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:
“Without this, as well as with it, we could have declared our independence of Great Britain; but without it, we could not, I think, have secured our free government, and consequent prosperity. No oppressed, people will fight, and endure, as our fathers did, without the promise of something better, than a mere change of masters.”
—Abraham Lincoln (1809–1865)
“But, after the war was over, just think what came to pass—
A letter, sir; and the two were safe back in the old Bluegrass.
The lad had got across the border, riding Kentucky Belle;
And Kentuck she was thriving, and fat, and hearty, and well;
He cared for her, and kept her, nor touched her with whip or spur:
Ah! we’ve had many horses, but never a horse like her!”
—Constance Fenimore Woolson (1840–1894)