Term of the Day - daily trading limit
By climber7565
@climber7565 (2579)
United States
September 23, 2009 9:06am CST
I wanted to start my first discussion and would love to learn your thoughts on this. My discussion aims to share my learning experience and gain from your experience. The topic is: Term of the Day:... as viewed from the financial world and related to investing.
Term of the Day - daily trading limit
What do you think it means? and what is your interpretation?
1 response
@simtech52 (21)
• United States
23 Sep 09
For day traders this is 4 times the cash you start the day with for trading purchases. As it takes 3 days for a buy or a sell to post, this will change daily as your buys and sells are posted from your previous activity is posted to your account. It is a federal limit to ensure that a person is not taking more losses they they can cover over the short term.
@climber7565 (2579)
• United States
23 Sep 09
Thank you for your contribution. Although it is true, but not the correct definition for the term of the day. This is going to be a very nice venue to exchange knowledge indeed.
The actual definition is: The highest and lowest prices that a commodity or options is permitted to reach in a given trading session. Once reached, no trading occurs in that commodity or option until the following session. Also called fluctuation limit or price limit.
@simtech52 (21)
• United States
23 Sep 09
That may be true on commodity options, I have never traded these. I do know that on stock options, ie puts and calls, there is no limit to the amount the price can rise or fall during a trading session. I have seen call options rise as much as 1000%, ie from $0.10 to well over a $1.00 per contract, as well as the same on the down side. If a stock goes into free fall or rockets up on good news, the stock option does the same. We are of course, talking in-the-money or near-the-money options here. The further from the actual stock price your strike price is will determine the amount of change in the option price compared to the change in the stock price.
