Dan and Dale,
Thanks for this discussion on selling puts in IRA accounts. I've just started an inquiry process with my broker. The first level of response, just the person who answers the phone on the options desk, is that I cannot. But he's given me an e-mail address to inquire further, from which I hope to also get a telephone number.
I've done my first round of quite preliminary reading of McMillan on selling puts as a way to get back into Qcom (assuming my 45s are called) and it looks like a strong strategy. The principle risk McMillan sees is having the stock assigned when the share price is actually much lower. But, since, as he notes in his McMillan on Options book, that's the same as being a long term holder of the shares, I don't think I increase my risk.
In fact, I think my risk is different. It's the risk of not acquiring the shares. While I'm new to this, let me recount where I see the risk. If I sell, for instance, Nov puts at 45, when the share price is 50, and the price descends to 46, I will not be able to use the money set aside to buy the 45s to pick up the 46s (unless I'm willing to take a loss by rebuying the options, which doesn't seem wise from this remove). Would have to use some other source. Thus, I could, unless I watch the risks here, wind up without the shares. At least through the November options period.
Sound right? Oh, yes, if I'm able to sell the puts (unlikely), I would protect myself from this risk by having enough cash in the account to protect against it.
John |
