DAYTRADING/SWINGTRADING STOCKS with INTRADAY INVESTMENTS Message Board

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Strategies & Market Trends : DAYTRADING/SWINGTRADING STOCKS with INTRADAY INVESTMENTS

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To: bowledover who wrote (311)	6/22/2001 5:28:02 PM
From: Dan Duchardt	Read Replies (1) of 565

David, Does anyone know, definitively, the actual story on these three issues/questions? The definitive answer is that different brokers will allow different things, and there are good reasons for imposing certain safeguards. Owning an option in an IRA can be a problem if you allow the option to reach expiration in the money (ITM). If you allow an ITM option to reach expiration date, any reputable broker wants to exercise the option for you. In an IRA, the broker cannot loan you money to purchase stock (for an ITM call), or loan you stock to sell (for an ITM put). Unless you have sufficient cash in the account to cover any stock purchased in the exercise of a call option, or have stock (or enough cash to buy some at market) to deliver to the assigned put writer, there is an insurmountable problem. In an ordinary cash account (non-IRA) under Reg T the broker could buy the stock for you if he believed in good faith you could deliver the cash to cover the purchase, or sell stock for you if he believed in good faith you could deliver the stock sold within the settlement period. This does not work in an IRA because contributions are restricted to annual limits. IRA custodians have a fiduciary responsibility to keep you from doing things you are not allowed to do. To cover themselves, many brokers simply will not allow you to trade options, other than covered calls and protective puts, and some will allow buying them only if you keep sufficient free cash to cover any exercised options. The least restrictive broker I have heard of for IRA option trading is at stockoptions.com I do not have an account, or any connection with them. Dan

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