Are you wondering why you can’t use your brokerage cash from the Robinhood app? Nowadays, you can find many people facing the same dilemma. Is this a problem with the app, or perhaps it’s a feature that some people don’t know?
We’ll start by explaining brokerage cash and why some people can’t withdraw their desired amounts. Since the problem is connected with options trading, we’ll talk about it too. Also, we’ll show you the other brokerage accounts and investment options available.
Robinhood and the other investment apps made it easier for newbies to start building a portfolio. Unfortunately, this means some users don’t know much about the trading assets. If you knew how brokerage cash worked, you probably wouldn’t have problems with investing.
Why can’t I take out brokerage cash?
You can’t use your brokerage bucks because some of it’s not settled yet. You’ll have to wait two days after your trade date. Afterward, the money will show up as brokerage cash.
Another reason why you can’t touch the funds is that you traded options. It’s when you buy a position hoping an asset’s price goes up or down.
If you want to earn from a rising stock price, you long call. To profit from a falling stock price, you long put. For example, let’s say BlackBerry’s stock price is $12.00 right now, and it may rise soon.
In response, you may buy a call option at $12.00 for 20 shares. If it hits $15.00, you earn $3.00 per share or a total of $60.00. You’ll expect the opposite for a put option, though.
For Example
Let’s say the BlackBerry stock price will drop. You may purchase a put option at 20 shares. If it goes from $12.00 to $10.00, you earn $2.00 per share or $40.00 in total.
This still doesn’t explain what it has to do with your brokerage cash. It makes sense if we include collateral. Simply put, these are borrowed stocks or money for options trading.
Investors use it to maintain their put or call position. Stock prices usually move up and down. While it does, you gain and lose money from your call or put option.
The borrowed assets and funds can help cover the price movements. Meanwhile, you may wait until it hits your intended price point.
You can’t touch the collateral while you’re holding the position, though. In the Robinhood app, brokerage cash may include the borrowed money or stocks.
Let’s say you have $2,000 in the brokerage account and $1,000 as collateral. That’s a total of $3,000. You can’t take that whole amount since it includes the borrowed assets.
What about in Robinhood Crypto?
Perhaps you’ve earned a lot from investing in stocks, ETFs, and options. However, you learned that cryptocurrencies are a hot investment nowadays. Even better, there’s Robinhood Crypto!
You wanted to invest using profits from the other assets. Unfortunately, you’ll have to wait a few days before you can use the funds. Robinhood says you need to wait three business days first.
It’s different for crypto earnings and limited cash deposits. You may instantly withdraw those. Still, be careful about investing in cryptocurrencies.
If you think some stocks are volatile, they’re nothing compared to cryptos. Expect much more risk from these assets. Choose your crypto coins wisely.
Types of brokerage accounts
Traders may open brokerage accounts in two ways. They can choose between a cash account and a margin account. Here are more details regarding these options:
- Cash accounts – You deposit cash in it to start buying assets. If you put $1,000 in it, you can only spend $1,000. Back then, brokerage firms let you purchase stocks even if the money wasn’t in your account yet. Now, only a few brokers allow it.
- Margin accounts – It lets you use collateral. If you want to trade options, you’ll need this. You also have to open a cash account if you want a margin account.
More options mean more responsibilities, though. The Federal Reserve requires that you deposit at least $2,000 before you can open a margin account.
Your investment firm will also ask you to sign a hypothecation agreement. This states that your broker will keep you out of your account if it falls below the minimum maintenance margin.
What’s more, you may choose your type of broker. You may pick full-service brokers or discount brokers. The former gives far more features than the discount options.
They can guide your investment planning. Also, you may let the firm invest for you. These conveniences come at a cost, though. Their investment accounts may cost $100,000 or more!
On the other hand, you may choose discount brokers. You’ll get more features for fewer expenses. They’re a better choice if you’re a first-timer who doesn’t have much money.
Robinhood has its version of a margin account. It’s called Robinhood Gold. Aside from options trading, it provides other options like professional research and market data.
Other investments and tools
Technology makes investing so much easier nowadays. Back then, placing stock orders was a chore. You had to call your broker on the phone to do it for you!
Nowadays, online broker sites let you do it in a few seconds. You have the money market, crypto market, and other exchanges at your fingertips.
Even better, most of them have smartphone apps. Now you can buy securities on the go! Some have amazing features as well. Take TD Ameritrade, for example.
The platform offers one of the best full-service broker features. Create an account to access its high-end investment tools. They even have investment advisors who are ready to help clients.
You get different options depending on your investment firm. Use these platforms to try new asset classes. Here are some examples you may want to consider:
Don’t rush investing, though. You should study your options before investing and set short-term and long-term goals. Otherwise, you’re more likely to lose money. Take options trading as an example.
If you don’t know what a margin call means, you might burn through your money! Also, choose your investment platform carefully. For example, see how it receives compensation from fees.
Final thoughts
Some people find it hard to start investing. It’s often because they have personal finance issues. They may have no source of income after losing it during the pandemic.
This is why you should learn money management skills. Please don’t give up on finding new employment opportunities. Meanwhile, spend only on necessary products and services.
Budgeting can help you get rid of credit card debts. Eventually, you can start investing in stocks, bonds, and more! In turn, this can help you set funds aside in your bank account.
Learn more about brokerage cash
Is brokerage cash my money?
If you’re trading options on Robinhood, your brokerage cash may not be entirely yours. Some of it could be collateral for your trade positions. Otherwise, the funds might not have settled yet.
Can you withdraw brokerage cash?
You may withdraw your funds easily from your Robinhood account. However, you must leave a minimum of $2,000 in the account.
Is it worth having a brokerage account?
Your brokerage experience will depend on your chosen firm. Make sure the platform fits your needs. It must have your desired features and asset options.
