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If a stock is bought with unsettled Cash, is there a way to use margin to sell it immediately without a good faith violation?

Personal Finance & Money Asked on September 25, 2021

If I purchase a stock with unsettled cash, and then it immediately spikes, is there a way to use margin to sell it without invoking a good faith violation? Essentially borrowing the money until it settles from the previous transaction?

One Answer

For purchases:

You can only trade with settled cash in a margin account.

A margin account allows you to borrow cash from your broker to purchase additional securities (leverage). This is collateralized by cash and marginable securities in your account. You pay margin interest on the amount of the loan and must maintain sufficient margin should the price of your security(ies) drop.

You may also trade in a margin account with your own cash (no leverage). Since you are not borrowing money, you do not pay interest or fees. However, you are allowed to trade with unsettled funds.

Answered by Bob Baerker on September 25, 2021

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