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:
“Whatever does not spring from a man’s free choice, or is only the result of instruction and guidance, does not enter into his very being, but still remains alien to his true nature; he does not perform it with truly human energies, but merely with mechanical exactness.”
—Karl Wilhelm Von Humboldt (1767–1835)
“Captain Carpenter rose up in his prime
Put on his pistols and went riding out
But had got wellnigh nowhere at that time
Till he fell in with ladies in a rout.”
—John Crowe Ransom (1888–1974)