Turn off margin

Alpaca Products Discussion Feature Requests
1

Would be great if there is an option to just turn off margin

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2

I wonder why the requirement for margin. If no margin then no PDT and can trade with higher frequency. I suspect with margin enabled Alpaca earns more revenue based on per stock traded while routing? But if no margin, then trading frequency higher. eg could trade 1 minute candles rather than daily candles.

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3

Totally agree. For people who only want to use their own money to trade, they should have the choice. These margin calls are annoying. It will be sent even you are only using your own money and force you to deposit more money.

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4

I feel like everytime I’m ready to go live with Alpaca, I run into an issue. Now, it is the simple fact that I can’t disable margin trading.

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5

I agree 100%. I have no interest in using the margins. Can we please have an option to turn off Margins?

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6

That would be great, because I don’t want to accidentally use it. Also if it disables PDT protection at the same time, that you be another plus.

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7

I agree as well. Should be an option to disable margin, just like there is with short selling. This is a big problem as I have alerts coming from tradingview set to buy and sell, but only want to use the funds I have available in cash, and not margin.

Please Dev Masters, please add a feature to disable margin trading, thank you :slight_smile:

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8

The SEC defines a Pattern Day Trader (PDT) as executing four or more day trades within five business days. The SEC requires that all registered US brokerages impose margin requirements on any account that qualifies as a PDT. This is a rule from the SEC and not something any registered US broker/dealer could avoid.

Here is a helpful document provided by the SEC describing the margin rules for day trading. https://www.sec.gov/files/daytrading.pdf

9

I understand what you are saying. However, I am not a “Day Trader”. I perform “Swing Trades” and invest in dividends.

‘daytrading_buying_power’: ‘0’,
‘daytrade_count’: 0

According to FINRA, the investor and broker must “agree” to use margins. I don’t care to leverage margins. I purposefully code to not perform day trading. Therefore, we should be able to disable margins if day trading criteria hasn’t been reached:

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10

If they feel they can’t disable margins. At the very least they can add a couple more entries into the account endpoint:

pending_order_amount - to show what cash you have promised for pending limit orders
deposited_avail_cash - to allow us to view the money we have left from our deposits w/o the margin added.

I don’t believe this to be unreasonable ask.

11

I echo the request to add a feature to turn off margins. I would disable margin on my account and would not then fall into the category of pattern day trader. It seems like an easy thing to program.

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12

following… …

13

Alpaca is looking into options and ideas for ‘turning off margin’ but, before jumping into a solution, we’d like to better understand the problem.

So, a little bit of context. All accounts have what is termed ‘limited margin’ where Alpaca effectively loans the account the value of any unsettled funds so traders do not need to wait the typical T+2 two day time before funds from a sale of stock can be used to purchase new stock. The account does not incur any interest charges for this. Margin up to the maximum ‘regulation T’ amount (2x) is extended to any account with an equity above $2000. If an account has over $25,000 in equity, and is flagged a Pattern Day Trader, it is additionally extended ‘day trade’ intraday margin up to 4x equity. Only funds borrowed overnight incur interest charges. If margin is only used ‘intraday’, and no funds are borrowed overnight, there are no interest charges.

Here’s my personal approach/use of these features (again for context). The ‘limited margin’ feature is indispensable for how I trade. I never need to consider settlement time in my strategies or algos. Before this feature, my strategy would always need to include a 2 or 3 day wait after selling a stock before I could buy new stock. The ‘RegT’ margin feature is also indispensable for how I trade for much the same reason. I never need to wait to sell a stock before buying into a new position. I generally don’t use leverage but this allows me to place my buy and sell orders at the same time. Again, without this, I needed to structure my algos to submit orders to close positions, wait until they closed, then submit orders to open positions.

One is never required to use any of these credit lines. They are just made available as ‘tools’ one can use to add leverage to ones trading or allow for more flexibility in timing.

Question one. Is the ‘limited margin’ feature (where one doesn’t need to wait for funds to clear) ok? Any community input to changing that?

Question two. Is ‘Reg T’ margin feature ok? If not what are the issues? Remembering that one is never required to use it?

Question three. Is day trade margin feature ok? Again remember that you don’t need to use it.

Thanks. We want to make Alpaca work for everyone and understanding how our account holders use (or don’t use) the various features helps us keep improving.

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14

@Karen There was a previous comment made “I would disable margin on my account and would not then fall into the category of pattern day trader”. While technically this is true, in practice it’s really exchanging one thing to watch out for with another.

According to Regulation T, you can make as many day trade (round trip) stock purchases using a cash account as long as you have the funds to cover each and every round trip sale. Hey this sounds great. I don’t need to worry about day trades if I didn’t have a margin account. However, the funds generated from the sales cannot be used again to purchase new stocks until the settlement period (T+2 days) is over. Rather than needing to count the number trades in a day (to avoid going over the day trade max) one would then need to count the number of days between trades to ensure they have enough settled cash.

15

needs to be updated and re-written

16

I see other customers have also asked for this feature, for a long time. I don’t understand why Alpaca would not be responsive to a simple request.

I don’t mind counting the number of days. At the very least, I want the option. Recently I was stopped from selling stocks because of the pattern day trader.

I am in the processing of transferring my account to a brokerage that allows me to not have a margin account.

I am also unhappy with the recent blocks on meme stocks with no explanation. I could not buy. I could not sell. Then I could. No explanation. I don’t like that.

Karen Higgins

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17

  1. The ‘limited margin’ feature is excellent, and I don’t think anyone here has a great reason to get rid of it. Some have said that disabling this would provide protection from PDT laws, but that ignores the problem of funds taking days to settle, as you pointed out.

  2. It’s true that trades can simply be made based on equity instead of buying power, thus eliminating the use of margin. And it’s also true that I can write code that goes off of equity instead of buying power. However, it’s always possible I could miss a bug in my code that causes shares to be purchased in excess of the account’s equity (thus using margin). Ultimately I think this is about peace of mind. The solution could be as simple as adding a ‘No Margin’ toggle in Account Configuration, like the existing ‘No Shorting’ toggle. This would set the account’s multiplier to 1, regardless of whether it is allowed to be set to 2 or 4.

  3. Same as #2.

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18

One general theme seems to be users wanting more control over their account and not being restricted by rules such as the ‘pattern day trade rule’ and ‘margin calls’. While a cash account wouldn’t be subject to these rules, they are subject to a number of other rules. Three rules in specific which apply to cash accounts, but not margin accounts, are ‘good faith violations’, ‘free riding’, and ‘cash liquidations’. These rules place restrictions on when one can buy and sell stock. Even in a cash account one can be prohibited from buying a stock whenever one wishes. Violation of these rules results in ones cash account being restricted for 90 days and are pretty strict (eg 1 free riding violation in 12 months). There is a pretty good explanation of these three rules here.

There’s no escaping rules in either a cash or margin account. They apply to all traders big and small. Buying stock is not like buying something on Amazon. It looks deceptively the same but is highly regulated in the US. I encourage everyone to understand the rules before they jump in.

I personally found writing code to comply with the cash account constraints to be more cumbersome than that needed for a RegT margin account. Just my experience.

19

OK, one more question… (Again, gathering everyone’s ideas to come up with some solutions)

What is the aversion to ‘using margin’? Is it:

  1. Don’t want to incur ANY margin interest charges.
  2. Don’t want to incur a lot of interest charges. Maybe $1 or $2 a month is ok or maybe .005% of equity is ok.
  3. Don’t want to add leverage and increased volatility to my strategy.
  4. Don’t want the potential for a margin call. A little margin expense is ok but really don’t want to deal with margin calls.

The reason why I’ve asked about cost is that one doesn’t always pay margin interest even if an account is highly leveraged. Leverage and margin aren’t exactly the same. The discrepancy arrises when shorting stocks.

Everything is pretty straight forward as long as you don’t short anything. If you start with $1000 in an account then buy $2000 worth of stock (long) then you have -$1000 cash in your account. You have effectively borrowed $1000. So far so good.

It get’s tricky however when one opens short positions. Think of the same situation but going short instead of long. Start with $1000 and short $2000 worth of stock. You effectively borrow the shares (not money) and then sell them. Whenever you sell, the cash in ones account increases. So, in this case, the cash increases by $2000 to $3000. Technically, there is nothing borrowed on margin. Zero. In fact you have extra cash in your account. (Some brokerages will even pay the user interest on that cash.) But, that doesn’t mean you can really spend it. If you saw you didn’t have any margin (ie haven’t borrowed anything) then one may think they could buy more stock. Wrong. The missing piece is that while you haven’t borrowed cash, you have borrowed stock. The liability of that borrowed stock needs to be accounted for.

In the examples above, both are leveraged 2x but only the long example incurs any margin expense.

20

thats amazing, to think we are talking about an api. its starting to sound like a circus