A Free Ride Violation (FRV) occurs when a cash account uses funds from an ACH deposit to place a round-trip trade, and the ACH is subsequently returned. When an FRV is triggered, a 90-day restriction will be placed on the account. The restriction will require that you only trade with settled cash. Otherwise, further restrictions may be put in place. Additionally, ACH deposits made within the prior 3 days are withheld from your settled cash balance. If you trade with unsettled funds, another Free Ride Violation can be triggered. If an account has multiple free ride violations, it will be limited to closing only trades only for 90 days.
What are the repercussions of a free ride violation(s)?
Accounts that have one free ride violation in the previous 90 days will receive an FRV restriction and be required to only trade on settled cash for 90 days. While in an FRV restriction, all ACH deposits from the previous 3 days will not count toward your settled cash balance. If an account has multiple free ride violations, it will be limited to liquidating trades only for 90 days.
How to remove an FRV restriction?
At this time, there are no resets available for FRV closing-only restrictions. The restriction will lift 90 days after the closing-only restriction is put in place. Please contact us at support@tastytrade.com with any questions or concerns relating to a free ride violation in your account.
How do I keep track of settled funds?
Settled funds and your account's available buying power are not the same value. When you buy/sell stocks or options in a cash account, the cash used for a purchase, or proceeds from a sale, is not delivered until the settlement date. Thus, each trade in your cash account will reduce your daily settled funds balance. Settled funds are not listed on the tastytrade platform but can be tracked manually by accounting for day trading throughout each day. Equity option trades settle in one business day, and stock trades settle in two business days. If you are only trading options, then you can record your start-of-day options buying power each day to know your start-of-day settled funds balance. As you purchase options throughout the day, subtract the debits paid to open those positions from your start of day settled cash balance to know if you still have funds to day trade. The platform will not prevent you from placing trades with unsettled funds.