Any legal way to arb or pair trade into a Roth from an Traditional IRA or Taxable Account?

[dcwriter2]

Was thinking about inverse and non-inverse 3X ETFs or married puts on stocks? Any research ever been done or this and what trades have the best chance of success, and the legalities?

 

[ScroogeMcDuck]

If you lose the coin flip you end up with more money in the taxable and less money in the roth. So there's no EV to be gained by this.

 

[horizon]

Would you please explain why it may not be legal to do so? I thought each account can trade whatever you want.

 

[ScroogeMcDuck]

"In 2008, the IRS issued Revenue Ruling 2008-5, in which it addressed the question of whether the wash-sale rules apply to IRAs. In this ruling, the IRS explained that when shares are sold in a non-retirement account and substantially identical shares are purchased in an IRA within 30 days, the investor cannot claim tax losses for the sale, and the basis in the individual's IRA is not increased."

But the wash sale rule is easily circumvented by, for example, replacing SPY with DIA, or selling otm puts on the exact same stock you just sold.