New ThinkorSwim users are often left asking what’s the difference between Stock Buying Power and Option Buying Power.
In addition, why is there an available balance to buy stocks but not options?
So let me clarify.
Option Buying Power Explained
Option purchases cannot be made on margin. As a result, the option buying power is determined by the cash available to trade in your account.
There are times when the Option Buying Power in your ThinkorSwim account is $0 or at a low balance.
When you deposit money into your ThinkorSwim account, you may not have instant access to the fund for options trading.
Also, funds from options require at least three days to settle.
New account transfer
If you recently switched to ThinkorSwim from another brokerage, your option buying power may have a balance of zero ($0).
The transfer takes time and the options money may take 3-4 days to clear.
To sum it up, your stock buying power becomes available sooner than your options buying power.
An ACH deposit may give you the funds to purchase stocks immediately.
In contrast, the money is not available instantly for options trading. It will take 3 days for the funds to settle.