| Author |
Message
|
| AznHisoka |
 Posted: Fri Dec 16, 2005 6:13 pm Post subject: Is the money usually available right after you sell a stock? |
 |
|
Investing Associate
Joined: 15 Dec 2005
Posts: 19
This Month: 0
6270.14 e$
Net worth: 11,997.26
Portfolio Value: 5,727.12
Monthly Return: -3.21%
Trades this month: 0
Churn Rate: 0.00%Items
|
| Suppose I buy 100 shares of a stock one day, and sell it a week later, or even the next day. Will the cash from my sale be available for use immediately(like the next day or even next minute) or will I have to wait a few days? Thanks |
|
| Back to top |
|
 |
| stockmarkettips |
| Posted: Fri Dec 16, 2005 6:30 pm Post subject: |
|
|
Investing Manager
|
| I could be wrong, but i believe you have to wait at least a day. |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Fri Dec 16, 2005 8:04 pm Post subject: |
|
|
CFO
|
Read your broker agreement. They generally do not allow you to "float" the stock... meaning you have to have the capital (cash) in your account to support your trades. Here's an excerpt from the customer agreement from my broker:
| Quote: | | if the trade is a purchase by you and sufficient funds are not already in your cash Account, you agree that you will make full payment for the Property described on the confirmation promptly and that you do not contemplate sale of such Property prior to making such payment. |
Meaning you cannot sell something before you pay for it. I imagine most brokers have a similar requirement. Officially you have 3 days to pay for your trade, but if you buy on Monday and sell on Tuesday and did not actually have the cash in the account to cover the trade then bad things may happen.  |
|
| Back to top |
|
|
| efflandt |
| Posted: Fri Dec 16, 2005 11:13 pm Post subject: |
|
|
Investing Manager
Joined: 01 Oct 2005
Posts: 206
This Month: 0
Location: Elgin, IL USA
76546.66 e$
Net worth: 125,489.06
Portfolio Value: 48,942.40
Monthly Return: -8.53%
Trades this month: 0
Churn Rate: 0.00%Items
|
There is a 3 working day settlement period for stock trades. If I have been holding a stock long enough and want to buy another one right away, as soon as I sell a stock (at Fidelity), the money is available for investment (but not withdrawl) as soon as the sale is confirmed. So I have sold one and bought another stock on the same day. The funds from the sale are applied to the purchase on the settlement date 3 days later. If you want to withdraw funds from a sale, you have to wait until after settlement date.
But if you buy a stock, you cannot sell it the same day (day trading) unless it is a margin account. Your broker might make an exception if the cash for the buy is already in your account. Not sure if you can sell it the following day or have to wait until settlement date, but you definitely need to have the money for the buy in the account (or margin) by the settlement date. In other words you cannot buy and sell a stock at a profit without using your own money or prior sale (or margin) for the buy.
So you may need to be careful about immediately setting any stop or trailing stop order that might trip out too soon. If you do not follow the SEC rules regarding money, assets, margin, or frequency of day trading, your trading may be blocked for 90 days. |
|
| Back to top |
|
|
| AznHisoka |
| Posted: Sat Dec 17, 2005 6:26 am Post subject: |
|
|
Investing Associate
Joined: 15 Dec 2005
Posts: 19
This Month: 0
6270.14 e$
Net worth: 11,997.26
Portfolio Value: 5,727.12
Monthly Return: -3.21%
Trades this month: 0
Churn Rate: 0.00%Items
|
Ok, so let me get this straight.
Suppose I buy a stock on Monday using my own cash, and then sell it next Monday. I can use the proceeds from that sale to buy another stock the next day, Tuesday, correct? I need to have the cash at hand by the settlement date, which is 3 days later (Friday). However, the cash from my sale reached the brokerage, because the settlement date for the sale is Thursday, 3 days from Monday. So when Friday comes, the cash from the sale is already there. So I'm safe, right? |
|
| Back to top |
|
|
| efflandt |
| Posted: Sun Dec 18, 2005 11:16 am Post subject: |
|
|
Investing Manager
Joined: 01 Oct 2005
Posts: 206
This Month: 0
Location: Elgin, IL USA
76546.66 e$
Net worth: 125,489.06
Portfolio Value: 48,942.40
Monthly Return: -8.53%
Trades this month: 0
Churn Rate: 0.00%Items
|
If you sell a stock purchased on an earlier date, as soon as the sale is confirmed, you can usually buy another stock with that money, even same day, without any special requirements. So if you had a stock for a week and sold it on a Monday, you could use the proceeds for another stock purchase that same Monday. 3 days later (Thursday), the credit for the sale would be applied before the debit for the buy.
Although, if your broker does not immediately show the sale funds available for investing, or only updates that overnight, it may be safest to wait until the following day to make another purchase.
It is the other order, buying then selling the same day, that is considered "day trading" and has other limitations. See NYSE and NASD memo links on http://www.sec.gov/answers/daytrading.htm |
|
| Back to top |
|
|
| barloy |
| Posted: Wed Dec 21, 2005 2:55 pm Post subject: good Q |
|
|
Investing Sr. Associate
|
| that was good info for me i to was woundering that same thing thanks for the help with that |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Wed Dec 21, 2005 7:29 pm Post subject: |
|
|
CFO
|
I looked at my broker agreement tonight to see what was said about this practice. It's called "Free Riding".
Free-riding violates Regulation T of the Federal Reserve Board. It consists of purchasing and selling a security without meeting the payment obligation under Regulation T. It generally entails using the proceeds of a sale of a security to meet the obligation to pay for the earlier purchase of the same security.
Whew. What it means is that you can't purchase something and then sell it, using the proceeds to pay for the earlier purchase. You have to have enough cash in your account to pay for the trade even though you may have bought / sold on the same day. |
|
| Back to top |
|
|
| moreno917 |
| Posted: Mon Jan 09, 2006 8:16 pm Post subject: |
|
|
Investing Associate
Joined: 09 Jan 2006
Posts: 24
This Month: 0
5087.49 e$
Net worth: 8,580.38
Portfolio Value: 3,492.89
Monthly Return: -4.41%
Trades this month: 0
Churn Rate: 0.00%Items
|
| Dave Rathbun wrote: | I looked at my broker agreement tonight to see what was said about this practice. It's called "Free Riding".
Free-riding violates Regulation T of the Federal Reserve Board. It consists of purchasing and selling a security without meeting the payment obligation under Regulation T. It generally entails using the proceeds of a sale of a security to meet the obligation to pay for the earlier purchase of the same security.
Whew. What it means is that you can't purchase something and then sell it, using the proceeds to pay for the earlier purchase. You have to have enough cash in your account to pay for the trade even though you may have bought / sold on the same day. |
Hence, if I have $5k in cash in the account and make a purchase today for $3.5k I can still sell the shares later today and buy even more shares of the same stock as long as its not for more than what my cash balance is that day, ie $1.5k? |
|
| Back to top |
|
|
| geb9696 |
| Posted: Tue Jan 10, 2006 6:30 pm Post subject: |
|
|
Investing VP
|
| Yes, that is how I understand it. |
|
| Back to top |
|
|
|
|
 |
| BallJacker |
| Posted: Fri Jan 13, 2006 4:51 am Post subject: |
|
|
Investing Manager
|
| moreno917 wrote: |
Hence, if I have $5k in cash in the account and make a purchase today for $3.5k I can still sell the shares later today and buy even more shares of the same stock as long as its not for more than what my cash balance is that day, ie $1.5k? |
If you have Margin, technically you have $3K. With my account, Wells Trade, I can use money in "float". If I dont have the cash to cover, they start sell my positions to cover, and they don't pick and choose which stocks.
Last edited by BallJacker on Sat Jan 14, 2006 1:31 am; edited 1 time in total |
|
| Back to top |
|
|
| geb9696 |
| Posted: Fri Jan 13, 2006 11:47 am Post subject: |
|
|
Investing VP
|
| Seems like that could turn out very badly if they end up selling the wrong stocks. Do you trade often with margin? What type of interest rate do you pay on the margin? |
|
| Back to top |
|
|
| BallJacker |
| Posted: Sat Jan 14, 2006 1:37 am Post subject: |
|
|
Investing Manager
|
| I have a lot of cash reserves I can move in and out of my account, if I need to. So I've never bought on margin, but the rates are not that bad. I've been advised by my broker not to use it unless I really need to. Like one of the other posters recomended, read your agreement. They vary from broker to broker. |
|
| Back to top |
|
|
|
|
stock market game on the web. At eInvesting you compete for monthly cash prizes while you interact, make virtual dollars, purchase items, and trade in the realistic stock market simulator. We make investing FUN!
