10.00 (2 Weeks Expiry). Next day premium value is $5.00 and it’s going to be Bullish again. So I closed position, BTC at $5.00.

Can I keep do this transactions? (Open STO at higher price, Close BTC at low price) instead of waiting till Expiry and Opening new position.

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    Is the OP essentially asking "Am I allowed to sell instead of waiting until expiry?" ... ??
    – Fattie
    Commented Oct 6, 2020 at 20:26
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    @Fattie - No, he's asking about how frequently he can do this without getting into regulatory trouble.
    – Bob Baerker
    Commented Feb 3, 2021 at 20:17
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    Ahh. Good one. Welcome, new user
    – Fattie
    Commented Feb 3, 2021 at 20:20
  • "Can I keep do this transactions? (Open STO at higher price, Close BTC at low price) " I suppose in a theoretical world where the market always moves in the way you expect it to, you can do this indefinitely. In the real world, you're going to eventually be stuck either having an open position or realizing a loss. And in this hypothetical, you could have made exactly the same profit by simply selling the underlying and buying it back the next day.
    – Acccumulation
    Commented Sep 23, 2023 at 21:55

2 Answers 2

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There is no direct limit on number of transactions you can perform as long as you conform to day trading and settlement rules. Where you may run into a problem is:

  • You are trading in a margin account and you violate the Pattern Day Trader rule. This would occur if you did more than 3 day trades in a rolling 5 day business period and did not have $25k of equity in your account.

  • It's a cash account and due to T+1 settlement for options, you do not have enough settled cash to transact a BTC

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There is no limit on the number of transactions you can perform. Some firms are high frequency traders which use computers to open and close positions possibly thousands of times per day.

There may be some limits, depending on the type of account you have, where the money you receive from closing the position may not be available for use until the next business day, or until the position has settled.

The pattern day trader rule may also apply if you have less than $25,000 of equity in your account and your broker is regulated by FINRA (a US self-regulatory organization - most US firms are).

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  • If you're going to open and close possibly thousands of times per day, it might be helpful to have MTM Trader Status :->)
    – Bob Baerker
    Commented Jun 8, 2020 at 19:27

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