Ways To Short In An IRA

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Norm

I believe that there are several ways to effectively do short sells in an IRA, including:

1. Buy put. Does not exactly simulate a short and cannot take advantage of smaller downward moves in stock price, since the option is generally not as sensitive to price movement.

2. Synthetic option. Buy put and sell call. In an IRA, the call must be covered. Requires more planning and is slightly more complex execution than a simple short sell.

3. Buy a negative beta stock. The beta can be negative for a number of reasons. For example, it could be a short fund.

If anyone has any comments on these or any other methods for effectively shorting an IRA, please respond.

Thanks,
Norm
 
2. If you buy put and sell a call (synthetic short stock) and you say the call has to be covered in the IRA then you will have to buy stock at the same time. If you buy stock and have a synthetic short stock you have a conversion/reversal which does not get you anywhere.


Quote from Norm:

I believe that there are several ways to effectively do short sells in an IRA, including:

1. Buy put. Does not exactly simulate a short and cannot take advantage of smaller downward moves in stock price, since the option is generally not as sensitive to price movement.

2. Synthetic option. Buy put and sell call. In an IRA, the call must be covered. Requires more planning and is slightly more complex execution than a simple short sell.

3. Buy a negative beta stock. The beta can be negative for a number of reasons. For example, it could be a short fund.

If anyone has any comments on these or any other methods for effectively shorting an IRA, please respond.

Thanks,
Norm
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Sell covered call and go long the put, a collar. You have locked the stock at current level. You have sold off your upside and gone long the downside.
 
Optioncoach,

That is a good point. I am not certain, but in some instances (some brokers) I think that the sold call can be cover with a cash position rather than the underlying stock. I will need to look into this.

Norm
 
SideShowBob - I have an account at IB and inquired about shorting SSFs in my IRA about two months ago. I was told that I could not do this because it would be against IRS regulations.

Have you actually done this? It seems it would be the very best way of all to effectively short an IRA.

Any IB reps are invited to comment on this.

Norm
 
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