A cash account lets you trade only with settled funds - money that has fully cleared. A margin account lets you borrow against your holdings to trade with more buying power than your cash alone. The difference is leverage and settlement timing, not a difference in what you can buy.

The settlement wrinkle

In a cash account, proceeds from a sale take a day to settle (T+1 for most securities). Trade with unsettled funds and you can trigger a "good faith violation." A margin account sidesteps this by extending credit, so you can reuse capital immediately - one reason active traders often prefer margin.

Why long options need neither

Here's the key point most new traders miss: buying options - long calls and puts - is paid in full and never uses margin. You pay the premium; there's no borrowing and no margin requirement. Margin requirements apply to selling options short and to leveraged stock positions, not to buying an option outright.

Buy an option and you're not on margin - you paid cash for a defined-risk ticket. No borrowing involved.

The 2026 context

With the old $25,000 day-trading minimum eliminated, the account choice is simpler than it used to be. A cash account can now day-trade at any size - just mind settlement. And because long-options strategies are paid in full, you can run a disciplined options approach without ever needing a margin account at all.