sell-to-open in an IRA account?

Discussion in 'Options' started by loufah, Feb 9, 2014.

  1. I accidentally sold (instead of bought) NFLX puts. I promptly bought them back, but I was surprised I was even allowed to write them at all. I had no position in NFLX stock. Was this an oversight by the broker, or is writing uncovered American-style equity options in an IRA allowed now?
     
  2. 1245

    1245

    Selling a naked put has a limited loss. You can sell naked puts. The margin is equal to the max loss. You can't short a stock or sell a naked call.

    1245
     
  3. Yup, selling puts is exactly the same risk profile as buying stock. It depends on the broker but at IB for example you can sell puts, put on options spreads, etc in an IRA as long as the account is approved for it.
    Even then, selling calls is not allowed because it's theoretically unlimited risk.
     
  4. eurusdzn

    eurusdzn

    Maye it was a cash secured put that was allowed to be sold in your IRA.
    Buying power may have been reduced by cash value of underlying.
    You may not have noticed cause your not a 5k forex banger.
     
  5. Mitch89

    Mitch89

    sorry for the question, how is it possible that writing naked put has limited loss?
     
  6. 1245

    1245


    If I sell the Puts on GE, last sale 25.11, I can only lose $25.11 minus the net credit from the sale of the put.

    1245
     
  7. newwurldmn

    newwurldmn

    Strike price - premium is max loss.
     
  8. 1245

    1245

    My intent was to say the same thing.
     
  9. Mitch89

    Mitch89

    Say the underlying is $90 and you sell put 85, now the asset plunged to $60 and after a day continued to $40 and to $20.
    your put (as long as you have it) has unlimited loss, or am I wrong?
     
  10. 1245

    1245

    Sorry, but you are wrong. The 85 put can not be worth more than $85 at expirations. If you sell a naked call, there is no limit to how much you can lose. So, margin requirements are different in these types of accounts. You can't have a situation where you have a margin call in an IRA. Selling the put will remove enough buying power to cover max loss. You can't short the stock or naked calls, because potential losses are unlimited.
     
    #10     Feb 10, 2014