Investors... Whats a free ride?

[Shockwave]

Ok, I made a stock purchase. Sold it, then turned around and made another.
Now, I got a warning confirmation that if I sell the stock I currently own before the settlement of my previous sale occurs I will have done whats called a free ride.
What is this? Is it bad? Will i have my spine ripped out and be cursed to Hell or is it nothing to really be worried about?
Thanks

 

[daclayman]

depending on your broker, you have used proceeds (money) from a sale of stock that has not hit the clearing house or you have purchased an amount of stock larger than cash on hand (without posessing a margin account) and then sold it. The 'free ride' refers to the fact that you have used cash that you did not have in your account. You will need to sell some shares or add additional monies to offset the free ride amount. you have violated an SEC rule; it should be listed in your broker agreement thingy. i can't remember the consequences; possibly a 30-day suspension from trading or a freeze on assets. call your broker, act stupid and add funds to make up the free ride amount.:beer:

 

[Shockwave]

Originally posted by: daclayman
depending on your broker, you have used proceeds (money) from a sale of stock that has not hit the clearing house or you have purchased an amount of stock larger than cash on hand (without posessing a margin account) and then sold it. The 'free ride' refers to the fact that you have used cash that you did not have in your account. You will need to sell some shares or add additional monies to offset the free ride amount. you have violated an SEC rule; it should be listed in your broker agreement thingy. i can't remember the consequences; possibly a 30-day suspension from trading or a freeze on assets. call your broker, act stupid and add funds to make up the free ride amount.:beer:

Cool, thanks! 🙂
Planned on stopping by tomorrow (Today? Frickin night shift) and talkin to them, just wondered if I was lookin at gettin an ass chewin or not.
Act dumb? Are you daft? Its no act! 😀

 

[rgwalt]

You sold stock that you owned and used the money to buy more stock. That is fine. If you sell the new stock before the transaction completes on the old stock that you sold, you will have taken a 'free ride'. That is, you will have bought, sold, and possibly made money on stock you never had the cash to cover (because your first sale hadn't gone through yet). Make sense? Just hold on to the new stock you bought until the sale on the old stock goes through.

Ryan