Author Topic: Is any turning back once I execute a trade?  (Read 1014 times)

dragonwalker

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Is any turning back once I execute a trade?
« on: April 06, 2021, 10:04:29 PM »
I have money in VTI right now. Once I sell the shares and the trade is executed which should be immediate is there any way to take that back just for some unforeseen reason what I had in mind for it doesn't work out?

markbike528CBX

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Re: Is any turning back once I execute a trade?
« Reply #1 on: April 06, 2021, 11:21:33 PM »
I have money in VTI right now. Once I sell the shares and the trade is executed which should be immediate is there any way to take that back just for some unforeseen reason what I had in mind for it doesn't work out?
Nope.
Just buy it back immediately.
Since it is VTI and you presumably have had it for a while, you have capital gains. The wash sale rule does not apply to capital gains, only losses.
You pay taxes on the gains (taxes will range from 0% to your marginal rate).

MustacheAndaHalf

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Re: Is any turning back once I execute a trade?
« Reply #2 on: April 07, 2021, 06:51:33 AM »
I have money in VTI right now. Once I sell the shares and the trade is executed which should be immediate is there any way to take that back just for some unforeseen reason what I had in mind for it doesn't work out?
Nope.
Just buy it back immediately.
Since it is VTI and you presumably have had it for a while, you have capital gains. The wash sale rule does not apply to capital gains, only losses.
You pay taxes on the gains (taxes will range from 0% to your marginal rate).
Don't do that - unless you have a margin account, you might violate "SEC regulation T".  I think it requires you to be out of settled cash - so that you're using the money from selling VTI to fund buying VTI later.  If you do this rarely, it's just a warning... but your account will be frozen & locked the moment the trade executes, and you're done for the day.  I think they review it manually and unlock it later.
https://www.investopedia.com/terms/r/regulationt.asp#special-considerations

I've made that mistake maybe 1-2 times a year, since Vanguard puts up warnings for almost every transaction.  I tried getting in the habit of checking if my trades for a given asset have settled, and only then follow a sell with a buy.  Since switching to a margin account, I no longer have that problem (the cash needed to fund purchases comes from a margin loan, not borrowed from cash that hasn't settled).

An easy way around that is after selling VTI, buy a very similar ETF like ITOT.  Both have the same expense ratios and same number of stocks.  I think trades take 2 days to settle, which means waiting 3 days.  Then you can switch back (sell ITOT and buy VTI.. or do nothing, they're extremely similar).
« Last Edit: April 07, 2021, 06:55:08 AM by MustacheAndaHalf »

celerystalks

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Re: Is any turning back once I execute a trade?
« Reply #3 on: April 07, 2021, 07:25:54 AM »
Generally, nope.

If the trade is a non-marketable limit order, fo example one placed to sell at a price above the current bid, it is possible to attempt to cancel it before it executes.

yachi

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Re: Is any turning back once I execute a trade?
« Reply #4 on: April 07, 2021, 02:09:16 PM »
I have money in VTI right now. Once I sell the shares and the trade is executed which should be immediate is there any way to take that back just for some unforeseen reason what I had in mind for it doesn't work out?
Nope.
Just buy it back immediately.
Since it is VTI and you presumably have had it for a while, you have capital gains. The wash sale rule does not apply to capital gains, only losses.
You pay taxes on the gains (taxes will range from 0% to your marginal rate).
Don't do that - unless you have a margin account, you might violate "SEC regulation T".  I think it requires you to be out of settled cash - so that you're using the money from selling VTI to fund buying VTI later.  If you do this rarely, it's just a warning... but your account will be frozen & locked the moment the trade executes, and you're done for the day.  I think they review it manually and unlock it later.
https://www.investopedia.com/terms/r/regulationt.asp#special-considerations

I've made that mistake maybe 1-2 times a year, since Vanguard puts up warnings for almost every transaction.  I tried getting in the habit of checking if my trades for a given asset have settled, and only then follow a sell with a buy.  Since switching to a margin account, I no longer have that problem (the cash needed to fund purchases comes from a margin loan, not borrowed from cash that hasn't settled).

An easy way around that is after selling VTI, buy a very similar ETF like ITOT.  Both have the same expense ratios and same number of stocks.  I think trades take 2 days to settle, which means waiting 3 days.  Then you can switch back (sell ITOT and buy VTI.. or do nothing, they're extremely similar).

The trade that causes the SEC violation is selling the stock that was purchased with the unsettled funds, not the purchase itself.  It's Freeriding that isn't allowed in non-margin accounts.  Investopedia provides this example:
Quote
Say you decide to sell shares of Boston Scientific (BSX) on Monday. You then use the cash from the sale to buy shares of Johnson & Johnson (JNJ) on Tuesday. You sell those JNJ shares on Wednesday, a full day before your sale of BSX shares settles.

Because settlement for the BSX transaction did not occur until Thursday (T+1), there was no cash to cover the purchase of JNJ on Tuesday and the sale of those shares on Wednesday. To avoid freeriding, the investor would have had to wait until settlement—Thursday—before offloading the JNJ shares.

So assuming OP has owned his VTI for a week, he can do the following:
Sell VTI at 2:20 pm
decide he shouldn't have sold
Buy VTI* at 2:25 pm
His broker should stop him from selling the VTI purchased at 2:25 until the cash from the sale at 2:20 arrives, in 2 days.

But he can't do the following:
Sell VTI at 2:20 pm
decide he shouldn't have sold
Buy VTI* at 2:25 pm
change his mind again
Sell VTI* at 2:30 pm
The sale at 2:30 would have violated regulation T.

*for simplicity I'm using VTI, but the restriction applies to selling any stock purchased with unsettled funds.

MustacheAndaHalf

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Re: Is any turning back once I execute a trade?
« Reply #5 on: April 09, 2021, 10:27:06 AM »
yachi is right, it takes an additional transaction:
1) buy something, using up your cash balance
2) sell it, giving you the pending proceeds
the next day:
3) buy it again, using pending proceeds from the first day's sale
https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_cashaccounts

i_have_so_much_to_learn

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Re: Is any turning back once I execute a trade?
« Reply #6 on: April 23, 2021, 03:15:13 PM »
a few important things to consider:
1) your sell order was a tax-impacting trade. You may owe capital gains tax (or may have losses that you can deduct... which leads me to...)
2) If you had a loss, you won't be able to deduct it if you buy back the same asset within 30 days. Search "Wash Sale Rules" on google to find the IRS requirements.

 

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