FDIC insurance protects deposits at insured banks, typically $250,000 per depositor, per insured bank, for each ownership category. If the bank fails, insured deposits are made whole, usually within days.
Traders meet the FDIC through bank sweep programs. Many brokers move idle cash overnight into deposit accounts at partner banks, which converts the cash from a brokerage claim covered by sipc into a bank deposit covered by the FDIC. Sweeps that spread cash across several banks can multiply the effective limit, but you should know which banks are used, because balances you already hold at the same bank count toward the same limit.
Nothing you buy with the cash is FDIC insured. Stocks, bonds, funds, and crypto held through a bank affiliate carry no deposit insurance.
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