Free riding (also known as Freeriding or Free-riding) is a term used in the stock-trading world to describe the practice of buying shares or other securities without actually having the capital to cover the trade. This is possible when recently bought or sold shares are unsettled, and therefore have not been paid for.
Since stock transactions usually settle after three business days, a crafty trader can buy a stock and sell it the following day (or the same day), without ever having sufficient funds in the account.
Read more about Free Riding: Trade Day + 3 Days, Free Riding Violation, S.E.C. Enforcement Actions, Good Faith and Free Riding, Liquidation and Free Riding, Economics
Famous quotes containing the words free and/or riding:
“A gentleman doesn’t pounce ... he glides. If a woman sits on a piece of furniture which permits your sitting beside her, you are free to regard this as an invitation, though not an unequivocal one.”
—Quentin Crisp (b. 1908)
“Holland is a dream, Monsieur, a dream of gold and smoke—smokier by day, more gilded by night. And night and day that dream is peopled with Lohengrins like these, dreamily riding their black bicycles with high handle-bars, funereal swans constantly drifting throughout the whole country, around the seas, along the canals.”
—Albert Camus (1913–1960)