Selling in an IRA

Discussion in 'Options' started by Joab, Mar 7, 2007.

  1. Joab


    Canadian here so no stupid comments please. :p

    I have an american friend that asked me for some help with his IRA.

    Can I do credit spreads in them ???

    What do I need to tell him to do in the account.

  2. You'll need margin for anything credit. Most brokerage firms don't allow that in an IRA.
  3. A529612, actually I can name several US brokers who permit credit spreads in an IRA, e.g. Schwab, Optionetics, TradeKing. These are the three I know for sure permit it. No doubt there are numerous others.

    Now, please don't mix "margin" with option requirement cash holdback.

  4. leonnis


    TOS allows anything but selling naked calls. any type of credit spread is fine.
  5. Dan is correct, I've been trading my IRA with TOS for over a year and do just about everything! They have been terrific we all know sometimes if you are assigned you are left temporarily short calls which is "illegal" but they work with you to sort it all out. I do credit spreads, naked puts (cash secured) only naked calls aren't allowed. DD's, calendars (no RC's) B-flys...its all good. I'm almost all options in an IRA and its more secure than when I was all equities! :D
  6. Joab


    Thanks guys mucho appreciated.
  7. Nanook


    RC's are allowed -- but only on the Put side.

    No naked Calls in any option strategy is allowed in an IRA account by any brokerage firm that I am aware of.

    Please enlighten me if there are any brokerage firms that allow naked Calls in an IRA account.

  8. Nanook, you're probably right that naked call writing is not allowed in an IRA account. However, there is an easy and cheap way to get around this.

    Simply throw your broker a bone and purchase a cheap (a dime or so) Out of the Money Call, thus creating a credit spread. More and more brokers are waiving the base commission charge for the second leg. For example, Schwab's charge is a base of $9.95, plus 75 cents per contract. So, if you do this type of credit spread with 2 contracts in each leg, the commission for the whole enchilada would be $12.95.

    Thus, purchasing 2 OTM Calls for 10 cents would cost $20 for the option and an extra $1.50 commission, or $21.50 total.

    Just a thought. Hope this helps.

  9. None...the reason R/C is allowed on the put side again is the same reason you can sell a naked put (fully cash secured)... limited risk. Naked calls or any option position that has naked calls in it is an unlimited risk position just not allowed in IRA's and this won't change in April. IMO Schwab is charging too much.