What are unsettled funds?
When you buy or sell securities, the funds and securities enter a settlement period to legally transfer ownership from the seller to the buyer. The funds used to purchase a security are immediately debited from the account. However, proceeds from the sale of a security aren’t credited to the account until those funds have ‘settled’.
How about the settlement time?
Settlement times can range from one to three business days, depending on the type of security. However, as of May 2024, most securities have a T+1 settlement (trade date + 1 business day). This includes stocks, bonds, municipal securities, exchange-traded funds, certain mutual funds, and limited partnerships that trade on an exchange.
Can I trade with unsettled funds in Alpaca?
Yes – all of our user’s accounts are set up as margin accounts or limited-margin accounts (less than $2,000 in equity). Regardless of your account type, we cover the float between the time equities are purchased and settled. There are no costs associated with this and you don’t need to wait for trades to settle before using the proceeds to buy more equities. However, there are some transactions in which unsettled funds cannot be used. As an example, unsettled funds cannot be used to purchase cryptocurrency, nor can they be withdrawn from an account.
Trading on margin involves risk. You can actually lose more money than you deposit in a margin account. A decline in the value of the securities you purchase on margin may require you to provide additional funds to Alpaca Securities LLC in order to avoid the forced liquidation of those securities or other securities in your account. Individual securities may also require a higher margin maintenance. For more information, please read the Alpaca Margin Disclosure document here.
This article is solely for informational purposes only. Alpaca does not recommend any specific investments or investment strategies. Investments in securities involve the risk of losses and past performance does not guarantee future results. Before investing you should carefully consider your investment objectives, time horizon, and overall risk tolerance as well as the information stated in the product offering prospectuses.