Why won't my retirement account let me write a “covered put”?
You're correct in your implied point: Selling a cash secured put has less risk (in terms of both volatility and maximum loss) than buying the security outright. However, many brokerages don't allow cash-secured put writing in IRA accounts.   There are three reasons this tends to be the case: A broker does not have to allow the full trading suite the regulations permit.  From brokersXpress: Do you allow equity and index options trading in brokersXpress IRAs?     Yes, we allow trading of equity and index options in IRAs based on the trading level assigned to an investor. Trading in IRAs includes call buying, put buying, cash-secured put writing, spreads, and covered calls.  I understand OptionsXpress.com offers the same level of trading. Disclosure - I have a Schwab account and am limited in what's permitted just as your broker does. The trade you want is no more risky that a limit (buy) order, only someone is paying you to extend that order for a fixed time. The real answer is to ask the broker. If you really want that level of trading, you might want to change to one that permits it. "I have a Roth IRA with Scottrade, and they allow me to write cash secured puts, as well as covered calls. I can also purchase calls or puts, if I choose. When I write a cash secured put, it automatically deducts the amount required to purchase the shares at the strike price from my ""cash available for transactions""." "A ""covered put"" of the form of being short, and buying at the strike price if the ""put ... is put"" (excercise), is off the table simply because you can't do shorts in the retirement account. Even if you feel you ""win"" the argument that you're hedged by being short, any broker can say, ""we simply forbid shorts"" and that's that. A ""covered put"" of the form of posting the cash, and spending it to buy at the strike price if the ""put ... is put"" (excercise), might be forbidden by brokerages because, frankly, how do you account for the ""dedicated"" cash? Is it locked down like margin is, or escrow, or what? I don't know offhand how I would address that in my very own firm. Thus, any broker could say, ""we forbid it"" and that's that. The other answers are very interesting in conjunction with this. JoeTaxpayer says, very paraphrased, 'just cuz it's legal doesn't mean we have to offer it.' Jaydles says (again, completely paraphrasing), 'complex stuff for a safe little retirement savings account;' 'difficult to administer' (as I said, how do you account for it); and 'tradition' So maybe look at Scott, per Thorn's answer, LOL. It appears that you can shop around on this issue."
Your wife could open a non-registered margin trading account with a Canadian full-service or discount broker. An account at one of the top Canadian brokers should provide access to trade U.S.-listed options. I've traded both Canadian and U.S.-listed options with my own broker. On the application, you'd need to indicate an interest in trading options, and more specifically, what kind of option trades; e.g. long puts and calls only, covered writing, combination trades, etc. And yes, part of the application approval process (at least when I went through it) is to answer a few questions to prove that the applicant is aware of the types of risks with trading options. Be sure to do some research on the fees and currency/fx aspects before you choose a broker.  If you plan to exercise any options purchased or expect to be assigned for any you write, be aware that those fees are often different from the headline cost-per-trade advertised by brokers. For instance, I pay in excess of $40 when a call option I write gets assigned, vs. ~$10 that I'd pay if I just plain sold the stock. One other thing to investigate is what kind of online option trading research and order entry tools are available; not every broker has the same set of features with respect to options — especially if it isn't a big part of their business. "I would think that a lot of brokers would put the restriction suggested in @homer150mw in place or something more restrictive, so that's the first line of answer. If you did get assigned on your short option, then (I think) the T+3 settlement rules would matter for you.  Basically you have 3 days to deliver.  You'll get a note from your broker demanding that you provide the stock and probably threatening to liquidate assets in your account to cover their costs if you don't comply.  If you still have the long-leg of the calendar spread then you can obtain the stock by exercising your long call, or, if you have sufficient funds available, you can just buy the stock and keep your long call.  (If you're planning to exercise the long call to cover the position, then you need to check with your broker to see how quickly the stock so-obtained will get credited to your account since it also has some settlement timeline.  It's possible that you may not be able to get the stock quickly enough, especially if you act on day 3.) Note that this is why you must buy the call with the far date.  It is your ""insurance"" against a big move against you and getting assigned on your short call at a price that you cannot cover. With the IRA, you have some additional concerns over regular cash account - Namely you cannot freely contribute new cash any time that you want.  That means that you have to have some coherent strategy in place here that ensures you can cover your obligations no matter what scenario unfolds.  Usually brokers put additional restrictions on trades within IRAs just for this reason. Finally, in the cash account and assuming that you are assigned on your short call, you could potentially could get hit with a good faith, cash liquidation, or free riding violation when your short call is assigned, depending on how you deliver the stock and other things that you're doing in the same account.  There are other questions on that on this site and lots of information online.  The rules aren't super-simple, so I won't try to reproduce them here.  Some related questions to those rules: An external reference also on potential violations in a cash account: https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations" "I have the same problem. The people above are right to an extent. You have to be more disciplined. But there is no reason why you can't get there in stages. If you try to do too much too fast you'll just give up. You need to find a system that removes some of the passive barriers affecting you.  You need to think what in particular is overwhelming you. For me it was sitting down at the end of the month to write it all down. Writing it all down at the end of the week or even each day didn't work either because it was too much and I had forgotten what stuff was. I'm like you.  The bank account is a record so why do I have to retype it or worse, hand write it out? Bleh. What I ended up doing was divide my expenses into four categories: food (to include all medical) shelter, transportation, spending -- with the first three being needs and the last being wants.  Eating out is spending. I have four checking accounts with four debit cards. I saved up some money. I put a paycheck's worth of money in each because I didn't know how much I spent each month in each category, but knew I didn't spend an entire paycheck in any one category per month. Voila.  No more work. At the store you just put things in the basket by category. At Target you pay for the food and toothpaste with the medical card and the DVD with the spending card. The cashiers don't care that you pay separately. And if you are buying so much crap that separating items by category is a problem, why the heck are you buying so much crap? At the end of the month you will now have a record of how much you spend on transportation, housing (electricity would be paid online from this account for example), medical and fun. That's all anyone needs to help you get started. You can then see if your housing is 35% or less (or whatever percentage you feel is right). The person trying to help the author above is right. A Target charge doesn't indicate whether you bought some oil for the car or cold medicine or a lock for the cabinet door that broke. But when you pay for each of these things under the right account, you do know how the money is allocated.  Doing it this way requires little discipline. Before you put the item in the basket, you just ask yourself, is this a want or a need (which is something you should be doing anyway). If it's a need, is it for my car, house, or body. The house is what I use if i can't figure it out (like paying for the renewal of my professional license).  that's it! You have to stand at the register for longer but so what.  If you are spending all your salary and you stop when you have no more money (assuming you've run through all of your savings, which you will soon if you don't change), then you have no more money to spend. So if you are honest when you put things in the basket(need vs want), you are going to run out of spending money real quick. Your spending money account will be empty but you will still have food money. Set your debit card up so that it denies your charge if you dont have enough money.  Once you realize how much you truly spend for needs in each category, yoy will only put that much in each account. Therefore, You can't use the house card to just ""borrow"" from it till next month. If you do, you won't be able to pay your bills. If you have so little discipline that you knowingly spend your bill money, then there is a deeper issue going on than just finding the right budgeting/cash flow system for you.  Something is seriously wrong and you need to seek professional help. When someone is trying to help you, the first step is to determine what category you are spending too much in. Then when you realize it's the house category, for example, you will need to figure out why you are spending so much in that category. A bank statement wont tell you that. So you can do what we did. On every receipt --before you walk out of the store-- write down what each purchase is on the receipt. Then you can hand over the receipts to whoever is helping you.  Most items are easily recognizable on the receipt so you wont have to write everything down.  you should be doing this for insurance purposes anyway.   Again, if your receipt is so blooming long that this is onerous, probably everything you just spent is not a need and maybe you need to turn right around and return stuff. Maybe you need to go to the store more often so there are only a few purchases on each receipt. Groceries are groceries.  You don't need to detail that out. For Ikea when you have to purchase pieces to a set, we get a separate receipts for each.  So the brackets and shelving for the bedroom will be on one receipt and the brackets and shelving for the other room will be on another receipt. Even at the store I cant figure out what all the little pieces are! But really, if you are making a decent enough salary, then you are probably spending too much on wants and are calling the items needs.  So really your problem is correctly identifying needs from wants. Define a NEED. YOU. Make up your own definition of need Dwell on it.  Let it become meaningful for you.  Oranges are a need. Chocolate is not (no, really it's not! Lol!).  So when you are putting the stuff in the basket, you dont even have to think about whether it's a need or not after a while.  Wants go in the child seat if at all possible (to keep the number of items smaller).  When you are ready to check out, add up the items roughly in the want pile. Ask yourself if you really want all that stuff. Then put some stuff back! At this point ask yourself is the 8 hours I will have to work to pay for this worth it? Am I really going to use it? Will using the item make me happy? Or is it the actual buying of the item that makes me feel powerful? Where will I put it? How much time will I need to maintain it? Then put some stuff back! Get some good goals, a kayaking trip or whatever. Ask yourself if the item is worth delaying the trip. How will I feel later? Will I have buyers remorse? If so, put it back! These are controls you can put into place that don't take a lot of discipline. Writing the items down on the receipt is a more advanced step you can take later.  If you are with friends, go first so that you can write down the items while they are checking out. If you are private and don't want to share your method with your friends, go to the bathroom and in the stall write it down while they wait. Writing the items on the receipt while in the store is sort of a trigger mechanism for remembering to do so.  That pulling out of the card triggers your memory to get out your pen or ask the cashier for one. The side benefit is catching someone using a cloned copy of your card.  In the medical account if you see an Exxon charge, you know it's not yours.  Also, while that one account is shut down, you have three others to rely on in the meantime.  My spouse hated fumbling for the right card. They all look the same. Color code your cards. We have blue cross blue shield so it feels natural to have the food/medical account with a blue sticker (just buy a little circle sticker and place it on the edge so half is on the front and half is on the back -- nowhere near the strip). I've never been given a hard time about it. Our car is red so the car card is red, etc.  If you think four cards is a lot to carry, ask yourself if you would rather carry four cards or keep track of every little thing?  Good luck. I know you will find a system that works for you if you keep trying." Gosh don't do either!  Unless you are fully funding you ROTH accounts and even then I wouldn't do it.  Those interest rates are free money.   You are giving away the best bargain in the history of home mortgages. Don't you think you can make more than 4% on your money invested?   Don't you think in 5 years you will be able to make 4% on bond/cd's/ and other low risk investments? Don't forget money you pay in the 2020's on beyond to your mortgage are inflationary dollars.  Do you think that money will be more valuable in the 20's and beyond? I don't.  Roths are free money too.  Think if you put 11k in there a year how much would you have at the end of it tax free.  There is a reason you can only put $5,500 in them, they are too good a deal tax wise to let people put too much in there. Think about this my parents bought their home in 1967 their mortgage was $170 a month.  Inflation hits and the interest they are paying at 8%! mind you, it was still a laughable amount of money each month for mortgage payment from 1977 and on. Also I bought a $450,000 house 38 months ago.  Instead of putting down 180 I put down 80 I let the other 100k in my investment account and moved 5.5k over to Roth every year. I now have a roth worth $38k and an investment account worth $105k.  I made 40k on my money those three years and the 38k is tax free! If you don't believe me call the help line at clarkhoward.com  Get over the emotional need to be debt free and make a logical finical choice.  I am begging you to think about this.  This post could save you tens of thousands of dollars. Let me put it one more way.  100k in debt with 100k in investments is debt free living.  Especially when you debt is under 4% and a tax write off. You generally cant roll funds from a 401k with a company you're still employed with.  Some companies allow it depending on the custodial agreement but it's rare.  Generally you need to wait until retirement or separation to roll funds out of a 401k. Because retirement account usually are tax effective vehicles - meaning you will pay less tax on any profits from your investments in a retirement account than you would outside. For example, in my country Australia, for someone on say $60,000 per annum, if you make $10,000 profits on your investments that year you will end up paying 34.5% tax (or $3,450) on that $10,000 profits. If you made the same profits in a retirement account (superannuation fund) you would have only paid 15% tax (or $1,500) on the $10,000 profit. That's less than half the tax. And if you are on a higher income the savings would be even greater. The reason why you can't take the money out of a retirement account is purely because the aim is to build up the funds for your retirement, and not take it out at any time you want. You are given the incentive to pay less tax on any investment profits in order for you to save and grow your funds so that you might have a more comfortable retirement (a time when you might not be able to work any more for your money). Simply put, that's not allowed.   Outside a retirement fund, they simply do not provide a mechanism to pay that expense ratio separately.  Ergo, any effort to pay that expense ratio would be classified as a new/additional purchase of the fund. You now must deal with  Inside a retirement fund, paying the expense ratio of the fund with cash would be treated as an additional contribution, which may then violate contribution rules (such as going over your contribution limit, or contributing past age 70-1/2). I think a larger issue is that you're trying to do market timing. Whether you had a large or small amount of money to invest, no one wants to put the money in to watch it go down.  You can't really predict if prices in a market or security will go up in six months (in which case you want to put all your cash in now), of if it will go down (in which case you'd want to wait until the bottom), or if it will skitter around (in which case you'd want to only buy at the bottoms).  Of course, if you're magic enough to nail all of those market conditions, you're a master finance trader and will quickly make billions. If you're really concerned with protecting your money and want to take some long positions, I'd look into some put options. You'll of course pay the fees for those put options, but they'll protect your downside.  Much of this depends on your time horizon: at the age of 35, someone can expect to see ~6 more recessions and perhaps ~30 more market corrections before retirement. With that big of a time range, it's best to avoid micro-optimizing since that tends to hurt your performance overall (because you won't be able to time the market correctly most of the time).  One thing that's somewhat reasonable, if you have the stomach for it, is to not buy at somewhat-obvious market highs and wait for corrections. This isn't fool proof by any means, but as an example many people realized that US equities basically were on a ~5 year up run by December 2014. Many people cashed out those positions, expecting that a correction would be due. And around late summer of 2015, that correction came. For those with patience, they made ~15% with a few mouse clicks.  Of course many others would have been waiting for that correction since 2010 and missed out on the market increases.  Boiled down: