TradeStation Margin Problems in an IRA Account

Discussion in 'General Discussion' started by Jack Lane, Jan 1, 2015.

  1. Jack Lane

    Jack Lane Member

    I recently had two problems with TradeStation's display and calculation of "Available Buying Power" in one instance, it was understated and the trade desk allowed me to execute an adjustment even though the platform would not accept the order. In the second instance, it place my IRA account in a margin call. In this case, the platform let me make the trade, but the next morning I received a margin call notification. The margin call was due by 3 pm the same day. One of the major issues with TradeStation's margin provisions is how they handle a that closes an existing position. In this case the funds are not credited to your account for one day. This can place you in a margin call situation. I spoke with the Margin department manager, but was told since this account is self-directed, it is the trader's responsibility to ensure that an IRA is not in a margin call position. I filed a complaint with their client services and got the same answer from the same person (no additional higher level review).

    I spoke with TOS, since I have performed similar trades with no problem, and they indicated that they provided the credit immediately when you close a trade. TradeStation's margin department does not provide the credit for one business day, therefore, you don't get to use the funds to initiate another trade for one day. This can be a big problem for delta neutral traders.

    Conclusion, using TradeStation for options trading in a fast moving market can be dangerous to your financial health due to their treatment of the funds on closing positions vs TOS.

    Last, has anyone in the community had a similar experience with TradeStation or another broker?
  2. Tim R

    Tim R Active Member

    Hi Jack,

    I use Tradestation as one of my brokers with an IRA and agree, they are awful in this regard. It is easy to use up all your buying power if you get in and out of option spreads on expensive stocks in the same day. I do frequently get into negative buying power, but that clears overnight. I have never gotten a margin call, however. When this happens, one way I've found to continue trading without calling the trade desk is to have working orders already in place as for some reason they still allow those to go through (and makes the buying power even more negative lol). Of course you need to know this ahead of time ;). I'm not sure how much longer I'll stay with them as all this seems to quirky to me.

    I also have IRA's at TOS and LiveVol (held at IB) and they treat it as a psuedo-margin account in the regard to option settlement which is much better.

  3. Jack Lane

    Jack Lane Member


    Thanks for your reply and sharing your experience. I will probably move my IRA to TOS or IB.
  4. jim

    jim Well-Known Member

    Last edited by a moderator: Jan 4, 2015
  5. Jack Lane

    Jack Lane Member

    This morning, I placed a 4 lot balanced butterfly in TradeStation and watched my buying power change from $13,000 to $1,000. Since the cost of the fly was $1,200, I called the margin department to explain. TradeStation immediately subtracts the cost of the longs, but does not give the credit for the shorts for one day. The platform gave no indication when this trade was placed that effect on my buying power. If I had purchased more flies, I would have been in a margin call again with no warning from the platform. I do not understand why they charge the debit side of the account immediately, but hold the credit side for one day.

    Note, this only applies for cash accounts, like an IRA.
  6. Tim R

    Tim R Active Member

    Hi Jack - What you're experiencing with Tradestation is consistent with what I observe. I think they are being very strict and overly conservative with option settlement. It is my understanding that option settlement takes one day to happen, so technically they don't yet have the credit for the options you sold. But on the same token if that's the case they would technically still have the money from the options you bought, so only reducing the buying power by the spread makes more sense. Maybe they are covering their butts in case something happens with the overnight funds transfers. Frustrating none the less.

  7. marat

    marat Well-Known Member

    Jack, Just to confirm. Are you saying that regular (non IRA) will not have this margin problem?
  8. Jack Lane

    Jack Lane Member

    It is my understanding that a regular margin account will not have this problem, but you may want to check with their margin department to make sure.

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