Well there are hundreds or thousands of articles on the internet on how earl withdrawal from 401k can cost you$$ due to penalties and taxes which I did not dispute. Now I have been mostly trading stocks in my 401k (as they dont allow options) and mostly traded options in my private brokerage. So basically here is incredible simple idea that withdraw fund from 401k this morning, any opinion will be appreciated? : for x stock that likely to move in bullish, you buy Y number of stock in brokerage and short the same number of stock in 401k. Of course the net effect is zero, but if stock go bull, then you have effectively withdrawn from your 401k. If the stock goes down unexpectedly, well, that is sad but also no loss, you just contributed to your 401k.
You're not the first to think of this. It can be detected by regulators. While you might avoid paying a penalty, you'll still have to pay the short term cap gains tax in your non-tax-deferred account.
Most 401(k)s do not allow individual stock purchases. Of those that do have a "brokerage window" most do not allow shorting.
https://www.forbes.com/sites/greats...k-about-going-solo-in-your-401k/#7a37752d1033 If self employed, you can make your 401k LLC and do so much more than regular 401k's. I have had this since 1996 and do options, real estate, businesses and you can borrow from it but have so many years to pay back with interest.
There's so many things wrong with this question. The short answer is, if you really want to do that, divert some of your withholdings into a brokerage account and do it that way. If you're trying to get that much money out of your 401(k) you over leveraged (or you've been saving for years and you don't have time to recover if you screw it up). Also, the interest payments are to yourself. Why would you complain about these? If you can't muster the modest 401(k) interest (isn't it somewhere around 4-5%?), and you can't swing the cash for options trading in cash flow, you're under capitalized...or, if you do in fact have that much money, you're getting over leveraged. This interest will be paid back to yourself (albeit, in post-tax dollars). If you can't pay that out of cash flow (or divert cash for options trades), you really shouldn't be taking on the risk of options. There's so many answers to the question you should be asking that don't involve risking your retirement account. Options should be traded only with speculative cash. 401(k) loans (or any loan, for that matter) should not be speculative...especially not with options.
Go easy on him. He's thinking creatively. I would guess most plans don't allow shorting, but there are good reasons for doing what he proposes. Most 401k plans don't allow options and those that do don't allow shorting naked calls (or selling combos which involve uncovered calls). Also commissions in the 401k are likely a lot higher than an IB account for example. Many traders can simply make more money with the tools that a non-retirement account provides vs. retirement account. So there is a good reason for doing it. What might make more sense is borrowing from the 401k to reduce principle on a house. In that case, the interest payment is effectively being made to oneself and that frees up other money for investing in a personal account.
ok, i do understand the capital gain tax, before talking regulator threat, you should talk bout whether it is legal or not or legal loophole. if it is legal, who cares of about whether regulator sees it or now, if not legal obviously i aint gonna attempt it.
i do lot of options trading, but just for this topic strictly, i am basically talking about stocks only. So i meant, shorting the stock in 401k and buying the same in private brokerage. Or shorting is not allowed, perhaps buying declining stock on 401k and shorting on private account.