Protection for Futures Accounts

[SellingNaked]

Hi Guys,

I've been on a quest to find the best possible way to protect a futures account (futures option seller). Reading the forums, I've found the possible solutions...please elaborate on each point as you see fit. Thanks in advance.

1) Move to Canada since futures accounts are protected with SIPC like protection.
- This is not workable for me since, to my knowledge, I have to become a Canadian
citizen...and I do so LOVE being American!
2) Spread your accounts around multiple brokerages (and FCMs).
- This seems a possible solution. A bit harder to manage as the accounts grow, but
nonetheless possible.
3) Lastly, buying T-Bills in the account vs leaving it in cash, apparently, the T-Bills are
covered...up to $500,000.
- This seems like a perfect solution especially when coupled with (2).

Thanks ya'll!

 

[Scataphagos]

Hi Guys,

I've been on a quest to find the best possible way to protect a futures account (futures option seller). Reading the forums, I've found the possible solutions...please elaborate on each point as you see fit. Thanks in advance.

1) Move to Canada since futures accounts are protected with SIPC like protection.
- This is not workable for me since, to my knowledge, I have to become a Canadian
citizen...and I do so LOVE being American!
2) Spread your accounts around multiple brokerages (and FCMs).
- This seems a possible solution. A bit harder to manage as the accounts grow, but
nonetheless possible.
3) Lastly, buying T-Bills in the account vs leaving it in cash, apparently, the T-Bills are
covered...up to $500,000.
- This seems like a perfect solution especially when coupled with (2).

Thanks ya'll!

Brokerage firm likely to charge you more in commission to buy and sell T-bill than you'll earn in interest.

 

[Mtrader]

1) Move to Canada since futures accounts are protected with SIPC like protection.
- This is not workable for me since, to my knowledge, I have to become a Canadian
citizen...and I do so LOVE being American!

Don't think you have to be Canadian. I also think that protection is limited to 1 million.

 

[SellingNaked]

Don't think you have to be Canadian. I also think that protection is limited to 1 million.

I thought there was a rule/law that did not allow US citizens from opening Canadian brokerage accounts? I cannot find the thread at the moment, but that was my understanding from an earlier thread. Now, maybe it was meant for Americans living in the US opening a Canadian brokerage account vs an American living in Canada. Anyone know more about this?

 

[pak]

Hi Guys,

I've been on a quest to find the best possible way to protect a futures account (futures option seller). Reading the forums, I've found the possible solutions...please elaborate on each point as you see fit. Thanks in advance.

1) Move to Canada since futures accounts are protected with SIPC like protection.
- This is not workable for me since, to my knowledge, I have to become a Canadian
citizen...and I do so LOVE being American!
2) Spread your accounts around multiple brokerages (and FCMs).
- This seems a possible solution. A bit harder to manage as the accounts grow, but
nonetheless possible.
3) Lastly, buying T-Bills in the account vs leaving it in cash, apparently, the T-Bills are
covered...up to $500,000.
- This seems like a perfect solution especially when coupled with (2).

Thanks ya'll!

Are you telling me that your funds are 100% protected from fraud or anything else... when buying any T-bill (why is their a $500,000 limit?) at a major direct access broker (Tradestation-IB for ex.)???

So is it true that if a client at MF global had a T-bill they got their $ immediately???

and wouldn't the cost of buying this t-bill be way worth it to know you have this protection???

 

[wrbtrader]

Hi Guys,

I've been on a quest to find the best possible way to protect a futures account (futures option seller)...

1) Move to Canada since futures accounts are protected with SIPC like protection.
- This is not workable for me since, to my knowledge, I have to become a Canadian
citizen...and I do so LOVE being American!

You don't need to become a citizen of Canada. In contrast, you need to become a legal resident of Canada and maintain (actively living in Canada...they do check) a Canadian address to open a Canadian brokerage account.

I recommend just spreading your trading capital amongst several brokerage accounts and hire a good tax accountant to do your taxes. Also, if you do decide to seek and gain legal residency in Canada.

Also, if you have both U.S. brokerage accounts and Canadian brokerage accounts (you're most likely have banking accounts linked)...there's an added advantage of residual income from moving some of your income from U.S. to Canada or vice versa when needed depending upon the currency exchange rate (when there's at least a 8% differential...right now a 1 U.S. dollar has 1.31 spending power in Canada). The latter is currently serious additional income just by moving capital around between your U.S. accounts and Canadian accounts. See your tax accountant for help with such.

 

[J.P.]

Also, if you have both U.S. brokerage accounts and Canadian brokerage accounts (you're most likely have banking accounts linked)...there's an added advantage of residual income from moving some of your income from U.S. to Canada or vice versa when needed depending upon the currency exchange rate (when there's at least a 8% differential...right now a 1 U.S. dollar has 1.31 spending power in Canada). The latter is currently serious additional income just by moving capital around between your U.S. accounts and Canadian accounts.

Interesting. Would you proffer a little more detail on your residual-income methods?