How to understand the restriction on Fidelity commission free etfs?

Discussion in 'ETFs' started by losemind, Aug 16, 2012.

  1. losemind

    losemind

    I am thinking of opening a Fidelity account:

    And I am reading the restrictions for Commission Free etfs...

    It's kind of hard to understand...

    Anybody please help me understand their restrictions?

    Thanks a lot!

    http://personal.fidelity.com/products/trading/What_You_Can_Trade/offer-faq-popup.shtml

    Are there any restrictions on the commission-free ETF trades?
    The commission-free trades on the 30 iShares ETFs must be done online at Fidelity.com, Active Trader Pro, Wealth-Lab Pro, or through Fidelity's wireless channels. Commission-free trades apply to all buy and sell transactions on eligible iShares ETFs. All iShares ETFs are not margin eligible for 30-days from settlement, similar to mutual funds. For margin customers, positions will automatically become margin eligible in their account after 30 days from settlement.
     
  2. From my understanding, they aren't commission free if you phone it in (i.e: broker assist).

    I do it all the time in my Fidelity 401k from the long side and it works just as advertised.
    I'm not sure about the short side, though.
     
  3. losemind

    losemind

    Thanks!

    I just don't understand the last 2 sentences regarding margin and settlement:

    All iShares ETFs are not margin eligible for 30-days from settlement, similar to mutual funds. For margin customers, positions will automatically become margin eligible in their account after 30 days from settlement.

    Could you please explain?

    Thank you!
     
  4. My understanding of that is that the money received after you sold shares in one of their commission-free ETF's could not be 'margined' until 30 days after settlement. Give them a call for clarification.

    I have an IRA with them which is not marginable so that restriction is not applicable to me. I use this particular IRA at Fidelity to mainly conservatively scale-in to the market via several of their comm-free ETF's, in very small quantities on a daily basis and then scale-out into strength. I like IVV and IWM. Because the share quantities are so small, I can feel good about a zero commission applied many times. There is no way I'd run this strategy paying any regular or even discount commissions.
     
  5. you can also short for free. TIP and IJH seem to be the only etfs out of the 30 with shares available
     
  6. losemind

    losemind

    oh not many etfs available for shorting?

    that's too bad!
     
  7. You can't use those ETFs as collateral for margin borrowing until you've held them for 30 days.
     
  8. Fidelity is pretty bad at having ETFs to short, although I haven't looked for these specific ones. They honestly have almost nothing on the short side (probably have their own stock loan business and don't give it to the riff raff for free).

    I can't see why they'd make these ETFs non marginal like mutual funds. Everyone else gives you margin from day 1 on ETFs. Can anyone think of a reason the Fido-iShares deal might have been structured to include this limitation?