April 15th, 2018 | 4 minute read (Repost from We The Market)
In the last four weeks I have been waking up to trades already in play when I did not want to hold any stocks over night. The first time this happened I contacted both DAS and IB to inquire how this is happening. Nothing was figured out. After the third time this happened I started to take a screen shot of my DAS platform to show I was out of all trades.
A trader friend of mine, William, recommended at the end of the day hitting ESC to clear any active orders in the system and then SHFT ESC to close out all trades. That became my practice every day. Also, I started to take screen shots of my platform to prove I am out of trades.
After the fourth time I called DAS and IB again. This is crazy. Three out of four times I woke up with a negative balance. Finally, Zach at IB, figured what the issue was.
Introduction to Regulation T or Reg T . You can only borrow so much money through the night holding a security. You know your margin account you own? During the day you may have buying power of $100,000 but at night you can only have 50% from your margin account and the remaining is covered by your cash. Research further for complete accuracy.
Here is where the phantom trade emerged. At 15:55, IB calculates your stock position you are holding and will automatically sell any shares to make you compliant with Reg T. On the DAS Pro platform, it does not warn you or even have any indication that you have sold those shares. When you believe you have 500 shares of Facebook and you put an order in to sell 500 shares you may have only sold 350 because IB already sold 150 shares. Now you may be in a Short position of 150 shares. You have no clue because DAS Pro platform does not show you that you just shorted 150 Shares. When you log on the next morning you will see those 150 shorted shares.
The learning lesson of today is to close out all positions before 15:50 EST. Or calculate your shares based on your cash and margin to abide by Reg T.