In observance of Memorial Day, the securities exchanges and Firstrade are closed on Monday, May 28, 2018.

Margin Loans

Margin Requirements Scenarios
Margin Buying Power Scenarios
Margin Call Scenarios
Good Faith Violations and 90-Day Restriction Scenarios
Pattern Day Trader Scenarios


Good Faith Violation Scenario

(Cash account only) Amy starts on Monday with 100 settled shares of XYZ stock, and sells them for $2,000. The proceeds from the sale will settle on Wednesday (T+2), but Amy decides to go ahead and invest the unsettled proceeds in UVW stock, which she buys for $1,000. On Tuesday before the XYZ trade settles (T+1), Amy sells her UVW stock for $1,500.

In this case, Amy created a Good Faith violation by selling her UVW stock prior to the settlement of the XYZ proceeds used to buy it. Learn more about Good Faith Violations.

90-Day Restriction Scenarios

Scenario 1 : An investor day trades using unsettled funds.

Nick had a $1,000 account balance in his cash account on Monday. He then bought $1,000 worth of ABC stock and sold it on the same day. Later that same day, Nick saw the price of ABC drop and decided to buy another $1,000 worth of ABC stock using the unsettled funds he had from selling ABC stock earlier. A 90 day restriction occurs.

Scenario 2 : When an investor sells securities that were not fully paid for by the settlement date.

Jake has $1,000 in cash in his account and he decided to place a market buy order on ABC stock on Monday. The market price inadvertently went up, and the order was executed at a higher price. Jake ended up buying $1,300 worth of ABC stock that was not fully paid for.

Since the trade was made through a cash account where no margin trading is allowed, Jake has to deposit $300 within 5 business days before selling the security. If he sells this position without fully paying for the security, his account will face a 90-Day Restriction.


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