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:
“The majority is never right. Never, I tell you! That’s one of these lies in society that no free and intelligent man can help rebelling against. Who are the people that make up the biggest proportion of the population—the intelligent ones or the fools? I think we can agree it’s the fools, no matter where you go in this world, it’s the fools that form the overwhelming majority.”
—Henrik Ibsen (1828–1906)
“Commuter—one who spends his life
In riding to and from his wife;
A man who shaves and takes a train,
And then rides back to shave again.”
—E.B. (Elwyn Brooks)