posted
Hi, I have a Scottrade account and I am a little bit confused on free rides. For example, say I have 1000 dollars in a cash account and use that $1000 in each trade for the examples below.
Example 1 Day 1 Buy XYZ Sell XYZ
Example 2 Day 1 Buy XYZ Sell XYZ Buy XYZ
Example 3 Day 1 Buy XYZ Sell XYZ Buy XYZ Buy XYZ
In which examples has a free ride occured? I already looked this information up on the SEC website but I am a bit confused.
posted
Basically any time you buy a stock, and sell it, and use that money to buy a stock before the initial PURCHASE of that first stock has setteled, you are free riding.
For example if I bought AAA today, that takes usually 3 days to clear, or be setteled. So if I sold it tomorrow, and later tomorrow bought more stock with those proceeds, I'm free riding that money because my original puchase still hasn't had time to even be setteled.
Now, if you buy AAA on monday, and say you sell it on thursday so you can use that money to buy another stock later on thursday, you are not free riding because that original monday purchase has had time to settle.
That is how I've always understood it, because that is how ameritrade limits my trading in a cash account. It won't let my funds be "available for trading" if I buy and sell a stock before it has setteled (about 3 days).
posted
No, that can be for any stock. So if you buy XXX and sell it before it settles, then you are not allowed to buy any other stock with those funds, since the original purchase hasn't cleared yet.
So it isn't just for buying, selling, and then buying the same stock again. It simply has to do with buying stocks with money that isn't technically yours, which is what you're doing if you buy a stock with money from a sale that occured before the original purchase was settled.
posted
Hmmm, im going to get ameritrade soon as i can(right now i just have mine with my bank). But right now if i sell a stock..even same day i bought it, it ussaly takes like 20 or so minuts to show the funds in my account. At which time 2-3 times ive gone out and used the money to get something else..hmm ill probably stop doing that..even tho no one has said anything
Posts: 64 | Registered: Jan 2004
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posted
I was actually wondering since if used all my money in one day before, and sold same day, and used money next day or what not before..and they havnt said anything..that bad or good thing? Im wondering any suggestions?
Posts: 64 | Registered: Jan 2004
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posted
They usually don't say anything your first time, second you may get a warning from them.. if you keep doing it, bad news.
Posts: 1051 | From: Michigan | Registered: Sep 2003
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posted
ive done it quite a few times, and they havnt said one word...ever. Im with my bank now,dont know if that makes any difference....i find it odd.
Posts: 64 | Registered: Jan 2004
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