I'm a successful, full-time trader and I'm ready to help you take your trading to the next level. If the trade presents more risk than that, skip it. The key thing to remember with the to time frame is this is the only window of opportunity to enter new trades. For all these reasons, taking a position before a news announcement can seriously jeopardize a trader's chances of success. Disclaimer: This web site is for informational purposes only and does not constitute an offer or solicitation for brokerage services, investment advisory services, or other products or services in any jurisdiction where we are not authorized to conduct investment business or where such offer or solicitation would be contrary to the securities or local laws and regulations of that jurisdiction. Towards the close, there may be a pickup in action and yet another strategy can be used.
Many investors I know keep several accounts. Often, they hold any number of IRAs that sit and stew with long-term investments. Some use separate taxable brokerage accounts to trade when they feel the need or George Costanza comes along with a hot stock tip. GEORGE: He knows this guy, Wilkinson. He made a fortune in the stock market. Now he's got some new thing - you know, there's supposed to be a big merger. He wasn't even supposed to say anything.
You guys should think about doing this too. GEORGE: I don't know. But Simons said that if I wanted to get involved, that Wilkinson would tell me the exact right minute to sell. You wanna do it? While I am not advocating a hyper-aggressive strategy for an IRA -- or adherence to Costanza's fundamental and technical indicators -- I do think some investors play it way too straight in their retirement accounts.
More possibilities exist in IRAs than many account holders realize. Go the Brokerage Route Often, investors buy into a single mutual fund to open an IRA account. When you do this directly through a mutual fund family, you limit yourself, at the outset at least, to investing only in mutual funds that company offers. For instance, if you call or send an application into T.
If you want to purchase anything other than a T. Rowe Price mutual fund in that account, you can't. Many investors don't take the next step to solve this problem. In most cases, you can call fund companies that have a brokerage arm, such as T. Rowe, and request that they make your IRA a brokerage IRA. All this does is open up your world by giving you the chance to invest in a wider range of offerings.
When you open an IRA account directly with a brokerage, you don't face this limitation. Go the "Margin" Route While regulations do not allow the use of margin loans in an IRA account, you can get what I like to call a "pseudo-margin" IRA account. Not many brokerages offer this feature. Thinkorswim and Interactive Brokers are two that I know of. As the IB website states, an IRA Margin account allows you to day trade, but you cannot short stocks or carry any type of debit balance.
If you wish to jazz up your IRA by trading in it, this type of account could work for you. If you trade frequently in a cash account, you run the risk of incurring free-ride violations. You free-ride if you purchase a security using unsettled cash. Most brokerages levy a free-ride violation, if you sell a security you purchased with unsettled funds prior to having enough settled cash in your account to cover the trade. This typically results in warnings, followed by a day settled as cash trading restriction.
In a margin account, you do not run the risk of free-riding. If you find yourself spicing things up in an IRA, you should consider this rarely-discussed IRA setup. Of course, you'll need to meet FINRA's pattern day trading requirements. Hedge As usual, Philip Davis put it so well in a recent Seeking Alpha article : I was invited to speak to an investing group last month and it was amazing to me how few people utilize even the simplest of hedging strategies like this to enhance their portfolio performance.
This critique applies directly to many IRA investors. If you take the long-term, buy-and-hold stance in your IRA, you might -- and I stress might -- benefit in the long run; however, you miss out on deposit margin formula deposit margin formula in excel gains along the way. While Philip advocates selling options to generate income and possibly steal shares of a stock you want to own long-term anyway, you can also go the other way when the time is right.
Consider the recent pullback in stocks writing put option profit ratio Apple NASDAQ: AAPL and Netflix NASDAQ: NFLX. You may consider your positions in these stocks the ticket to your retirement. And you may be right. It's an IRA so you leave them there to make you rich By the time you're ready to retire, divesting stakes in AAPL, NFLX, and other high-fliers might just pay for your second home in the Hamptons or maybe not!
Often you can predict when these stocks are about to pull back. When the indicators are there, why not buy an AAPL or NFLX put that you can trade in and out of for a profit? If you net a gain, look at it as the receipt of a dividend these companies presently do not pay. You won't get taxed on pattern day trading rules options hair money right away, if at all. And don't worry, it's not like cheating on your spouse.
Sure, you pattern day trading rules options hair AAPL and NFLX -- you have Steve Jobs and Reed Hastings' Barbie Dolls -- but there's nothing wrong with betting against them for a few hours or a few days. You can be long the shares and long the puts at the same time. Generate More Income It makes plenty of sense to hold dividend-paying stocks in your IRA as opposed to a taxable account.
IRAs act as a tax shelter. While these dividend-payers are in there, increase their payout with little risk. Consider writing covered calls against the shares you own in dividend-paying stocks. For instance, I own Verizon NYSE: VZ in an IRA. I could write a covered call on my VZ shares to pocket even more cash.
You can repeat this process over and over again on any stock you own, not just dividend-payers. Consider doing it with volatile characters that you believe in, such as ETFs that swing like the ProShares Ultra Dow Jones-UBS Crude Oil ETF NYSEARCA: UCOwhich I wrote about yesterday on Seeking Alpha. Just because it's an IRA doesn't mean it has to be Uncle Leo's investment account. You can take creative -- and for the most part, relatively low-risk -- steps to get bigger returns from your IRA.
Disclosure: I am long AAPLVZ. ELAINE: You're getting what? GEORGE: Did you ever meet my friend, Simons? JERRY: How high's it suppose to go? Hedge As usual, Philip Davis put it so well in a recent Seeking Alpha article :. Disagree with this article? Follow SA Editor Rocco Pendola and get email alerts.
Stock Market Training: How to Avoid the Pattern Day Trading (PDT) Rule
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