April 19, 2011 3:19 pm

Trading Options In An IRA Account

 
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When saving for retirement, the first step is often to open an IRA account. Some investors use a portion of their savings for trading options in an IRA account. Some brokers provide assistance to investors trading options with an IRA account.

options trading in IRAAccording to one such brokerage firm, it is easier to trade options with IRA accounts than with other retirement accounts like a 401(k). Some investment brokers will help the investor convert a retirement account to an IRA for options investing.

A brokerage firm may have restrictions on which clients can trade options in IRA accounts. They also may allow trades in some select types of IRA accounts and prohibit trades in others.

An investor with an IRA account with an investment broker may have more flexibility in how the funds are invested. With the IRA account, the investor may be able to invest part of the money in stocks.

Even investors with experience in options trading may choose to secure some of their IRA funds in long-term, stable investments like bonds. Some investors may allocate some of their retirement savings into mutual funds.

When deciding on a retirement savings strategy, the investor may want to ask about the tax ramifications of the different types of investments. Some retirement investments are taxed when the funds are withdrawn during retirement.

IRA accounts have rules as to when funds can be withdrawn without penalties. For some IRA accounts, the age for eligible withdrawals is fifty-nine and a half years old.

There are also restrictions on how much money can be added to the account annually. Typically, up to five thousand dollars can be added to an IRA account annually, but the limit is raised to six thousand dollars if the investor is fifty years old or older.

Withdrawals from a Roth IRA are tax exempt, but the contributions made to the account are subject to tax. With a traditional IRA, contributions are not taxed until withdrawn.

When investing in options with an IRA account, the investor may choose from several options investing strategies. If the investor holds at least one hundred shares of a stock, the investor may want to buy a protective put to limit the potential loss if the value of the stock would decline.

The investor may sell a covered call. Buying a long call or long put is an options strategy that investors using an IRA account may use.

There are some restrictions on the types of options trades that can be done with funds in an IRA account. The investor cannot sell naked calls. An investor cannot use funds from an IRA account to sell short puts unless they are secured by cash.

Because of the possibility of complex tax implications with using options trading with an IRA account, the investor may want to consult a tax professional. Also, the investor may want to consider using options strategies that have limited risk. John’s method allows you to use your IRA account to trade options for safe, conservative and consistently profitable weeks, every week.

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2 Comments on "Trading Options In An IRA Account"
  1. .
    January 6, 2012 at 1:20 pm

    [...] in successfully growing your portfolio using options – safely, efficiently, and quickly and trading options in an IRA account? You know where to go. Share and [...]

  2. .
    March 12, 2013 at 5:22 pm

    [...] investor using an IRA account for options trades may be limited in the types of options trades. Since there are restrictions, an investor interested [...]

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Disclaimer: The risk of loss in trading any financial vehicles such as securities, options, futures and forex can be substantial. Members must consider all relevant risk factors, including their own individual financial situation, before going into trading. Options involve risk (as in trading with any other channels) and are not suitable for all investors. See Characteristics and Risks of Standardized Options. Past results of any individual trader or trading system published by us are not indicative of future returns by that trader or system, and are not indicative of guaranteed future returns which may be realized by members.

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