Here's what weirds me out. I can't short stocks in my IRA. I can't even short stocks if I buy protective calls, ensuring a finite worst case loss. (I checked with my broker about that.) But I *can* sell bear call vertical spreads, with American style options. So what happens if the short call gets in the money and is exercised? I'll have a short stock position with a protective call, forbidden in my IRA. WTF?
ha ha.. that has happened to me umpteen times.. its calld hitting below the belt... lol... also. here is how they react... say u r assigned the stock on fri. short. then on Monday. their software will detect it.. u will have till 1 pm. then u will recieve a call from them and in that call they will be informing u that u r short the stock and that is not allowed hence ,they will close the position.. but have u heard even more wierd. someone had bought goog calls and they were OTM. somehow at expiration they became 5 cent in the money they were exercised. then on Mon, goog was 10$ down. and this person had a paper loss of 25K. and the stock was immediately sold.. the acct was 20K under.. and it was an IRA ha ha. could not be funded . well the broker still did ask for the money and came after the person... beware of what u hold at expiration or in short spreads. what can get assigned.
It's the compounding of daily returns and can easily be modeled in a spreadsheet: http://www.proshares.com/funds/performance/the_universal_effects_of_compounding.html
Yes, I just asked by broker about the "assigned bear call spread" issue and he told me that within 10 minutes after the short call becomes a short stock position it will be automatically closed out. Anyhow, to answer the OP's question (how to short in an IRA without suffering overmuch from time decay) it looks like the best bet would be a long term deep ITM put, made into a synthetic short with an OTM short call at the same strike, protected with a further OTM long call (making it legal in your IRA). You only suffer the time decay on the far OTM long call, and this is equivalent to shorting a stock with a protective OTM call. Make sure your put is sufficiently ITM that the strike price is unlikely to be attained; you don't want the short call to be exercised, as that will make your position a true short stock position that is autozapped by your broker. And don't forget to close out your position before expiration.