Can i buy puts in an ira

But, in this case, the losses will be made up for by gains in the stock. In essence, protective puts act like car insurance. If you don't get into a wreck, the insurance expires worthless.

But if you do, it can more than pay for itself. You can also use protective puts as a hedge against mutual funds. Investors do this by purchasing puts on so-called exchange-traded funds. For example, if you own a biotech fund, you can purchase put options on an ETF called the. When you own BBH puts, if your regular biotech mutual fund declines, in all likelihood, the puts will simultaneously increase in value, and vice versa.

At the Nasdaq's ETF. Web page, if you click on any of the ETFs listed there it says whether they are optionable. Another strategy that can be even more useful is what's called the cash-secured put. This strategy can be used strictly to generate income, or to acquire stock at a "discount. If you're using cash-secured puts to generate income, you're betting that the underlying stock will increase in value and the put will expire worthless, so you get to keep the premium.

You may, however, be trying to acquire stock at a "discount" if, for example, you missed a stock's run-up. In this case, you can sell a cash-secured put with a strike price near where you think the stock ought to be trading. If the stock retraces back to that price, the put will be exercised.

You get the stock at what you believe is the correct price. And you also get the premium from the put you sold. If, however, the stock doesn't come back down by the put's expiration, you can still elect to purchase the shares, in which case the premium will likewise lower your cost basis. It's a little like buying cereal with a dollar-off coupon.

If the put is exercised, a few investors then go on to sell a covered call against the stock they've been assigned. This move lowers their cost basis in the shares even further, while generating additional income. The latter brokerage has chosen to specialize in options trading within an IRA. Some might argue that you don't need to use options to hedge your IRA, because you can enter and exit stock positions without worrying about capital gains taxes.

The aggressive nature of options trading can lose you plenty, they'll tell you. But long options become totally worthless once they expire. The same can be said of some dot-coms too, but that's another story.

With that in mind, here's a conservative approach to options trading in an IRA. Currently he holds no positions in the stocks of companies mentioned in this column. While Ingebretsen cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to.

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Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. In a covered call, you write a call option and buy shares of the stock so you have them on hand if the option is exercised. In a cash-secured put, you sell a put option and keep enough money in the IRA to buy the shares if the put option is exercised.

With both covered calls and cash-secured puts, you own the asset you have to deliver when options are exercised. You can use options to reduce the risk of other investments made with IRA money.

He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in Share It.