If you are a young investor and are looking for a way to get started with financial markets. Webull is the ultimate platform for you. Unlike other platforms, this one allows users to enjoy commission free trading and do not require any minimum account size. Since it is not a full-services broker, traders will require to consider DIY approaches when it comes to portfolio management. As you trade at Webull, chances are that you will come across terms such as unsettled cash.
In most cases, you will come across this term whenever you are trying to withdraw money from your account or you intend to place a trade on this platform. If you are an investor on this platform, there is a need for you to know what unsettled cash is and how it can relate to your investment activity moving forward. In this article, we shall take a closer look at what is unsettled cash in Webull, among other related ideas.
Unsettled Cash On Webull
Simply put, this refers to the proceeds or gains obtained from the same of a security that is yet to be deposited in your account. Typically, this delay can be attributed to the 2-day settlement period that is commonly used by online brokers.
It is imperative to note that the unsettled cash is not a reflection of the balance in your Webull account. In addition, you cannot use it to purchase stocks until the two days are over. Once the deposit reflects in your account, you can now go ahead and trade on Webull.
Unsettled Cash And The T+2 Settlement
Previously, the settlement period used to be 3 days. This means that it took 3 days for one to benefit from the sales of securities on Webull. However, this was the case till 2017. After 2017, this period was shortened.
Unlike the yester years when there was a lot of paperwork, nowadays, there are paperless shares that have made trading easier than ever. With the inception of computer networks, transferring money and securities takes place almost instantly. Here, transfers are able to enjoy the T+2 settlement cycle. To put this into perspective, traders can now purchase a security and their payment will be received by their respective brokerage firm within a period of 2 days from the day the trade was executed.
How Long Does Unsettled Cash Take On Webull?
If you are an active investor, chances are that you are looking for a way to get the most out of your money fast. Just like other platforms, you might be curious to know how long your unsettled cash will take on Webull.
Typically, unsettled cash takes 2 business days on Webull platform. Therefore, once you trade a stock, you will get the proceeds from that trade after 2 business days. However, there are exceptions when the proceeds from your trade might be transferred to your margin account almost immediately.
For instance, if you trade a stock that is not yours and intend to purchase the same at a relatively lower price, be sure that it will be delivered to your prospective buyer and still be able to keep the profit earned on the go. Therefore, you will not have to wait for days for the proceeds to reach your account. After all, this is a short sale and all the gains are always transferred to your account instantly.
Can I Trade With Unsettled Funds On Webull?
From the discussion above, it is evident that you cannot get proceeds from your trade immediately unless it is a short sale. You might have to wait for about 2 days from the day you executed the trade for you to trade again. This is because that is the period when you the proceeds of your trade will hit your account.
Just like any other investor, you might be wishing to reinvest your funds after selling your stocks on this platform. However, the proceeds from that sale will always be categorized as unsettled funds. The good news is that you can now trade with unsettled funds on this platform. However, this comes with a couple of restrictions.
For instance, you will not be in a position to purchase or even sell certain securities until all the funds are settled. If you try to trade several stocks within a short span of time, you will be subjected to a day-trading limit.
Besides this, your broker or brokerage company might have to wait for a couple of days before they can withdraw them from your account. However, if you choose to trade a security before the settlement date and then fail to deliver the security to your prospective lender or buyer, you will be deemed to have a good faith violation. Here, you will have liquidated your stocks that you have purchased using unsettled funds.
In simple terms, you will not have any securities in your account that you can deliver to the lender or buyer on the other end. If such happens, the lender or buyer can file a claim with FINRA and demand to be paid for the damages caused.
Once you liquidate stocks that were purchase using unsettled funds, known that no stock liquidation or cash deposit will be able to mitigate the situation. Each of the Good Faith Violation will remain in your account for 12 months and will expire on the 13th month.
In case you engage in Good Faith Violation for 3 consecutive times, your account’s buying power will be limited to just settled funds only. Therefore, you might not be able to trade with unsettled funds. After the 4th GFV on Webull, your account will be limited for 90 days. Finally, after the 5th GFV, your account will be closed for a period of 90 days. If you possible, try to avoid Good Faith Violation so that your trading account can remain in a pristine state.
Why Is Your Unsettled Cash Negative On Webull?
The above-mentioned phenomenon is common if you trade stocks on provisional credit. Like we mentioned above, you are free to trade with unsettled funds. However, the money that you will use does not belong to you per se.
This is the reason why it is commonly known as provisional credit. Your balance will remain negative as you will be spending more money that you already have in your trading account. However, once the funds have settled, this condition gets fixed on the go.
What Are The Precautions That One Should Consider When Trading With Unsettled Cash On Webull?
Like we have states above, you risk your trading account being restricted or even closed if you continuously make Good Faith Violations on Webull. For instance, if you sell shares of Y on Tuesday, you can expect settlement to be done on Thursday. Your unsettled cash in this case can be $150 after you execute the trade. With the unsettled funds amounting to $150 in your trading account, you can go ahead and purchase shares of G worth the same amount of money. In case the shares of G are sold before Thursday, you will have fulfilled the conditions of Good Faith Violation. However, in case you sell the shares of G on Thursday, there will be no Good Faith Violation.
From the above-mentioned illustration, you can now use the funds to trade or purchase other stocks. As long as the new trade will not be closed before the settlement of the initial trade, you will be good to go as you will not have caused Good Faith Violation. In fact, if the new trade closes on the same day that the settlement of the initial trade is done, the better for you.
Can I Use Unsettled Cash Before Settlement On Webull?
Well, this depends on the type of trading account you have on Webull. For instance, if you have a margin account, be sure that the unsettled funds will be available immediately you trade the stocks. However, for cash accounts, the way you utilize unsettled funds can mean make or break for your trading account. This is because you might end up causing Good Faith Violation and such violations might lead to restriction and potential closure of your trading account.