Margin account question

[legion3pm]

In a Cash account after you sell your stock you have to wait three days for your funds to settle before you can buy and sell again (unless you buy again and hold the stock for three days). Do you also have to wait three days if you have a margin account, or can you buy and sell without waiting as long as you have the buying power? Hope that makes sense.

Also if you buy with margin and dont sell the same day but hold for a day or two how do the interest rates work? Is is day by day or by loan no matter how long you hold it?

Goods you use Scottrade. If i borrowed $3000 on margin which gave me $6000 of buying power and bought the stock say tuesday and sold it wednesday how much interest would i owe?

[Goods]

Hey legion-- The interest on a margin account accrues from the time you borrow it but as far as I know, it depends on the broker how much they charge or when they decide to add it up.

I know it's bad but I don't pay attention to margin interest. My account tends to float up and down so much it's an afterthought.

Using your example, margin interest is, say, 10% APR. You borrow $3000. (This is simplified btw)
-- 10% interest yearly is $300
-- Divide by 12 months = $25 month
-- Divide by average of 30 days per month = $.83 day. This is taken directly out of your account at the end of the month just like a bank. And just like a bank, they pay interest to you if you have cash sitting in your account not being used.

So hopefully, your $6000 worth of stocks goes where you want it to and you cover the commisions, the margin interest and make a tidy gain.

[sesh]

The calculation shouldn't depend on the broker other than the interest rate.

If you buy on margin but hold for a day or two, then you will be charged a day or two's worth of interest. So if you borrow $3000 for 1 day at 9.25% it is $3000 * .0925/365 * 1 (#number of days borrowing) = $0.76.

Also, when you get filled on a sell order you are able to buy something else right away, you only have to wait the 3 days for settlement if you are withdrawing funds, as anytime you buy something you don't have to pay for it for 3 business days. Hope that helps.

[legion3pm]

OK so a margin account eliminates the three day settlement that occurs with a cash account as far as buying and selling stock. I was wondering b/c i read that if you buy and sell in a cash account and used the money from the sell to buy again that you cant sell those stocks for three days until the previous transaction has settled. The way I understand a margin account working is that you can buy and sell without worrying about settlement dates and the only thing you have to worry about it being deemed a daytrader if you dont have the $25000 minimum.

example

$4000 cash in margin account which would give you $8000 buying power.
Buy $4000 worth of stock and sell it in the same day as soon as you sell it do you have $8000 worth of buying power again? or do you have to wait for that to settle like in a Cash Account?

[legion3pm]

To sum it up can you get called for a Freeride in a margin account like you can in a cash account?

[sesh]

legion both a margin account and cash account work the same way in your example, you will regain your full buying power right away once you sell. The only time you really care about the settlement cash is for withdrawing funds, or for purposes of interest calculation.

Type margin account in investopedia and you read more about it, because I'm afraid I'm just adding to your confusion.

[legion3pm]

yeah i guess my example was a little bad. i know in a cash account that after you sell your stock you get the money back right away to re-buy stock but you cant actually sell that stock until your money from the first buy/sell settles b/c if you do its called a "Freeride" and they'll shut down the account. i was wondering if a margin account was the same or if it eliminates the "Freeride".