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American Capital Agency Corp. Message Board

  • faaqcee faaqcee Aug 19, 2011 10:58 AM Flag

    Question For The Board:

    I just put a limit order in for a buy of AGNC at 28.75. Scottrade had a message that said my funds were not yet settled from my previous sale. The message stated that I was given a "free ride", but the order went through anyway. Are there any inplications that I should know about, i.e., additional taxes or fees, or if I am doing something illegal. I really can't see me having to wait three days or so in between trades if I were to come across what I deemed a good deal. Your endearing apprentice, FOXY

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    • That's nice. I should've gone that route from the beginning then. I shall make a call on Monday then. Thanks Jim,you,as most of the ladies and gentlemen on this board, are Aces.

    • I'm just one of the little guys who knows even less. The lessons I've learned from people like you Reits far outweighs any bankroll I could ever amass. Thanks

    • Hey Foxy,

      The collateral is the "value" in your Scottrade account. No need to involve the Ex- Mrs. Foxy.


    • Iguess it would not hurt to fill out a form. If I could somehow use the "Wells" account as collateral, that would be the ticket. But if it somehow made the ex a beneficiary on the scottrade acct. as well, or if I needed a permission slip from her, then it would be a no go. I am currently living with a fine lady for the past 13yrs., 3x longer than when I was with my ex., since the divorce has been continiously contested it is a very sore subjuct with my current squeeze. I'd rather put up my house, which is paid off in full. I hope Fido doesn't bite,and loud barking doesn't faze me. Thanks for the heads up. FOXY

    • And here I thought you had unlimited resources...I am shocked! ;-)

    • I used to get messages like this before I had a margin account.

    • Very good answers all, thank you. You were all very kind and helpful in responding to my query. If it didn't mean anything I don't think they would have written it. Maybe they will try to charge me interest on the unsettled funds that were redistributed as stated by Island.

    • Hey Foxy,

      In my over zealous trading back in December of 2010, I too was the lucky recipient of a similar message from FIDO. Below is a definition of a "free ride":

      To answer your question re: taxes or fees, there aren't any, but under Fed. rules, your account can be frozen for 90 days if a specific number of "free ride" violations occur.

      The easy way around this is to make sure that your trading account has margin available. With margin, there is no "free riding", as the margin (money loaned to you by Scottrade) covers the subsequent purchase. Margin used in this manner is very inexpensive, and in many cases, free (margin is usually charged at the end of the trading day, based on your margin balance).

      I am by no means an expert, but I hope that this helps.


      • 2 Replies to ddjim2
      • From what I read, it is possibly that my account may be frozen for 90 days! I sure hope that is not the case. The broker(scottrade) knows that the money is there, even if the trade takes 3 days to settle. Being fully invested in volitile times provides a need to be agile regarding both purchases and sales. Take just this week for example, one could have found more than a few individual stocks with which to trade numerous times making money each time. If one were to be restricted to 1 or 2 trades per week, while the money is guarenteed to be there, how could anyone stay in step with such a volitile market? FOXY

      • If you sold the second security it is a free ride. You can sell and buy, but must hold the new security for three days.

    • If you have a margin account you can buy securities before funds are available from a pending transaction settlement, but you may get charged interest for the few days that money was borrowed to make the current transaction.

      • 1 Reply to island241
      • yourbestfriendintheworld yourbestfriendintheworld Aug 19, 2011 11:39 AM Flag

        In a margin account, the cash is yours to use at the moment of the sale, in the same way the shares are yours to use as of the moment of a purchase. But if for some reason the trade fails to settle then your use of the cash will be treated as a margin debt.

        One reason for this is that there's half a chance the counterparty in your transaction is your own broker acting as market-maker for the stock you sold. It would be unethical for them to pretend they couldn't settle your transaction immediately, since, in reality, everything in your account belongs to your broker and is merely assigned to your control in a way that acts, to your point of view, as though you own it (look up what "in street name" means).

        If you do it in a cash (non-margin) account, the broker is required to make sure you don't do it again for 3 months.

        I'm not actually sure what happens if you try it in a margin account where you're already at your margin limit. I've never been that profligate or unlucky, I guess.

    • If you upgrade your account to margin, you won't get that message anymore.

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