I received an e-mail today from one of my brokers today, Trade Station Securities to make me aware of a major change in how equity trades are settled.
For as long as I can remember a stock (equity) trade has been settled on a “T+3” basis. That meant that if I sold a stock today, the proceeds of that trade would not be available for withdrawal or other use for three trading days, “TODAY + 3”.
One of the many attractions to options trading is that option trades are settled overnight, “T+1″. If I was to sell an option contract today, the proceeds would be available to withdraw or use in another trade tomorrow, TODAY + 1”.
Apparently that is changing, well at least with regard to stocks.
According to Trade Station “On September 5, 2017, the timeline for equity trade settlement will be reduced from three business days after the trade date (“T+3”) to two business days after the trade date (“T+2”).
This great news if you are a stock trader. It really doesn’t have much impact on options traders except where an option contract assignment or exercise might take place. The most common of these would be having a stock assigned to you when selling naked put options or having a stock called away when a call option is exercised.
Traders who trade in margin accounts for either stocks or options will see very little to no impact from the new “T+2” settlement model.
Speaking of margin…..stay tuned for my upcoming discussion on margin types and margin requirements.