Robinhood Settlement Date

Are you aware that when you execute a trade for a stock that there is something referred to as the settlement date that appears on your trade confirmation? If you have executed a sale, the proceeds from that trade cannot be used until the settlement date. This is important to keep in mind so that you do not try to use or withdraw these funds before you are able to.

How Long Does it Take to Settle Cash at Robinhood?

It takes two business days to settle funds from stock trades at Robinhood. One day is required to settle options trades.

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History of the Settlement Date

To simply define it, the settlement of a trade is the transfer of money for securities that have been bought or sold. Before the modern era of computers and technology, it could take many days or even weeks for a trade to settle after it was completed. Old methods of transportation and hand written securities could not do it any faster.

In the second half of the 1900s, as computers became more commonplace, things started to change. At first settlement times came down to just seven days, and then a little later, five days, and then even down to three days.

In 2017, mostly because of the continued rapid advances in technology, the United States reduced settlement times to just two days. The speed of transactions was being significantly upgraded, and by shortening the settlement time they were also reducing risk in the entire financial system.

Nomenclature

In the United States, the settlement date is denoted as T+2. The T in this case stands for the date (T for time) that the trade was executed, and the +2 stands for 2 business days of additional time. It’s important to note that these are business days, and would therefore not include weekend days or bank holidays, etc. The previous systems that were used before could be denoted as T+3, T+5, and so on.

How to Shorten T+2

You cannot trade a stock on a United States based exchange without a settlement period, but there are some ways to get around the settlement date so that you can access your money faster from sales of stock. But remember, if you want access to your cash from sales faster, this means payments for purchases also must be made faster.


Robin Hood How Long To Settle Cash


Options Trading

If you are really looking to shorten your settlement periods, you will be excited to find out that options trades in the United State operate on a settlement period of T+1. This is one day less than equity trades. This is really great to know because if you wanted to take a bullish position on a particular company but also wanted to take advantage of the shorter settlement time of options, instead of buying shares you could purchase call options which take the same bullish stance but settle with only T+1. Also, let us say there was a company that you wanted to short or you think the company is overvalued or going to not do so well in the future; instead of shorting the stock and being subject to the longer settlement period, you could buy puts of that stock and accomplish a similar goal but utilize the T+1 settlement period for options.

Open Robinhood Account

Open an account and get up to $200 in free stock.

Open Robinhood Account




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