Is it ok not to have enough fund in Cash Acct. until settlement date?+another questn

[cjs516]

Ok, I understand that the settlement takes 3 days from the transaction date and that's when one needs to pay up.
So then for cash accounts, as long as I have the fund in the account within 3days, can I exceed the cash available when purchasing an equity?

Secondly, I'm aware that I can sell equities before the settlement date. But what about buying equities again right after? Same rule for TSX, NYSE and NASDAQ?

Sorry for such newbie questions.

[potato]

If the trade is allowed they will charge interest on the neg cash.

[cjs516]

Hmm, I see, thanks.

What about the 2nd question? Can I buy again right after selling equities that are not settled yet? And would it be applicable in NYSE and NASDAQ?

[Thalo]

Hmm, I see, thanks.

What about the 2nd question? Can I buy again right after selling equities that are not settled yet? And would it be applicable in NYSE and NASDAQ?

Yes, yes and yes. Just make sure you have the cash in the account on the settlement date.

ie:
1. buy at T
2. sell at T+1
3. buy at T+2
4. cash in account at T+3
5. cash out of account at T+4 (though you might as well leave it)
6. cash in account at T+5

[urban1]

If the trade is allowed they will charge interest on the neg cash.

Interest should only get charged on a settlement date basis.

From Interactive Brokers:

Why is Settlement/Value Important?

Only settled money is considered for interest rate purposes. When one buys stock, one retains the rights to interest on the money until settlement date. Similarly, sellers only start to receive interest starting from settlement date.

Settlement/Value Dating is generally a minor consideration for stock, option, and future traders. However, due to the large amounts of capital involved, it is critical for FOREX and fixed income (bond or money market) traders to thoroughly understand value dating.


Hmm, I see, thanks.

What about the 2nd question? Can I buy again right after selling equities that are not settled yet? And would it be applicable in NYSE and NASDAQ?

In general yes. Talk to your broker about this one though. And dont expect make intraday trades buying selling buying selling buying selling with each trade valued at your total equity.

[cjs516]

Thanks guys!:)

[SpillOnAisle9]

In general yes. Talk to your broker about this one though. And dont expect make intraday trades buying selling buying selling buying selling with each trade valued at your total equity.

I've never had any problem going in/out/in/out in the same day with
InvestorsEdge and using the total equity amount. It's all handled properly.

The only wrinkle happens with multiple lots......The other day I sold
1000 shares of something and it processed as 3 lots (600, 300, 100).
The transaction listing showed commissions charged on each of the
lots. I called up EE and asked WTF and they said it would be adjusted
the next day when the system noticed all three transactions happened on
the same day........and it did....however if I was trying to go all-in-all-out
and multiple lots happened I would have been negative during that day.

If you are going to do this it might be a better idea to make the order
'all or nothing' and then it goes through with the fees being predictable
(just remember it's not guaranteed to go thru because of the all-or-nothing
setting though....but that's another issue)

[WHO]

I guess it depends on internal rules. With Scotiabank, in my RSP account, I used to be able to place a buy order and wait for the settlement to "settle" (makes, sense, eh).
But, during the "financial crisis", I guess their rules changed at some point, because of the liquidity crisis perhaps. They don't allow me to do it anymore. When I argued that I used to be able to do it, they just said "you can't".

Not a big deal, I lose 3 days of interest on my money, that's all.

[monty613]

I guess it depends on internal rules. With Scotiabank, in my RSP account, I used to be able to place a buy order and wait for the settlement to "settle" (makes, sense, eh).
But, during the "financial crisis", I guess their rules changed at some point, because of the liquidity crisis perhaps. They don't allow me to do it anymore. When I argued that I used to be able to do it, they just said "you can't".

Not a big deal, I lose 3 days of interest on my money, that's all.

at most brokers you need cash, or near-cash (money market instrument) to place a trade in an RSP. this prevents people from buying too much forcing an overcontribution.

[WHO]

at most brokers you need cash, or near-cash (money market instrument) to place a trade in an RSP. this prevents people from buying too much forcing an overcontribution.
That's why I was surprised they suddenly stopped allowing me to do it. I do have money market funds, and every time I placed a buy order, I wouldn't wait for the settlement date and place a sell on the equivalent amount from a money market fund. It was just a scheme for me to keep earning some kind of interest on my money in the meantime. For 3 days, it's not necessarely a big deal but let's say there's a week-end in the middle, it becomes 5 days, again not a big deal but 5 days is more than 1% of a year :D

[heymike]

Many years ago I was buying and selling within 48 hours; never had enough cash in the account to cover it all; but due to diversity and timing and what not I never actually went into the red as far as a cash balance. I was called by a TD waterhouse rep; who gave me a warning about it stating you can use the grace period to create a float.

This was years ago, Nortel at 9.50 a share was the trade they called me on; I was making some good money though, despite the $29 commission; you just had to have a few thousand shares and level II market quotes. (these trades were over my actual net worth) I bought anytime the smart guys were getting the hell out; a lot of volume would nail the price down $0.50 to $1.00; then I jumped in for the sucker rally, usually the $0.25 to $0.50 pop. I did this about 7 or 8 times over a week, till I got the call.

But I was making money, so, I lowered the overall amounts, then the commissions made it unfeasable. This I switched to lower valued shares, it worked great....until it didn't. (who knew they could halt shares the second the entire board of directors walks away. $1,500 education right there)