Expert: Wong Chin Woon - 7/11/2006

Question
I have a cash account and would like to trade regularly, but not neccessarily every day.  However, I'm wondering about a couple of issues:

1) Can I buy a stock at say, 10AM, and then sell it at 2PM, or even the next day?  I heard that CASH accounts take 3 days to settle, so I don't know if I'm allowed to sell a stock I don't "officially" own yet.

2) If I can do #1, I hear that I'm not allowed to use the proceeds of the sale to buy and sell any other stocks until the SALE has settled 3 days later, or else I'll be charged with a "free ride".  So WHY oh WHY do they credit my account right away?!

Also, if you don't mind, a quick question about margin accounts.  Can you buy stocks in a margin account without ever having to borrow at all?  I hear margin accounts solve the above two problems (I can buy and sell whenever I want), but I don't want to borrow!

Thanks!

Answer
Hi Jerry,

Different country have different practices so if you are in Singapore I can tell you the exact answer.

1. Over in US (I assume you are in USA) I think they did not encourage speculation rather they want some short term trading hence it take you 3 days for the trade to settle. I am not sure whether you can short sell a stock over in US. In Singapore, if you do that there will be a penalty charge and the exchange will do a force buy above the market price after 3 days time limit is up.

2. Each exchange have their own rules and regulations. Whatsoever the reasons, mainly to stop speculation.

Of course you can do that. I believe in US the criteria should be about the same. By the way, the other type is called Contract For Different, a leverage products for single stock futures. You can take a look into it.

Cheers!

Wong