$SPX BUTTERFLY EXPRIED ITM
Summary of User’s Concern and Solutions Discussed:
- The user is concerned about what happens if their Butterfly PUT trade expires in-the-money (ITM) while trying to avoid being labeled a Pattern Day Trader (PDT).
- Fidelity provided links to resources on Long and Short Butterfly Spread strategies to help the user understand their options.
- They explained the definition of a day trade and the criteria for being designated as a Pattern Day Trader, emphasizing that day trades must be in a margin account.
- Fidelity shared additional resources, including a video on trading on margin and FAQs about margin trading for further clarification.
Here’s the full thread
I’m start learning butterlfy strategy here. I wanted to avoid PTD, so not possible to sell otherwise. I wonder what wil happened if I let my Butterfly PUT trade ends in expired and ITM.
Sorry if this has been addressed before.
Hi @yeew, thanks for reaching out!
Depending on the specific option contract you have, you can learn more by checking out the links below.
Long Butterfly Spread with Puts: https://www.fidelity.com/learning-center/investment-products/options/options-strategy-guide/long-butterfly-spread-puts
Short Butterfly Spread with Puts: https://www.fidelity.com/learning-center/investment-products/options/options-strategy-guide/short-butterfly-spread-puts
Now, a day trade is defined as an opening trade followed by a closing trade in the same security on the same day in type margin. The opening trade must precede the closing trade to be considered a day trade, and the same day includes pre-market, regular session, and after-hours sessions. Please note that day trades are tracked by the number of opening orders closed on the same day (intraday).
Additionally, You will only receive a Pattern Day Trader (PDT) designation after placing 4-day trades in the margin holding type within a five business day period or if you have two unmet day trade calls within 90 days in a margin-enabled account. You will not be labeled a Pattern Day Trader if such trades are placed in type cash, as day trades by definition must be placed in type margin. Please feel free to review this short video to help further your understanding.
Trading on margin: PDT (Video): https://www.fidelity.com/learning-center/trading-investing/trading/pattern-day-trading-video
Margin FAQs: https://www.fidelity.com/trading/faqs-margin
If you have additional questions, pleae don’t hesitate to follow up with us here.
Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read the Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/about/publications/character-risks.jsp). Supporting documentation for any claims, if applicable, will be furnished upon request. 🟢