I don't trade with IB and I have not researched what restrictions they
apply to their IRA accounts. Again, brokers impose their own
restrictions. I do know that ThinkOrSwim and OptionsXpress will let you
trade pretty much anything you want in terms of options, in an IRA
account. The primary caveat is that a short put requires adequate cash
to buy the stock in the event of assignment and they do not permit a
naked short call because of the theoretical unlimited upside risk. The
way around that limitation on a short is to buy a far OTM call, thereby
creating a theoretical cieling. There simply needs to be enough cash in
the account to cover the potential risk because contributions to the
account are limited by law and if you incur a loss beyond your available
account capital you and your broker have problems.
The reason why many brokerages do not allow you the maximum freedom in
the way of options trades is 1.) they don't really understand options,
and/or 2.) their brokerage side software cannot adequate track complex
positions and perform the functions necessary to ensure that your IRA
account has adequate capital to cover the risk. If their software is
not up to the task, they cannot safely allow their clients to trade
complex options strategies in an IRA account because they are
on-the-hook for covering assignments that their brokerage clients
cannot.
In other words, the problem with options in an IRA account is not with
any limitation imposed by law but with the respective brokers ability
and willingness to accomodate their options savvy clientele.
What I also suggest people do is pick up the telephone, call their
broker, and ask these questions. If they won't allow you to do what you
want in your account, then a change of brokerage may be in order.
Christopher Smith
TheOptionClub.
--- In OptionClub@yahoogro
>
> Chris,
>
> I opened a ticket with IB to clarify what can and can't be done in an
IRA from their perspective. I believe they are 'option savvy' as I have
been using them for several years.
>
> I am unable to test different option strategies in my 'simulated
account' since it is not an IRA but has the same trading level as my IRA
- so I can't test apples to apples. I don't wan to do any 'testing' in
my live account.
>
> All that being said, I just felt the need to reply to you comments
even though I have no interest in doing anything but buy-writes and
CSP's in my IRA.
>
> FLASH - here is the verbatim response from IB (unbelievably fast):
>
> Stocks, covered call writing (covered shares are restricted), buying
calls (funds equal to the aggregate exercise value of the long calls are
restricted), and buying puts (shares subject to exercise are
restricted), selling cash secured puts, spreads securities with European
style expiration, futures contracts, and futures options. The IB IRA is
structured as a Stock Cash Account (if you choose to trade only stocks)
or as a Stock Options Level I Account (if you choose to trade options in
your IRA). IRAs may also invest in US dollar denominated futures
contracts, and future option contracts.
http://www.interact
ntity=llc#38
>
> Interactive Brokers Customer Service
>
> Jeff W
>
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