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Trading FAQs



  • What kinds of securities can I trade?

    When you open and fund a TradeKing account you can trade online the following securities:
     
    Stocks
    ETFs
    Options* (equity, index and ETF)
    Mutual Funds
    Fixed Income (corporate, agency, treasuries, municipals, strips & zeros, CDs and new issues)
     
    TradeKing does not offer access to futures and foreign currencies.
    *separate online option agreement required.
  • What is my trading password?

    Your trading password is an additional level of security that you can turn on or off. When on, you will be asked for a trading password before entering an order, requesting funds, and other account requests.
     
    The trading password is initially defaulted to be the same as your login password. We suggest that you change it to a new one of your choice.
     
    If you have forgotten your trading password, give us a call. We'll confirm your identity and reset the password for you.
  • How are commissions charged on spread and multi-leg orders?

    An option trade that contains multiple legs will only be subject to one ticket charge. Therefore, a spread trade of 1 contract per leg will be charged: $4.95 + ($.65+$.65) = $6.25. A spread trade of 5 contracts per leg will be charged $4.95 + ($.65 x 5) + ($.65 x 5) = $11.45. A spread trade of 10 contracts per leg will be charged $4.95 + ($.65 x 10) + ($.65 x 10) = $17.95.
  • What are unsettled funds and why am I being warned or restricted from using them?

    Under Regulation T of the Securities and Exchange Act of 1934 all transactions in a cash account must be paid for in full and are also subject to settlement rules. If you purchase a security with settled funds in your cash account you may sell that security at any time without restriction. If you purchase a security in your cash account with insufficient funds or unsettled funds you must hold that security until the purchase is fully paid for with either a new deposit or the settlement date is reached for the funds used. Read our Unsettled proceeds sales disclosure here.

    Stock trades settle 3 business days following the trade date (T+3) and Option trades settle 1 business day following the trade date (T+1). According to this rule, sale proceeds generated by selling stock in a cash account are considered "unsettled" for a period of 3 business days following the trade date. You may re-use the unsettled sale proceeds to purchase another security prior to the settlement date of those funds however, in doing so you are agreeing in good faith to hold the new purchase at least until the funds from the original sale settle. If you sell the security that was purchased all or in part with unsettled funds prior to those funds settling it will be considered a violation of SEC rules and your account will be restricted for a period of 90 days. During that time you must place your trades over the phone with a live broker.

    The original theory for this rule is that a customer who sells securities prior to paying for them in a cash account (either with a new deposit or settled funds from a prior sale) has received an extension of credit. Credit transactions must be executed in a Margin account. To apply for a Margin account please submit a margin application. There is minimum account equity of $2,000 for a margin account. Margin accounts are subject to Daytrading rules. TradeKing does not promote Daytrading.
  • Are there restrictions or higher fees for stocks trading under $2?

    We charge a penny per share fee added to the regular $4.95 commission when trading stock valued below $2. Please visit our Commissions and Fees page for more detailed information.
     
    Online trading on domestic pink sheet and bulletin board stocks is limited to variable dollar and number of shares amounts. Online trading limits vary depending on the stock, its volume and liquidity.
  • Can I trade on the after-hours market?

    Yes. Extra hours trading is available at TradeKing. Pre-market orders may be entered between 8:00am - 9:30am ET; post-market orders may be entered between 4:00pm - 5:00pm ET on regular trading days. You may enter limit orders only. An order placed during an after-hours trading session is only good for the session during which the order was placed. If an order is not executed during a specific after-hours session, the order expires at the end of the session and does not roll into the next traditional or after-hours session. Orders not yet executed can still be canceled before the close of a session, in the same way as during traditional market hours. Orders executed during an after-hours session are considered to have been executed during the day's traditional session for settlement and clearing purposes. To enter an extra hours order go to the "Trading" menu item and choose "Extra Hours". Please refer to the additional disclaimer for extra hours trading.
  • How does your NBBO guarantee work?

    TradeKing guarantees that each order is executed at the national best bid or offer (NBBO) on market or marketable limit orders.
    We demand the NBBO on every executed order and we will reimburse your commission if we do not get it.
    Not all orders are eligible for NBBO treatment. Some of the non eligible are stop orders, advanced orders, limit orders not entered at the current bid/ask, orders during "fast markets", orders placed at any exchange which designates that it is temporarily not eligible for NBBO treatment, and those entered for opening rotation.
  • How do I find out why my account was restricted?

    To find out why your account has been restricted send us an e-mail with the words "Restricted Account" in the subject, or contact us via telephone at 877-495-KING (5464).  
    Under FINRA regulation T, when a security is purchased, the funds must be received by TradeKing prior to the sale of that security. If the respective security is sold prior to TradeKing receiving the appropriate funds, the credit from the sale will not be applied to the account and the account will be placed on a 90-day restriction. Orders placed in a restricted account will have to be placed through a broker.
  • Do you offer best bid and offer guarantee & smart order routing?

    Do you guarantee national best bid and offer (NBBO)?

    YES. TradeKing guarantees the national best bid or offer (NBBO), or better, on market orders as well as marketable limit orders. TradeKing will reimburse clients the commission on the trade if we do not get the (NBBO) or better.
     

    Do you use smart order routing technology?

    TradeKing utilizes industry-leading intelligent order routing technologies. This technology sweeps the market for NBBO or better prices and executes transactions at the best available price.
     
    The smart order routing technology we use for options is an industry-leading and highly customizable platform. It uses real-time, streaming market data to make the best decisions possible about how to execute your options orders.
     
    It takes real-time market quotes and displayed size at the time we receive your order. If price and size on multiple exchanges are available to fill your order, the system takes into account which exchanges have the best functionality for different types of orders (i.e. spreads, buy-writes, stop orders, etc...); which specialists give the best service and execution quality; and finally, preferences for one exchange over another.
     
    Price improvement is a critical component of best execution today. The system will seek out price improvement opportunities in options via a proprietary modeling tool that indicates when a high probability for price improvement exists. It does this without compromising the confidentiality of your order. It only attempts to send a price improvement order to the market when there may be a high probability of it being accepted; otherwise, it continues to route the order to the market(s) where it will get instantaneous, automated execution at the NBBO.
     
    If there is insufficient liquidity at one NBBO destination to satisfy your order, the router will split the order and access multiple exchanges simultaneously. This requires no additional work on your part.
     
    All these factors are added into the routing logic to arrive at the best decision for each order.
  • What are Berkshire Hathaway A&B symbols?

    Berkshire Hathaway A: BRK.A
     
    Berkshire Hathaway B: BRK.B
  • What is the max time a GTC order will stay open?

    One year. If you enter a good 'till cancel order we will keep it open in your account until you cancel it or for a year from the date that you have entered it.
  • What is a stop order?

    A stop order is a market order to buy or sell if a specified price (the stop price) is reached or passed. As soon as the stop price is reached the order will be sent to the market to be executed "at market". A sell stop price will be below the market, a buy stop price will be above the market. A stop limit is an order to buy or sell a certain security at a specified price or better, but only after a specified price (stop price) has been reached. A stop-limit order is essentially a combination of a stop order and a limit order.
  • What are bid and the ask prices?

    The price of a security (a stock for example) is basically determined by supply and demand, which, in the stock market, translates into bid and ask prices.
     
    All stock trading in the United States is based on the bid and ask system. The nature of this system is that sell orders are filled at the bid price (which is the highest price that somebody in the market is willing to buy at the security you want to sell), while buy orders are filled at the ask price (which is the lowest price somebody in the market is willing to sell at the security you want to buy).
     
    The difference between the bid and ask price is known as the spread. This is the amount market makers earn per each share on each trade. So, BID is the price one can SELL at, ASK is the price one can BUY at.
     
    The difference between the closing price of one day at 4 pm ET, and the opening price on the following day at 9:30 am ET is due to whatever happened during those hours that may have convinced owners of a particular stock to change their mind about the price they are willing to sell. Also, people who are interested in buying a particular stock, may change their mind about what price they are willing to pay for that particular stock.
     
    Open orders can be changed and/or cancelled. Besides, during the pre-market (8:30am -9:29am) session, new orders are entered and trades are executed.
  • What mutual funds can I purchase?

    TradeKing offers many U.S. based mutual funds, load and no-load. Click here to view a list of the mutual fund families offered through TradeKing.
     
    You can also search for the mutual fund that meets your needs by using the mutual fund screener under the Tools tab:
    TradeKing offers many U.S. based mutual funds, load and no-load. Click here to view a list of the mutual fund families offered through TradeKing.
     
    You can also search for the mutual fund that meets your needs by using the mutual fund screener under the Tools tab:
  • What are the commissions on mutual funds?

    No load
    Purchases: $9.95
    Sale: $9.95

     
    Load
    Purchases: $0 (Subject to charges from the mutual fund)
    Sale: $0 (Subject to charges from the mutual fund)
  • What are trailing stops?

    A trailing stop order is an order in which the stop trigger price is specified in terms of points or a percentage above or below a security's market price (bid, ask, or last). If the security's price moves in a favorable direction after the order is placed, the stop trigger price will adjust itself automatically. Click here to read a more in depth explanation.
     
  • What is a foreign stock transaction fee?

    TradeKing is charged a local settlement fee (normally $75) when trading an over-the-counter foreign stock. TradeKing passes this fee (in addition to the regular trading commission) to its clients with no mark-up. over-the-counter foreign stocks are typically represented by a 5 letter symbol ending in F or Y (example: nintendo - NTDOY). foreign companies listed on US exchanges (example: Nokia - NOK, and Sony - SNE) are not subject to this fee. Please note that when transferring foreign stock into a TradeKing account an incoming transfer fee of $50 per position applies.
  • How do I short stock?

    You must have a margin account in order to short stock. In order to sell stock short TradeKing must first "borrow" the stock on your behalf and confirm that delivery of the shorted stock will take place. This is referred to as a stock locate. Broker-dealers have a variety of means to borrow stock in order to facilitate stock locates and make good on the delivery of shorted stock. If a stock locate cannot be determined then the stock may be unavailable for shorting.
  • Why isn't stock XYZ available to sell short?

    If a stock locate cannot be determined, then the stock may be unavailable for shorting. This is known as a "hard-to-borrow" security. Some factors that can influence the availability of stock are high demand, small float and increased volatility of the particular security. In some cases a hard-to-borrow security may be available to sell short, but only for an added fee known as a hard-to-borrow fee or negative rebate.
  • What is a "Hard-to-Borrow" fee?

    Hard-to-borrow fees, also known as negative rebate or negative borrow fees, are charged by clearing firms when stock that is sold short is in low supply. Before we go over how the fee is calculated, let's quickly discuss what selling short means and how something becomes hard to borrow.

    Short selling involves borrowing shares of stock you don't hold yourself, selling them, and then hopefully buying the shares back later at a lower price. The short seller then returns the "borrowed" shares to their original owner, having pocketed the difference between selling-high and buying-lower.

    Now let's compare short selling in the stock market to a bank. Among other activities, banks make money by taking money deposited in savings accounts and lending that same money out to other customers at a higher interest rate (a loan to buy a house, a car, etc). The bank must keep so much capital on hand just in case you decide to close your account and withdraw your money.

    A similar balancing act happens in the brokerage world when shorting a stock. Clearing firms, who handle most of the back-office operational paperwork for brokerage firms, typically hold all stocks for the margin customers of the brokerage firm. When a trader wants to sell a stock short, the clearing firm lends that person the shares to be able to do that. Much like the banks described above, if a clearing firm is going to lend out the shares, they have to simultaneously make sure they have enough on hand, just in case a person that is long the shares actually wants to sell them.

    Each clearing firm only holds so many shares available to borrow for short selling. When the number of shorted shares hits a certain percentage of the total shares a clearing firm holds, the clearing firm may activate policies to make the stock harder to borrow, thus maintaining their own supply. One common policy is the implementation of hard-to-borrow fees. TradeKing passes these fees at our cost to you, the client.
  • How are "Hard-to-Borrow" fees calculated?

    A hard-to-borrow fee is an annualized fee based on the value of a short position and the hard-to-borrow rate for that position. The fee is charged on a pro-rated basis depending on how many days you hold the position short. It will be assessed to your account at the end of the month or upon settlement of the closing trade. Finally, if you open and close a short stock position intraday (not held overnight), you will not be subject to a fee.

    Please call 877-495-5464 with any additional questions regarding hard-to-borrow fees. Make sure you also read Why can't TradeKing tell me in advance what the hard.

    Example Calculation of a Hard-to-Borrow Fee:
    Current price of stock = $11.00
    Number of shares sold short = 10,000
    Hard-to-borrow rate = 5%

    (market price of stock) x (share quantity) = Trade value
    $11.00 x 10,000 = $110,000

    (trade value) x (annual hard-to-borrow rate) = Annual hard-to-borrow fee
    $110,000 x 0.05 = $5,500

    (annual hard-to-borrow fee) / (360 days) = Daily hard-to-borrow fee
    $5,500 / 360 = $15.27 daily charge
  • Why can't TradeKing tell me in advance what the "Hard-to-Borrow" fee on a given stock will be?

    The hard-to-borrow rate for a security can range from a fraction of a percent to above 100% of the principal value of the trade, depending on how much market demand there is for a specific position. Because demand and the number of shares available to short are constantly changing, it's possible for a stock to go from not having a hard-to-borrow fee to having a hard-to-borrow fee within the same day. For this very reason, it is not always possible for TradeKing to gauge what the exact fee will be in advance.

    TradeKing does everything in our power to keep clients informed and in the driver's seat when it comes to knowing what the current fee will be and deciding in advance if you want to pull the trigger on the trade or not. That said, selling stock short is risky business, and we can't control the availability of shares out there to borrow. Here's what we do to keep you informed:
    • In general, stocks carrying a hard-to-borrow rate indication above 5% will not be eligible for short selling without prior written customer authorization.
    • We provide a warning message indicating the possibility of a fee. This message is displayed online while previewing an order.
    • Should a position go from having no fee or a fee below 5% to a fee above 5%, TradeKing will attempt to contact you to advise you of the change.
    IMPORTANT NOTE: Hard to borrow rates on existing positions can and do fluctuate daily based on supply and demand. Clients will be responsible for any rate increases should they occur. TradeKing reserves the right to close the position on your behalf without prior notice.
  • What are your short stock close out procedures - Short stock "buy-ins"?

    A short stock "buy-in" and closing trades can occur at any time during the lifecycle of a short position. A buy-in can occur if the stock that has been borrowed is no longer available to be held short OR if the negative rate on the stock exceeds 5%. If you intend to hold short stock positions with negative rates above 5% you must provide prior written authorization. Carrying a short stock position with a negative rate does not protect the position from being bought-in by TradeKing or our clearing firm at any time without prior notice.
  • What are Investment Objectives and why do I have to choose one?

    Industry regulations require brokerage firms to "know their clients." Part of this process involves gathering information about your trading experience, financial background (i.e. net worth and annual income), and investment objectives. Your investment objective is your overall outlook on trading for your account. We as a firm need to have an accurate picture of your goals because we need to be sure the trades you are making are suitable for your situation. Below are brief descriptions of our investment objectives. Should you want to update your account’s investment objective, please either send us a signed and dated letter of request with your name, account number, and your new investment objective OR call a TradeKing representative at 877-495-5464. Any requests not made by phone may be faxed to 866-699-0563 or scanned and emailed to service@tradeking.com .

    Income
    Preservation of capital with a primary consideration on current income

    Balanced
    Diversification of asset classes for an equal blend of income and long term growth with the primary consideration being current income

    Growth & Income
    A balance between capital appreciation and current income with the primary consideration being capital appreciation

    Long Term Growth with Safety
    Long Term capital appreciation with relative safety of principal

    Long Term Growth with Greater Risk
    Long term capital appreciation with greater risk

    Speculation
    Maximum total return involving a higher degree of risk through investment in a broad spectrum of securities
  • How do I sell my fractional shares of stock?

    Fractional shares of stock will be automatically liquidated when an order to sell the whole number of shares is filled in it's entirety. You must close the entire position before the fractionals will be liquidated. If you have a leftover fractional position and would like to liquidate it please call us at 877-495-5464.
  • What price will I receive for my fractional shares of stock that are liquidated?

    If your fractional shares are liquidated as part of an execution for a whole number of shares you will receive the same price for the fractional liquidation as you did for the whole number of shares that were executed.

    In cases where the whole number of shares are filled in multiple executions at different prices but are part of the same order you will receive the avg. price of the whole shares for the fractional share liquidation.

    If you liquidate fractional shares only, you will receive the closing price of the stock for the day the request to liquidate was received.
  • How do I remove a worthless security from my account?

    To remove a worthless security from your account, please download, complete, and return the Worthless Securities Letter to us by email, fax, or mail. There is a $30 processing fee. If the security cannot be removed as worthless, we will notify you by email and no charges will apply. When a security is removed as worthless, it will be processed for a net credit of $0.01. The activity will appear on your Activity page and account statement. A confirm will also be generated.
  • How do I remove a non-transferrable security in my account?

    The DTCC deems a security non-transferrable when a security does not have a transfer agent or company contact for a period of six years or more. The DTCC imposes monthly charges to all participants holding non-transferable securities. TradeKing passes through a fee per position to accounts that hold a non-transferable security of $7.50 per month. To avoid this fee, please download, complete, and return the Request for Disposition of a Non-Transferrable Security to us by email, fax, or mail. There is a $30 processing fee. Forms received and processed by the 20th day of a given month will not be charged a fee for that month. If the corporation re-opens its transfer books and the DTCC reinstates the position, you may request the shares to be re-instated to your account.