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Author Topic: Please Help A New Guy: unsettled funds, margin, day trading questions
osnola22
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Hi all. I have been reading this board for a while before registering and have learned alot. Thanks. I'm just getting started and had a few questions.
I just opened an account with ameritrade and deposited $1000. I haven't done anything with it yet, I want to read, learn, and research before doing anything. Could any of you help explain to me about unsettled funds are and what effect this would have on me? Say I was to buy $1000 of stock ABC and it went up by 10% in the same day and I sold it all. Now I would have $1100. Would I be able to use this whole $1100 immediately to buy another stock? Only $1000 of it? This is where I am confused. I have heard about them calling you a day trader and holding your money for a few days. Would a margin account help me out to do this? I have read a few things about this, but could someone explain this to me in layman's terms and give some suggestions on what would be best for me to be able to have full access to all of my funds all of the time. I don't like the idea of having to pass up on a deal because my funds are being held or are 'unsettled'. Any help, responses, reading links and/or suggestions will be very appreciated. Thanks alot!

Posts: 65 | From: valrico, FL, US | Registered: Dec 2004  |  IP: Logged | Report this post to a Moderator
poorman
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Its my understanding that opening a margin account would let you use those unsettled funds. They take three days to settle, but useing margin cost money. You are getting a loan from your broker to use it and thats not free. Not a good idea in my book. If you only opened with 1000.00 you most likely don't have extra money to lose. NEVER risk more than you can walk away from trading stocks. You can try splitting the money into three groups and only useing 1 group a day so you will always have funds ready to buy. Can't buy alot wit 333.00 but if you pick right this will build.
JMHO GOOD LUCK TRADING.

Posts: 1169 | From: Pollock Pines Ca | Registered: Feb 2004  |  IP: Logged | Report this post to a Moderator
osnola22
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Hey man, thanks for the reply. I've been reading a little about margin accounts and if I understand correctly, say I had 5K in there, then that means I would be able to borrow 5K from the broker to make purchases, but if the value of my stocks dropped below 5K, I would have to add money to make up for that and also pay any commision, interest, or whatever they charge. Is it possible to have a margin account and only use my money? You say it takes 3 days to settle. Is that only for cash accounts, or for margin too? If I bought $1000 of something and then sold the same day, since I would have a margin account, could I purchase another $1000 worth, or would that be considered borrowing since the original funds are unsettled? Thanks for the help!
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slant77
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I only have a cash account but if you bought 1000 of stock abc then later that day you sold stock abc for 1200 you could buy it again using unsettled funds. The funds must settle before you can resale. other wise it will be considered a free ride.
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Ktrain420
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if you buy a stock and sell in the same day....you can't use those funds again until the 3rd business day or you will be subject to a 90 day restriction. this only applys to a "cash" account. margin accounts are not the smartest thing in my book cause if you lose money the broker still wants there interest. i would only play with a cash account. hope this helps
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poorman
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quote:
Originally posted by osnola22:
Hey man, thanks for the reply. I've been reading a little about margin accounts and if I understand correctly, say I had 5K in there, then that means I would be able to borrow 5K from the broker to make purchases, but if the value of my stocks dropped below 5K, I would have to add money to make up for that and also pay any commision, interest, or whatever they charge. Is it possible to have a margin account and only use my money? You say it takes 3 days to settle. Is that only for cash accounts, or for margin too? If I bought $1000 of something and then sold the same day, since I would have a margin account, could I purchase another $1000 worth, or would that be considered borrowing since the original funds are unsettled? Thanks for the help!

To answer some of your questions.
Yes you can have a margin account and only use your own money.
I think if you have a margin you can use unsetteled funds to repurchase another stock but then you are useing borrowed money. I use a cash account so I am not sure.
The 90 day restriction is not a good thing( you get this if they list you as a pattern day trader) it would lock up your money for three months.
Your best bet is to call Ameritrade and ask them these questions. Get the name of the person that is giving you the answers so you can cover your butt if there is a mistake.


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Ramius
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With Choicetrade you don't have to wait for the fund to "settle" before using the funds again.

If you buy stock X and sell it the same day the proceeds from that sale will be available for you to trade with again the very next morning. If you wanted to WITHDRAW the proceeds from that sale from you account then you would have to wait the three days.

Posts: 722 | From: Richmond, Va , USA | Registered: Mar 2004  |  IP: Logged | Report this post to a Moderator
   

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