The Question and Answer Board

[Porgie Tirebiter]

No, I think we're in agreement. In regard to valleyview's original question, Reg-T pretty much says you can't sell something you don't own.

If I buy ABC with fully settled funds, I own it instantly because I paid for it with my own cash on hand and so I'm free to sell it 5 minutes later if I want to. If I buy XYZ (using the same cash from the ABC sale) 5 minutes after that the broker can legally place the shares in my account because the broker has a "reasonable expectation" that I will be able to pay for them by the settlement date (T+3). But I don't truly own XYZ (and therefore can't sell it) until the ABC trade has fully settled.

And actually T+3 is a reduction, it was T+5 previously.

Settlement on Sell to Close options transactions is T+1. On Buy to Close there is generally no settlement time involved as you only sold an obligation. There may be some restrictions if you are using borrowed cash or margined securities as collateral but that is an area way out of the range of my expertise.