Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (43520)	6/15/2001 8:16:06 PM
From: StockHawk	Read Replies (1) \| Respond to of 54805

Just as no margin is required to buy common stock, none is required to buy option contracts. I don't understand your comment. If I may jump in here, I believe the issue is that in an IRA you cannot enter into a type of transaction that could potentially cause you to lose more than you have in the account. In other words, say I have $10,000 in a regular account and I sell 10 naked JDSU $10 calls for $5 each. I take in $5000. Next week, just my luck, someone floats a takeover offer at $60 per share. Suddenly, it will cost $50,000 to cover my short calls. My account is wiped out and I'm thinking the Amazon rain forest might be a good place to hide - at least while I'm in the process of suing my broker who - shame on them - allowed me to trade inappropriately. Of course, I could also pony up the money and take the loss. But you can't just add wads of cash to an IRA. Since certain call positions can have "unlimited" downside, you can not use them in a "limited" account like an IRA. At least I think that is the reason. StockHawk

To: Mike Buckley who wrote (43520)	6/16/2001 2:59:26 AM
From: Dinesh	Respond to of 54805

Mike, In IRA accounts, long positions are ok and naked positions must be fully covered. These are Fed regulations. Stockhawk does a better job of explaining the need for these rules. I thought you had meant that most brokers didn't allow any options at all in the IRA. I guess I misunderstood your question. There are some additional rules that are peculiar to IRA account. One is allowed to use proceeds of a sale to buy something else on the same day. But, past the trading day, those sale proceeds become available only after that trade is settled. These matter of course only if you are the trading kind but somehow I didn't get that impression... -D