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Buying Power

Cash Buying Power
Margin Buying Power
Options Buying Power

What is cash buying power?

Cash buying power is the amount available to purchase securities in a cash account. It includes:


  • Settled cash.
  • Unsettled cash.
  • Eligible provisional/instant buying power from pending ACH deposits.

What is the difference between settled cash and unsettled cash?

Settled cash is cash that has completed the settlement process and is available for trading. Stocks, ETFs, and options trades settle on the next business day, provided the trade occurs before 8:00 PM ET. Crypto trades settle immediately. Unsettled cash is cash from the sale of securities that has not yet settled. Although unsettled cash is included in cash buying power and can be used to open new positions, buying power restrictions may apply if you sell a position before the funds used to purchase it have settled.


Why didn't my cash buying power fully recover after I sold a position?

If a position was purchased using unsettled funds, selling that position before those funds settle will not immediately restore your buying power. Once the original funds settle on the following business day, the sale proceeds will be added back to your cash buying power.


How does trading with unsettled funds affect my account?

Day trading with unsettled funds can result in a Good Faith Violation (GFV). Repeated GFVs may lead to restrictions that limit trading to settled funds only.


What is a Good Faith Violation (GFV)?

A Good Faith Violation occurs when a stock is bought using unsettled funds and then sold before the original funds have settled.


Example:


You sell 100 shares of ABC on Monday (settling Tuesday), use the proceeds to buy XYZ the same day, then sell XYZ that same day. This creates a GFV because the funds from ABC hadn’t settled yet.


  • After 3 violations: Your account will be restricted to using settled funds only for 90 days, beginning the day after the 3rd GFV is issued. After the 90-day restriction period expires, you may resume trading with unsettled funds. However, the GFV violations will remain on your account for one year from the date of each violation and will automatically expire once the applicable period has passed.
  • After 4 violations: Your account will be restricted to liquidate only for 90 days. The restriction will be lifted automatically 90 days after the most recent GFV was issued.

How do I resolve a GFV?
GFVs cannot be resolved through deposits or liquidation. Each violation automatically expires a year and one day after its due date. No action is required and the violation will be removed automatically.


How does free riding affect my cash buying power?

If your account incurs a free ride violation, unsettled funds will not be included in your cash buying power for 90 calendar days and cannot be used to purchase securities. During this restriction period, only settled cash and any eligible provisional buying power from pending ACH deposits, if applicable, will be available for trading. You can find more information about free riding here.


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