Options and futures trading in Solo 401k account

Discussion in 'Risk Management' started by rainman77, Sep 15, 2021.

  1. rainman77

    rainman77

    Hello, I opened a solo 401k account with ThinkorSwim (TDA). As i have custom plan, TOS has given full options trading privilege with margin (no limitation).

    Can you please help with CPA or any resource that clearly says what is disallowed in solo 401k and can result in UBIT? TIA
     
  2. horizon

    horizon

    Is it full margin or limited margin? I did not know Solo 401k has Any restrictions.
     
  3. CET

    CET

    I did not think this is allowed and that only limited margin is allowed. If you just opened the account today, it may be corrected by tomorrow. Someone else posted a similar question, and the next day TDA had corrected the full margin to limited margin. If it is still the same tomorrow just call them and make certain which way it will be before you do anything in the account.
     
    rainman77 likes this.
  4. What I know is that futures are allowed in self-directed and self-administered 401(k) and in IRA accounts, unless the plan documents prohibit it of course. Broker margin is allowed in 401(k) and can be enabled for TD Ameritrade retirement accounts, but will result in UBIT. There is nothing that prohibits leverage in retirement accounts; only "borrowing money" is prohibited and/or results in UBIT. What I don't know for sure is if options financing (for example box spreads or synthetic positions via put/call on the same security) results in UBIT, i.e. if it would be considered borrowing money, or considered engaging in derivative contracts to obtain indirect leverage similar to futures. Rainman, please let me know when you have more insight on this.
     
    Last edited: Sep 16, 2021
    rainman77 likes this.
  5. rainman77

    rainman77

    Based on the discussion with TDA customer support, it is full margin. He said the limitation of solo 40ik is limited by articles drafted by your provider. In my case it is solo401k.com
     
  6. rainman77

    rainman77

    Thank you, will update you once i have the answer. Also, as you fairly good knowledge about this topic. If my account says (for example) net liquidity as 100K and margin used as 50K, and i do not have uncovered position. Does it mean i am using margin and will it result it UBIT?
     
  7. Hello Rainman, I don't know for sure the answer to your question, and also I'm more familiar with futures than with options. However, my guess and my understanding is that you are not borrowing money, but rather pledging part of your portfolio to secure your options positions. It sounds like your margin requirement is currently $50k, which (in my understanding) does not mean that you borrowed any money. Your options positions could result in leverage or de-leverage (hedging), which shouldn't matter. Please take this with a grain of salt, as your question is related to mine regarding whether box spreads or similar methods to obtain leverage will result in UBIT. Please let me know when you have more insight, and I will do the same. It might be that only a CPA or attorney specializing in this area can answer this definitely.
     
    rainman77 likes this.