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Spread calls in IRA retirement account and legal rules/regulations (USA)

Personal Finance & Money Asked on August 7, 2021

I have an IRA account (USA) with Fidelity brokerage. I have an ability to do both Calendar and Vertical Spreads options in that particular retirement account.

Are there any legal rules and regulations with respect to trading options in IRA for Spreads? Example: Let’s say, I opened a Calendar Spread Call (two legs: long position and short position). Later, I closed just the short position ahead of expiry and kept the long position open.

  1. Will it be considered as Short Sell? I see many articles saying “No Shorting an IRA”.

  2. Continuing further… few days after closing the previous short position, if I re-open the short position to get more profit on rise, (my long position is still open whole entire time), will it still be legal?

One Answer

For brokers that offer spreads in an IRA account, a short call is considered covered if you own a call with same or lower strike price with the same or longer expiration.

If you close the short call, you own a long call. At any time, you can sell another short call as long as it meets the aforementioned 'covered' requirement.

If you check your Fidelity spread agreement, you'll see language stating that you cannot engage in any transaction that requires an extension of credit (uncovered options).

When in doubt, call Fidelity and speak to their trading desk.

Correct answer by Bob Baerker on August 7, 2021

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