If you have a cash account, settled funds refer to two types of funds:
Newly deposited funds
Funds settled from your sale transactions
Unsettled funds refer to the proceeds from the sale of a security prior to settlement date. Unsettled funds may be used to open new positions, but closing positions with unsettled funds may result in a Good Faith Violation.
Here's an example:
On January 1, you deposited $1,000 via Wire and purchased 10 shares of "ABC" stock at $100/share.
On the same day, you sold all 10 shares of "ABC" at $120/share and received $1,200 total sale proceeds; these sale proceeds would settle on January 2.
Prior to January 2, the $1,200 would be considered “unsettled funds”.
Please note that all dates mentioned are assumed to be trading days.
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