Understanding the basics of your cash account

E*TRADE Securities

02/28/19

You may find a cash account beneficial for your investing needs because you can use it to buy stocks, bonds, or even mutual funds and these securities are owned by you.

What are cash accounts?

Cash accounts require that all stock purchases be paid in full, on or before the settlement date. The settlement period is the time between the trade date (the date when the transaction occurs) and the settlement date (the date when the payment is made and the transfer of the securities’ ownership occurs).

In general, stocks settle T+2, i.e., trade date, plus two business days.

However, keep in mind that banking holidays, like Columbus Day and Veterans Day, are non-settlement days where the securities markets are open. While you can trade on these days, they are not included in the settlement period.

In cash accounts, selling stock short and selling uncovered options are not permitted.

What about your buying power?

The buying power in a cash account is the maximum dollar amount that is available for placing trades. Settled funds, unsettled funds-available, and unsettled funds-unavailable are used to determine a cash account’s buying power.

Hypothetical example for illustrative purposes only, does not include commissions or fees.

If you think a cash account might be right for you, you’ve come to the right place. Let E*TRADE help you with your trading needs. Open an account to start trading with E*TRADE today.

What to read next...

There are rules you should be aware of when trading in cash accounts. One rule of cash accounts is when you buy securities, you must fully pay for the securities on or before the settlement date. If you aren’t fully paid by then, you could create good faith or freeride violations.

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