Trading Options in 401k

T

tonybaloney

I am currently deciding whether to open a 401k or an IRA. The 401k is my preferred choice as the contribution limits are higher, but I have not been able to find a broker that allows the trading of options in a 401k, whereas many brokers offer options trading in an IRA.

Does anyone know of a broker where I can open a solo 401k that will allow the trading of options?
 
You can set up your own 401k independent of any broker, make yourself the trustee, and then open brokerage accounts as you wish in the name of the plan with no restrictions.

I have such a plan for only $250 a year from

http://www.401kadm.com/ and there are others as well if you search on solo 401k
 
Great info! That's exactly what I was looking for.

Unfortunately I waited until the last minute so there is no way I can get this done for the 2012 tax year. I'll have to do a SEP-IRA this year and the 401k next year.
 
Quote from comintel:

You can set up your own 401k independent of any broker, make yourself the trustee, and then open brokerage accounts as you wish in the name of the plan with no restrictions.

I have such a plan for only $250 a year from

http://www.401kadm.com/ and there are others as well if you search on solo 401k
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I know you said no restrictions so this is probably redundant, but you can short stocks in that thing? I guess my question is how difficult is it to find a broker for such a set up? (e.g. would IB allow shorting in such an account knowing they wouldn't have recourse beyond what's in the trust if I go debit)
 
I just found out that Etrade will allow you to trade options in their 401k. The commissions are terrible compared to IB, but it's still worth it to me.

I don't think they will allow you to short stock though.
 
Quote from bs2167:

I know you said no restrictions so this is probably redundant, but you can short stocks in that thing? I guess my question is how difficult is it to find a broker for such a set up? (e.g. would IB allow shorting in such an account knowing they wouldn't have recourse beyond what's in the trust if I go debit)
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no you can't short stocks in ANY qualified plan, be it ira , 401k, etc etc

nor can you establish an option position that requires margin.

You can trade futures but you are limited to overnight margin requirements at all times.
 
Quote from PHOENIX TRADING:

no you can't short stocks in ANY qualified plan, be it ira , 401k, etc etc

nor can you establish an option position that requires margin.

You can trade futures but you are limited to overnight margin requirements at all times.
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Correct me if I'm wrong, but I don't believe there are any laws against doing it in a self administered retirement plan, so I'm assuming by "no you can't" that you mean it's impossible to find a broker that will accept such an arrangement in a trust account...but isn't trading via LLC, which many people seem to do, essentially the same thing? Or are those backed by personal guarantees?
 
Quote from bs2167:

Correct me if I'm wrong, but I don't believe there are any laws against doing it in a self administered retirement plan, so I'm assuming by "no you can't" that you mean it's impossible to find a broker that will accept such an arrangement in a trust account...but isn't trading via LLC, which many people seem to do, essentially the same thing? Or are those backed by personal guarantees?
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Basically you have it exactly backwards , it IS prohibited because a qualified plan is forbidden to borrow money or it can lose it's tax free status which is REALLY a boneheaded thing to be striving for.

Having a self-directed IRA or whatever is irrelevant.

Now there is a difference between an IRA & a 401k in that some 401k's are allowed to make loans(penalty free) to you which is not the case for an IRA. I don't know if there is a limit by statute or not but I've never seen one that offered more than a $50,000 loan.
btw: lose your job and the loan becomes due immediately which may subject you to early withdrawal penalties. Wow wouldn't that suck, as if losing your job isn't bad enough.


http://www.ira-basics.com/prohibited-transactions-in-an-ira/
 
Quote from Bry:

my friend says he purchases vanilla options with his Tradestation IRA...

here's an article per options in an IRA--not many custiodians will allow options strategies beyond covered calls or cash-secured puts

http://www.essortment.com/stock-options-allowed-ira-account-19458.html
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I can't imagine any broker allowing for anything but covered calls or cash secured puts because you must have enough in your account in case of being assigned and combos involve prohibited legs.

My suggestion is trade index futures if the appeal of options is leverage.
 
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