I have a cash account without margin. Usually after selling stock cash settles according to T + 2 algorithm. But sometimes my buying power increases right after selling so the cash settles immediately. Is it what they call T + 1? On what does it depend? Thanks!
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2This is true "buying power increases right after selling", but it does not imply "therefore the cash settles immediately". It just means that the broker is willing to let you use the fact that (T+2) for a past transaction comes before (T+2) for a future transaction.– Ben VoigtCommented Nov 7, 2019 at 15:32
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1note also that even though you do have the 'buying power' right away, if you use it to buy something and sell that something again within the original two days, you have a trading violation - this is not obvious. google 'good faith violation'.– AganjuCommented Nov 7, 2019 at 19:19
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@Aganju that's true! I checked my trading history and realised that i sold ABC, bought XYZ and sold XYZ on the same day. And after that i could buy only using my settled cash. Thank you a lot. If you want you can make it an answer and i will mark it as a right answer.– korsunCommented Nov 8, 2019 at 13:35
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2 Answers
Even though you do have the 'buying power' right away, you do not 'have' the money before it is 'settled'. Your broker is allowing you to already buy something else with that money - as do most brokers - because whatever you buy is also only due after the settlement period.
Note however, if you use it to buy something else, and then sell that something again
within the original two days, you'd have a trading violation - and this is not an obvious thing:
Basically, you are making a profit (by buying and selling) with money you didn't yet 'have'. That is considered a trading violation, according to US trading rules. It would allow a huge leverage for all traders if allowed; as a consequence, you cannot do multiple trades with the same cash within the settlement period - after the first sell, the cash is considered 'used' for the next two days.
It looks like your broker is blocking you from doing that. Some don't block you, and then afterwards lock your account for the trading violation.
Google 'Good Faith Violation' to learn more about it.
Government securities and options usually settle on T+1.
Stocks, corporate bonds, municipal securities, and ETFs settle on T+2. I don't recall the details but IBKR offers T+1 early settlement on some equities but the securities available for this is at their discretion (check their web site for details) Sometimes, a buy-in of a short equity position can lead to T+3.
I'd suggest that you double check your Account Window and make sure that you are looking at the correct info. Look at the Available For Trading window and see if the number is different from the Buying Power amount.
answered Nov 7, 2019 at 17:17
