stock question

[sweetpetutie]

This stuff makes my head spin and I don't want to get in trouble somewhere along the line. For example, I have $1000 to trade, I want to buy $500 worth of stock but get this message: "This buy order was accepted without sufficient settled funds to trade in your account. If you subsequently sell this security without first delivering sufficient cash by settlement date, you may incur a trading restriction requiring settled cash up front for future purchases." So, if what I have to trade is more than the cost of what I want to buy, what's the potential problem?? Also, if a 'day trade' and the market is closed, does it go to the next day or end?

 

[Tilted]

This stuff makes my head spin and I don't want to get in trouble somewhere along the line. For example, I have $1000 to trade, I want to buy $500 worth of stock but get this message: "This buy order was accepted without sufficient settled funds to trade in your account. If you subsequently sell this security without first delivering sufficient cash by settlement date, you may incur a trading restriction requiring settled cash up front for future purchases." So, if what I have to trade is more than the cost of what I want to buy, what's the potential problem?? Also, if a 'day trade' and the market is closed, does it go to the next day or end?

(1) Did you just sell something else to give you the $1000 or did you just deposit that money?

If the answer to (1) is no, then:

(2) Is this a margin account - and if so, is the $1000 your 'Money Balance' or your 'Buying Power'?

 

[sweetpetutie]

(1) Did you just sell something else to give you the $1000 or did you just deposit that money?

If the answer to (1) is no, then:

(2) Is this a margin account - and if so, is the $1000 your 'Money Balance' or your 'Buying Power'?

I sold recently to have money to buy something else, but how long does it take for it to be available? As for question #2, I haven't a clue.

 

[Tilted]

I sold recently to have money to buy something else, but how long does it take for it to be available? As for question #2, I haven't a clue.

How long actual settlement takes depends (though we shouldn't be talking about more than a few days) - but, it sounds like they will let you make another stock purchase with the unsettled funds (which is what I'd expect). They just don't want you to sell that new stock right away (i.e. until you actually have the money in your account to pay for the stock you bought).

If you want to be certain what your situation is before acting, you should call or send an email to the broker (I assume you're using someone like ETrade, Scottrade, etc.).

Knowing that you just sold stock, I don't think the second question matters - it doesn't relate to the likely issue.

 

[sweetpetutie]

Thanks a lot. That makes perfect sense.

 

[hooknline]

it takes around 3 days to settle for most companies and a bit longer if you buy small cap stocks. The rule is from the IRS "The stinking $@#^%"
If you sell before settled then it is in violation of internal revenue rules and is called "free ride". The broker will report you if you make the mistake and sell before account settles. best to wait untill you get notification that account sale /purchase has settled before moving on. I learned the hard way once