When you sell an investment (or cover a short sale), behind the scenes there’s something known as settlement time. This refers to the amount of time it takes for the different brokers to formally exchange money and securities between buyers and
sellers.
Although the cash is available in your account right away for another investment, it takes a few business days (in most cases) for the actual cash to be exchanged for shares and the trade to be settled.
If you place a trade to “free up” cash for a withdrawal, please keep the settlement time in mind since this may delay your withdrawal until the settlement is finalized.
For Stocks, ETFs, Mutual Funds, and most Bonds, settlement time is T+2 business days, which is the date of the trade, plus two business/trading days. For example, if you sold a stock on Monday, the trade would settle on Wednesday.
For Options contracts, settlement time is only T+1 business day.
Note: The North American investment industry is moving towards a shortened settlement time of T+1 for most securities. In February 2023, the Securities Exchange Commission (SEC) voted to reduce settlement to T+1 which will go into effect on May 28, 2024.