What are unsettled funds?
When you sell a security, the proceeds from that sale are known as “unsettled funds”. A stock trade takes 2 business days (Trade date + 2 days) for the trade to settle, and options take 1 business day (Trade date + 1).
For example, assuming there are no market holidays, a stock sale on a Monday will settle that Wednesday. An option sale on a Monday will settle that Tuesday.
How can I avoid Good Faith Violations?
You can avoid GFVs by only placing trades up to the settled cash amount in your account, holding the position you bought on unsettled funds until the original trade settles, or depositing funds to cover the cost of the newly purchased position.
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