Funds Available to Trade With

Funds Available to Trade With

When you would like to open a position in your Tradier Brokerage account, several factors determine how much stock you can buy or how many option contracts you can open. This guide covers buying power for stock purchases, short sales, and options across cash and margin accounts.

Buying Stock

The most important consideration when buying stock is whether you have a cash or a margin account. Cash accounts only permit the purchase of stocks with settled or unsettled cash you hold in the account. Margin accounts allow you to borrow funds to purchase stock if certain criteria are met.

Cash Accounts

Cash accounts display two numbers on the Tradier Dashboard:

• Available Funds: The total cash available to purchase stocks. When making a purchase, settled funds are used first. Once depleted, unsettled funds are used.

• Settled Funds: The total amount of cash that has fully settled and is available to purchase stocks.

Unsettled Funds (not displayed separately; calculated as Available Funds minus Settled Funds): Cash received from sales made during the same business day. Funds settle overnight, so proceeds from prior trading days will be settled at the start of each new trading day.

Freeriding: Using the proceeds from the sale of a security to pay for the purchase of that same security — before the original sale has settled — is known as freeriding and is prohibited. A freeriding violation can result in a 90-day restriction to your account, limiting purchases to settled funds only. If you have questions about whether a trade sequence could trigger a violation, contact us before placing the trade.

Margin Accounts (Non-PDT)

Margin accounts not designated as Pattern Day Trading (PDT) accounts display two numbers on the Tradier Dashboard:

• Option Buying Power: The amount available to buy non-marginable securities. This includes stocks priced below $5 per share, most leveraged ETFs, and other securities that cannot be purchased on margin. When previewing an order, the estimated cost will indicate whether the security is marginable.

• Stock Buying Power: When your margin account value is above $2,000, your stock buying power will be 2x your option buying power. This is the amount available to purchase fully marginable securities, which include most large-company stocks and standard ETFs.

PDT Margin Accounts

A Pattern Day Trading (PDT) account is any margin account in which 3 or more day trades are executed within a rolling 5-business-day period and those trades represent more than 6% of total trading activity for that period. Once flagged as PDT, the account must maintain a minimum equity of $25,000. For more detail, see our dedicated PDT article.

PDT margin accounts display an additional figure on the Dashboard:

• Day Trading Buying Power (DTBP): When your account value is above $25,000 and not in a margin call, your start-of-day DTBP will be 4x your option buying power. DTBP can also be used to buy fully marginable stock. When purchasing non-marginable stock, you may use up to 1/4 of your DTBP.

Additional DTBP rules:

• Selling securities you held overnight does not increase your DTBP.

• Your DTBP cannot exceed the level it started at for that day.

• Depositing funds intraday will not increase your DTBP for that day.

Short Selling

Short selling is available in margin accounts only. When you short a stock, you are borrowing shares and selling them with the expectation that you will buy them back at a lower price. The following applies:

• You must have a margin account with sufficient option buying power to meet the margin requirement for the short position.

• Proceeds from the short sale are not available for other purchases until the short position is closed and settled.

• Short positions are subject to margin requirements and may result in a margin call if the stock rises significantly in value.

• Not all securities are available for short sale. Availability depends on the ability to borrow shares.

If you have questions about short selling requirements for a specific security, please contact us by emailing service@tradierbrokerage.com.

Buying and Selling Options and Spreads

When trading options, only a limited set of strategies are permitted in a cash account. All other strategies require a margin account.

Cash Account Strategies

• Covered Calls: If placing a combo order where you simultaneously buy stock and sell a call option, the cash required equals the net cost of the order (cost of the stock minus proceeds from the sale of the option).

• Cash Secured Puts: When selling a cash secured put, you need cash equal to the exercise price of the put option, less any premium received.

  • Example: Selling 1 $50 put for $2 requires $4,800 in available funds ($50 x 100 – $2 x 100 = $4,800).

• Long Calls or Long Puts: You need enough cash to cover the full purchase price of the option contract(s). Remember to multiply by 100 for the total cost.

  • Example: Buying 3 call options at $0.40 per contract = $120 total (3 x $0.40 x 100).

Margin Account Strategies

• Covered Calls: The cash required equals the net cost of the order (cost of the stock minus proceeds from the option). The stock buying power requirement is the same as purchasing the stock alone. See the Margin Accounts section above.

• Long Calls or Long Puts: You need enough option buying power to cover the full purchase price of the option contract(s).

  • Example: Buying 3 call options at $0.40 per contract = $120 total (3 x $0.40 x 100).

• 2-Leg Credit Spreads: The requirement equals the difference in strike prices minus the premium received. You need sufficient option buying power for this net amount.

  • Example: Sell 1 $50 Call / Buy 1 $55 Call for a $1 credit. Net requirement = ($5 – $1) x 100 = $400 in option buying power.

• 2- or 3-Leg Debit Spreads: If there is no risk based on the strikes used, the requirement equals the premium paid. You need sufficient option buying power for this amount.

• 4-Leg Credit Spreads: The requirement is based on the higher-risk component of the spread (either the call spread or put spread side).

  • Example: Sell $50 put / Buy $45 put AND Sell $50 call / Buy $60 call for a $2 credit. The call spread has a $10 spread width vs. $5 for the put spread. Net requirement = ($10 – $2) x 100 = $800 in option buying power.

• Naked Puts: The requirement for a naked put is the greatest of the following calculations, multiplied by the number of contracts and by 100:

  • (a) 25% of the underlying price minus the out-of-the-money amount, plus the option premium

  • (b) 10% of the strike price, plus the option premium

  • (c) $2.50

  • Example: Write 1 $40 put for $1 when the stock is at $45. Using (a): (45 x 0.25) – 5 + 1 = $7.25. Requirement = $7.25 x 100 = $725 in option buying power.

• Naked Calls: The requirement for a naked call is the greatest of the following calculations, multiplied by the number of contracts and by 100:

  • (a) 25% of the underlying price minus the out-of-the-money amount, plus the option premium

  • (b) 10% of the strike price, plus the option premium

  • (c) $2.50

  • Example: Write 1 $58 call for $1 when the stock is at $50. Using (a): (58 x 0.25) – 8 + 1 = $7.50. Requirement = $7.50 x 100 = $750 in option buying power.

Options Strategy Quick Reference

If you have questions about buying power, margin requirements, or any of the strategies described in this article, our support team is happy to help.

Email: service@tradierbrokerage.com