Can anybody comment on IB's IRA accounts? I am a happy IB customer with my margin account and I think it makes sense to transfer my IRA to them. Especially if they allow a level of option trading similar to TOS, then for me they sound like a better deal. Their high interest rates paid on cash and their low commissions sounds a lot better than TOS especially for someone like me who thinks their other shortcoming are minor and who doesn't need the TOS tools. However the IB IRA FAQ shows some strange restrictions. For example, "funds equal to the aggregate exercise value of long calls are restricted". Also spreads are only allowed on European style contracts. The buying puts statement also has a strange caveat of "shares subject to exercise are restricted". Huh? Does anyone know if the FAQ is correct? Here is the statement that addresses IRA trading capabilities cut from IB's web site: "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. " Don
If I'm reading/understanding correctly they are reasonably generous...however not as good as TOS for your IRA. You will probably need to talk to a CSR to get a clearer view. I trade our IRA with TOS and there is no margin but I'm allowed ALL defined risk trades and its working out well. IB should really get with the program as so many up and coming retiree's are interested in managing their own IRA's using options.
IB, I think, is very restrictive in type of options strategies allowed in IRA accounts. IB's risk management is mechanical (programmed into the system), so it will not allow the slightest chance of an IRA account having a net short position due to earlier assignment/exercise or the account having insufficient fund. So you cannot do a spread really with American style options, and most stock options are American. I have a couple of IRA accounts with IB and haven't done any spread trades becuase of their restrictions. Having said that, I have regular account with TOS, not IRA's. So maybe Donna you can comment how TOS handles situations where a short leg is assigned before expiry? Does TOS liquidate the whole position? TIA
Happy to answer as best as I can. I've only been trading at TOS since last Sept. So far I have not been in a situation where I was assigned unawares. If I'm naked a short put the entire amt at risk is held back (my cash) if I do a put/call spread only the diff is held back and so far I've closed out the spreads myself. I believe they would notify me if a short was being breached and I didn't have enough cash to purchase the whole stock so I could make a choice to sell something else or unwind the spread. Their system is unbelievably intuitive and advanced in terms of option spreads. My current FOTM IC on the SPX is quite complicated and I know they have given me the best "margin" (buying power) allowance possible. The system knows what is protecting what. Right now its showing a couple of ratioed B-flys (because I've scalped some puts and added shorts bla bla) To answer your question as far as liquidating the entire position...my guess is they would do nothing to actually jeopardize the position without consulting you first. The only thing I can't do is write naked calls. I can even do reverse calendars (although not inclined to do so). I cannot short a straddle (because of the naked call). Essentially anything I personally would want to do I'm allowed to do, and yes sometimes it does look as though they may be accepting risk...however I believe their system will keep us both out of trouble In short...I'm one VERY happy IRA camper Highly...Highly...Highly recommend them.
I might be able to live with the "no spread" limitation of IB and the other disadvantages. However, if "funds equal to the aggregate exercise value of long calls are restricted" is true that would be the straw that breaks my back. Anybody know if that statement (restated below from IB'S web site) is true? Do they mean before the long calls are exercised? "funds equal to the aggregate exercise value of long calls are restricted" Don
Hi Don, I have an IRA at OX,and at IB. In the OX account I just do spreads. In the IB account,I have sold puts but do not like it as the funds are resricted.Why they would restrict funds on long calls/puts I do not know. My feeling is the best strategy for an IB ira is the in the money covered call,exercise/assignment is free.You know,the Dagnyt ETF special. Bol,Waf
If you sell puts in an IRA I believe they need to be cash-secured. There shouldn't be any funds restricted on long calls or puts, just the initial debit subtracted from account.
Yes,they are cash secured,but they pay no interest on the cash,I guess what I mean is the cash is restricted,that is you cannot put it into an an interest bearing instrument of any type. So in this case the synthetic equivalent (covered call) is a better use of funds,I think. Maybe funds are not restricted on long option positions,I very rarely go long so I am not sure. Bol,Waf