Question regarding cash account - day trading

Alpaca Trading
1

Hi–with respect to the scenario posted back in 2023 https://forum.alpaca.markets/t/cash-account-to-avoid-pattern-day-trading-rule/11846/5
regarding using cash accounts to trade with instead of margin accounts - hasn’t the rule been changed from T+2 to now T+1?
https://www.sec.gov/resources-for-investors/investor-alerts-bulletins/new-t1-settlement-cycle-what-investors-need-know-investor-bulletin

So with T+1 if you start a cash account in August 2024 with $10,000 to trade options

$10,000 cash deposited and cleared (available for trading) on Monday August 19
**Buy $10,000 of AAPL options Monday August 19 and sell those $10,000 in AAPL options before 4pm EST market close on August 19 for a $2,000 net gain **
Under the new T+1 rule would the $12,000 be available to trade with market open 9:30AM Tuesday August 20?

jkozlow3 Feb 2023
With a cash account, let’s say someone want to make 1 trade per day, every single day using
their full account balance.
Scenario:
$10,000 account
On Monday I sell $10,000 worth of AMZN to purchase $10,000 of AAPL
On Tuesday I sell all shares of AAPL to purchase $10,000 of TSLA
On Wednesday, I sell all TSLA shares to purchase $10,000 of GOOG
In this scenario, I would incur a good faith violation, correct? Because I used the proceeds of a
sale to purchase another security and then sold the newly purchased security before the original
funds used to make that purchased had settled? Or am I incorrect?

Dan_Whitnable_Alpaca Alpaca Developer Relations
@jkozlow3 Correct. What one would need to do is this.
start with $10,000 equity. All AMZN (ie no cash)
• Monday: sell $10,000 worth of AMZN
wait 2 days for proceeds to settle
• Wednesday: purchase $10,000 of AAPL
• Thursday: sell all shares of AAPL to purchase $10,000 of TSLA
wait 2 days for proceeds to settle
• Monday: sell all TSLA shares to purchase $10,000 of GOOG

2

@Jay_Greenlees You asked “Under the new T+1 rule would the $12,000 be available to trade with market open 9:30AM Tuesday August 20?”
Yes. You can use funds to trade at the beginning of the following day and will not incur any trade violations. The timing in the original post T+2 are all reduced by 1 day.

There is some subtlety occurring behind the scenes. Take a look here for the DTCC settlement timeline (DTCC is the overarching clearing firm for all US equity transactions). The actual movement of funds and securities occurs during the day T+1 (ie the day following the transaction). However, brokers assume everything will settle smoothly and credit user accounts at the beginning of the day. Part of the reason is the broker has your shares. If something doesn’t go smoothly they will simply debit the account or make adjustments as needed (but that is very very rare). Note that you will not typically be able to withdraw the funds from a sale until the following day T+2 when the money actually shows up in the broker’s account at settlement time (ie during the day sometime).