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In a message dated 98-06-23 19:24:19 EDT, MRLYNNG@xxxxxxx writes:
<< George:
The problem you will have in an IRA is that you can only buy options because
the security you trade must be paid in full. The price and exposure of
buying
an option is a known figure. When you sell an option, the risk is infinity
and altho you receive a set amount of money, how would they collect if a
margin call were needed. In addition the IRS may not consider the money to
cover a margin call as "eligible" for an IRA contribution. Too many
problems.
Lynn
>>
George and Lynn,
IRA cannot make loans to the person, otherwise the loan is considered a
"distribution" to the person subject to tax and penalties.
Margins used in a broker account is considered loans to the person (thus
subject to tax and penalties). Brokers are probably required to report to the
IRS all distributions from the account. They don't want to be liable for the
negligence penalty (for not reporting the "distribution"). Therefore they
don't allow margins for IRA accounts.
Also, you can sell covered calls form an IRA account.
Sincerely,
William
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