my employers 401k does not allow long calls / puts what choices i have?

G

ggelitetrader000

Based on googlling, the tradingacademy.com url mentions long calls and puts are generally allowed in 401k https://www.tradingacademy.com/lessons/article/options-trading-401k-accounts-restrictions/
however my employer's internal policy regarding 401k plan does not allow that even though the brokerage company (fidelity) that services the 401k do allow. This caused fair amount of confusion and running back and forth.

Now with fairly large amount of cash sitting in my 401k account and can only do stock i feel quite vulnerable as I have seen and trading for years the options and options can be much safer than stock.

I am wondering about the possibility of rolling the fund to another 401k account that i can supposedly setup independently but i am not sure if my employer will allow the rollover while I am working there.

Has anyone ran into similar situation? Thanks.,
 
1. Lobby them to change - the 401(k) could be a legacy setup. Fidelity has 401(k)s that do allow them so I would assume it your firm's restriction.
2. Do them in a taxable account - problematic for taxes. If your hedge works and you're net zero between the two accounts you would have a tax liability.
3. Inverse ETF if allowed. Finding something that is either a close or rough fit, but it's more capital intensive.
4. Your point about moving the 401(k) - I suspect they would more likely to change and allow hedging before they allow you to move to another provider - whole bunch of reasons as to why.
5. If you have lot's of company stock in the 401(k) Fidelity may have an OTC hedge - a long shot.
 
never heard of a 401k that lets the owner do anything other than allocate some % to predefined funds. the point of it is to reduce taxable income and get the employer match
 
Option_Attack said:
You might consider starting a Roth IRA. Stuff as much as you can in there. Then transfer to IB or other broker that allows option trading in an IRA.
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I have Roth IRAs at Fidelity and Schwab. I can only do covered calls or puts to buy back stocks, I believe. Federal law I think...I may be wrong, but I feel that is the case.
 
Cabin111 said:
I have Roth IRAs at Fidelity and Schwab. I can only do covered calls or puts to buy back stocks, I believe. Federal law I think...I may be wrong, but I feel that is the case.
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hmm that is i wonder, then url i might have posted in my OP could be wrong? Do you have any source so I can also inestigate? If so, that'd suck. IMO, really covered calls and puts are extremely dangerious and loss-prone than long calls and puts,but it may depend on individual's preferences. I steer clear of anything that says "covered".
 
Covered calls "can be" the safest of all options. You must own the stock and have it at the broker. You still collect the dividend and hope the stock goes up slightly, but does not get called away...Do another covered call. The problem arises when you have a stock like GM (that I had in 2007). Bought it at about $44. It kept going down and down. I should have bought back the option and sold the stock. No, I let it slide to $1. and sold the stock. Live and learned on that one. If you set your limit (if the stock drops below 10-20%...Your comfort level) you buy back the option and get out of the stock. In order to buy back the option there MUST be someone on the other side of the trade. As long as you can buy it back for one cent, you can either unload the stock or write another option (covered call)...
 
Cabin111 said:
Covered calls "can be" the safest of all options. You must own the stock and have it at the broker. You still collect the dividend and hope the stock goes up slightly, but does not get called away...Do another covered call. The problem arises when you have a stock like GM (that I had in 2007). Bought it at about $44. It kept going down and down. I should have bought back the option and sold the stock. No, I let it slide to $1. and sold the stock. Live and learned on that one. If you set your limit (if the stock drops below 10-20%...Your comfort level) you buy back the option and get out of the stock. In order to buy back the option there MUST be someone on the other side of the trade. As long as you can buy it back for one cent, you can either unload the stock or write another option (covered call)...
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yes "called away" is a thing i dont like it among others. i just look at covered call graph and it really sucks. losses are unlimited and gains are capped which is exactly the opposite of long calls: losses are limited and gains are unlimited.
 
ggelitetrader000 said:
Based on googlling, the tradingacademy.com url mentions long calls and puts are generally allowed in 401k https://www.tradingacademy.com/lessons/article/options-trading-401k-accounts-restrictions/
however my employer's internal policy regarding 401k plan does not allow that even though the brokerage company (fidelity) that services the 401k do allow. This caused fair amount of confusion and running back and forth.

Now with fairly large amount of cash sitting in my 401k account and can only do stock i feel quite vulnerable as I have seen and trading for years the options and options can be much safer than stock.

I am wondering about the possibility of rolling the fund to another 401k account that i can supposedly setup independently but i am not sure if my employer will allow the rollover while I am working there.

Has anyone ran into similar situation? Thanks.,
More...

My mistake was not transferring my 401K into an IRA with a broker. Our trustee kept changing and getting transferred to subpar mutual funds. Transfer only if they approve you to buy calls and puts. Some brokers are very strict and will not even allow that except, covered calls.
 
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