i just started investing online and have a few thousand in it . I have a play that i want to get in and out of a stock quick. in my sharebuilder account, could i buy more stock than i have actual money for…(for example. i have . I buy ,000 worth of a stock. i sell it later in the day or 2 before it hits my bank account.) please only yes its possible or no its not. I want the legality, not the good or bad of it. thank you
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Is this legal/will it work with online brokers?
Life's A Beach 1:02 pm on February 26, 2010
What you are describing is called free-riding and is illegal.
Common Sense 1:02 pm on February 26, 2010
You can buy 50% more stock than money you have a margin account.
Otherwise what you’re trying to do is illegal.
Joseph F 1:02 pm on February 26, 2010
In a Sharebuilder Margin Account, if you have a dollar (plus commission, plus monthly fee), you can buy $1.50 worth of stock. It never "hits your bank account", your margin purchasing power is based on the value of your Shareholder Money Market account…
Bob 1:02 pm on February 26, 2010
In margin accounts, you can use 2:1. Some people who do day trading can get approved for higher ratios intra-day.
If you don’t have funds in the account, either the order will be refused or you will be asked how you intend to pay for the stock. If you answer that you will sen a check in 3 days and then don’t send a check, but sell out, you have lied to the broker and cause him to assume a lot of risk. They might let this happen once. I’m sure that I could do it where I’ve been a customer for a long time, because they’ll believe a mistake once in a while. But, if they think this is a strategy of yours, they will close your account and black list you.
A nobody 1:02 pm on February 26, 2010
Not it is not legal and it will not work
Sharebuilder is not an online brokerage firm that supports a trading platform
What you want to do is called "free riding" it is illegal as per the Federal Reserve who control the receipt of monies for securities purchases, it is also in violation of the Securities & Exchange Act of 1934;
The brokerage firm can not pay you the proceeds of sale until they have received payment in full for the purchase of that security,
If you send a check to the B/D, knowing that you do not have the funds in the account and you are waiting for the B/Ds check to cover it, you are check Kitting, which is illegal and the writing of the check could be considered fraud and punishable as such
You can try it, if caught and the chances of you being caught is about 99.9% you will, your account will be suspended and your name could be reported to the reporting agency that tracks such customers and provides such information to most B/Ds in the industry.
Believe me, I spent 7 years of my life with a regulator working on B/D and customer fraud cases