I sold my ETFs today in a non-margin account in an online trading platform.

99.99% of my account currently consists of unsettled funds. What does it mean that they are "unsettled funds"? Does it mean that the trading platform hasn't sold them yet?

  • If the trading platform hasn't sold them yet, can my P/L change from what is displayed presently, once the actual sale occurs?
  • If the trading platform has sold them already, why doesn't it allow me to buy a different security today from the cash from the sale?

3 Answers 3


The term "unsettled funds" is a legal term, defined by legislation and judicial decisions and enforced/monitored by the SEC. The intuition is the idea that while a financial transaction on a security may be processed at one point in time, the "settlement" of the cash takes time and could end up reversed or delayed (such as for rule violations, investigation, etc.). As such, if you trade with that money then the legal argument is that you were actually making trades with purchases you didn't really have the cash for with 100% certainty, and thus you were effectively engaging in a risky activity using extended credit. In a cash account, as distinct from a margin account, this can be a rule violation according to the SEC, because the whole definition of a cash account is you can only buy things you have the cash for with no credit involvement and no risk of making a trade you don't have the money to fully cover.

Depending on the nature of the security you sold, the legal amount of time it takes to settle is generally 1-3 days, but you should look for your trading platform's "Unsettled Funds Rule" policy to see. As an example, Ally gives this explanation for stocks and options, and Trading Direct gives a "Cash Account Trading: Unsettled Funds Rule Summary" here. Fidelity gives more detail on ETF settlement periods, including the different classes ETF-like securities, here (2 days settlement for ETF, less for other security types.

99%+ of the time, unsettled funds are your money, and having funds as unsettled does not mean that the transaction of selling/buying did not occur and is not closed - it just means the funds have not been allowed time to "settle". Think if it like the time it takes a check to clear, basically.

Buying/selling with unsettled funds in a cash account can be an SEC rule violation (the particulars being apparently somewhat complicated), so you just have to wait the 1-3 days for the funds to become defined as settled before you can make additional transactions.

  • 1
    That makes sense for individual stocks and bonds, but how do open-ended funds work? I thought that when you sold fund shares that the underlying stock shares (or bonds) went back into the brokerage's "pool" to then be bought by someone else. (Otherwise, how can you sell fractional shares?)
    – RonJohn
    Aug 5, 2019 at 16:42
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    Options and futures are T+1. Stocks and ETFs are T+2. Mutual funds bought at an outside broker are T+1. Mutual funds bought from the issuer are immediate (buying and selling a Fidelity fund from Fidelity). Aug 5, 2019 at 16:50
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    @RonJohn Good point, I added additional source from Fidelity that covers this. The settlement period differs depending on the type of security, and they say open-end mutual funds settle next day while ETF requires 2.
    – BrianH
    Aug 5, 2019 at 16:51
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    "Unsettled" means payment has not been made and legal title has not passed yet (takes 2 days, "T+2" for stock, or 1 day "T+1" for options). It is rare that this process doesn't happen.
    – xirt
    Aug 5, 2019 at 19:36

You sold your ETF shares so the transaction is complete. Poof! Your shares are gone.

Equities have a T+2 settlement date. Since it's a Cash Account, that means that the proceeds from your sale will be available for trading in two days.

In a margin account, your broker would allow you to buy other securities immediately.

  • This alone is a huge reason to have a margin account. I wish I knew this. The flexibility of switching from Bull to Bear at will and vice-versa is a great advantage, even if you don't use leverage normally.
    – Zesty
    Aug 5, 2019 at 19:21
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    Just make sure that you don't run afoul of the Pattern Day Trader rule (if you have less than the $25k of minimum equity required) Aug 5, 2019 at 19:33
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    ..and mind the margin requirements. Uncleared funds can generally not be used to shore up the margin. There is also an outside risk that settlement does not proceed, especially when dependent upon an earlier transaction that is deemed "obviously in error".
    – mckenzm
    Aug 6, 2019 at 2:39
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    Day-trading with unsettled funds is prohibited in cash accounts. This is not the case in a margin account. Aug 6, 2019 at 3:03

The term refers to what happens behind the scenes. When you place a trade, it takes about 2 days for the trade to settle. If that trade is a sell order, you will need to wait for 2 days to reuse the capital. In the meantime, it is unsettled.

This doesn't affect the profitability of a trade.

Think about it like buying an item on eBay and paying by check. You agree on the price and make the deal, but the deal isn't really paid for until the seller receives your check by mail.

Trading with unsettled funds can lead your broker to freeze your funds. Plus, it's annoying to wait for funds to settle if you see a good investment opportunity. The best solution is to convert your account to a margin account. With margin accounts, you do not need to wait for funds to settle, so you can recycle your cash easier.

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