Tradestation allows futures trading in an IRA but they require a $15000 minimum deposit (then again if you don't have that much you'll likely wipe out the account). See: https://www.tradestation.com/support/myaccount/faq_fut.aspx SSB
developer17, Sorry to hear your pain but thanks for posting this story here. It has provoked an interesting discussion and also provided a useful reminder about options exercise. I would suggest that you don't even think about lawyers because you will lose. The IB Agreement seems to clearly cover cases like this. No need to drag the misery out. Also: You are probably going to be stuck paying a penalty to the IRS but I would chalk it up as part of a useful but costly lesson.
not sure if it was quah or someone else that brought up the issue of being assigned but it is my understanding that you can only be assigned when you are short the options. the long side is exercised.
Correct. Developer17 was long. The exchange auto-exercised him. And the underylying stock he now owned opened gap down. And he never had the money to own a quarter million worth of GOOG so IB liquidated him as soon as they noticed what had happened, then raided his other IB account for the balance of the loss (this is the only part I question the legality of). I too am grateful to Developer17 for sharing this lesson, so all of us don't risk losing $10,000, because we didn't understand what can go wrong on the long side, if we don't click the magic button on IB's TWS. What would have happened in this same scenario if Developer17 had sold the call? Would the options exchange have auto-assigned him? And he would have accidentally made $10,000? And if he had bought the put... an auto-exercise for the $10,000 accidental profit when the gap down hit on Monday? In both these situations would IB have auto-liquidated him too? EDIT: OK, I am thinking that there is no such thing as "auto assign". In my above question there is no right that you or the exchange has to accept an assigment. There is only the option to exercise. However, exchange or not, you could GET assigned. And the other post says there are margin requirements to short (sell) the call and developer17 only had $2500 in his account. However, I still wonder about buying the put and accidentally making $10,000. Maybe that can't happen either because there was no profit in that position on that Friday. OK, here is the scenario, what if the opposite had happened, he bought the put, there was a slight profit in it on Friday, the options exchange auto-exercised, then GOOG was gap-UP on Monday, then he would accidentally make $10,000.
What about this senario? In the end what if IB ended up with the 9 thousand or so dollars. Maybe they took the other side and sucked down his other account since they knew he had 15,000.00 and they could get it monday. GOOg opened down low on the day so maybe they figured they it would would come back up. I say IB might have gotton his dinero????
You would think that being long on ITM calls they would only be exercised if YOU gave the Ok. If you owned calls and they expired ITM and your broker received NO instruction from you then they would expire and the seller of the calls gets a lucky break.
I have not read this whole thread so I may be duplicating what someone else has said. I would just like to add a minor point. According to Internal Revenue Code Section 4973 the penalty for an excess contribution to an IRA is computed in the following way: "...there is imposed for each taxable year a tax in an amount equal to 6 percent of the amount of the excess contributions to such individualâs accounts or annuities (determined as of the close of the taxable year). The amount of such tax for any taxable year shall not exceed 6 percent of the value of the account or annuity (determined as of the close of the taxable year). " As a result, I don't think Developer17 would have a penalty for an excess contribution unless I am misunderstanding the facts.
Such thinking cost developer17 $10,000. The default is for the options exchange to automatically exercise them for you. This can result in a margin call. This in turn can result in a highly leveraged loss. (or gain). A lot can happen in 48 or 72 hours over the weekend and you are holding the bag. There is a button somewhere in TWS to over-ride the default behavior.