If you are a trader who averages 390 options orders a day in a calendar month, then you could be classified as a professional trader. The number 390 is derived from the number of minutes in an ordinary trading day (9:30 am to 4:00 pm Eastern Time), hence placing a new order each minute of the trading day.
Orders submitted by professional traders will have a lower priority in order execution compared to non-professional traders.
Why does this rule exist?
This rule was first implemented by the CBOE (Chicago Board Options Exchange) and ISE (International Securities Exchange) to address investors that have access to information and technology that would effectively empower themselves to trade in the same manner as a market maker or broker-dealer. Although the CBOE and ISE initially implemented this rule, most other U.S. options exchanges have similarly implemented rules to distinguish orders as “Professional” in origin.
How are orders counted?
Each time a new option order has been sent (no matter if the order is executed or not), a new order number is generated and counted towards the 390 Rule. Orders that are canceled and replaced will generate a new order number and count towards the 390 Rule. Spread orders are considered a single order, regardless of the number of legs of the spread.
How and when is the classification applied?
Firstrade is required to conduct a review on a monthly basis to identify those customers who have exceeded the 390-order threshold during that calendar month and who are to be classified as Professional Traders for the next calendar month. Because this review happens monthly, a customer classified as a Professional Trader for one month will return to standard status the following month if their activity falls back below the threshold.