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| crazymonk |
 Posted: Fri Jun 15, 2007 5:25 am Post subject: How to avoid free-ride? |
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Investing Associate
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I just started to get into the market, however I encounter the unfair rule of 3-days settlement. This mean I have to wait 3 days to do a roundtrip trade. Else I can buy but cannot sell. Some suggest upgrade to margin account. However I want to daytrade once or twice a week, but don't intend to be a daytrader. Is there a negative side if I open a margin account (but don't buy with margin)? is it going to solve the free-riding problem?
Thanks. |
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| Dave Rathbun |
| Posted: Fri Jun 15, 2007 7:14 am Post subject: |
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CFO
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I think you can avoid the rule if you have $25K in the account.
The basic reason for the rule is you can't trade on funds that have not settled yet. So when you sell something, the funds are not deposited into your account until the settlement date. It's like trying to deposit a check in your checking account and then writing a new check on those funds before those funds have cleared. |
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| crazymonk |
| Posted: Fri Jun 15, 2007 12:28 pm Post subject: |
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Investing Associate
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| Dave Rathbun wrote: | I think you can avoid the rule if you have $25K in the account.
The basic reason for the rule is you can't trade on funds that have not settled yet. So when you sell something, the funds are not deposited into your account until the settlement date. It's like trying to deposit a check in your checking account and then writing a new check on those funds before those funds have cleared. |
I think the rule favor the brokers too much, for nowaday, everything can be settle via computer within minutes. They got to keep our money for 3 days.
Anyway, Scottrade stated that you can open a margin less than 25K (2K min only if you're not a daytrader). |
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| geb9696 |
| Posted: Sun Jun 17, 2007 9:04 am Post subject: |
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Investing VP
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| Dave Rathbun wrote: | I think you can avoid the rule if you have $25K in the account.
The basic reason for the rule is you can't trade on funds that have not settled yet. So when you sell something, the funds are not deposited into your account until the settlement date. It's like trying to deposit a check in your checking account and then writing a new check on those funds before those funds have cleared. |
This is 100% correct. |
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| sport302 |
| Posted: Sun Aug 19, 2007 7:28 pm Post subject: |
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Investing Associate
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Simple answer- Yes you can avoid the free-riding issue with a margin account.
Negatives - None if you treat it just like a cash account and only use your actual cash. |
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| deprived |
| Posted: Fri Aug 31, 2007 3:31 am Post subject: more questions |
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Investing Sr. Associate
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| I have an account and once i sell a stock i get my funds posted within that business day and i pay a confirmation fee to ensure the funds are aqquired, Am i still limited to the three day rule? |
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| efflandt |
| Posted: Fri Aug 31, 2007 11:04 am Post subject: |
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Investing Manager
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| One thing to be aware of in a margin account is that if you have a stock that pays a "qualified" dividend and that stock is loaned out to a foolish short, you get the dividend from the person who shorted it, but it is not "qualified". So if your stock has been shorted, the dividend would be fully taxable instead of considered a long term gain. |
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| weeds87 |
| Posted: Tue May 18, 2010 3:56 am Post subject: |
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| sabina |
| Posted: Tue May 18, 2010 12:53 pm Post subject: |
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