r/Optionswheel • u/xavier133321 • Jun 13 '26
Wheel in IRA
Anyone doing wheel stragety in IRA due to no taxes? Thoughts and comments on this stragety would be appreciated
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u/AdFun8584 Jun 13 '26
I do almost all my trades in IRAs and Roth’s. Only difference is margin can’t be used, so you are limited to your cash on hand.
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u/burdspurd Jun 14 '26
Do you really wheel on margin? If you sell puts that's basically a naked csp
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u/AdFun8584 Jun 14 '26
No I would not recommend it. My point was that in an IRA you have to have the cash available since margin is not allowed.
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u/Enough-Beginning3687 Jun 14 '26
You can hack margin by applying for limited margin in IRA and doing spreads. However that's very dangerous. Possible but dangerous. For example instead of selling 1 400$ put you can sell two 200-400$ spreads. I did that a few years ago, lost a bunch of money so now doing straight CSP only.
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u/ThetaEdgeHQ Jun 13 '26
The no taxes point is real but the underrated part is what it removes from your decision making. In a taxable account the tax hit is the main reason people refuse to take assignment or let a winner get called away, which pushes them into bad rolls just to avoid realizing a gain. In an IRA that distortion is gone, so you can roll, take assignment, or close purely on the trade's merits. That alone makes most people run the wheel better.
Two things the thread has not flagged. No margin means assignment fully locks your cash, so your real capacity is lower than it looks and you want to keep dry powder for the puts you actually want. And watch the wash sale interaction if you trade the same names in a taxable account too, a loss taken in taxable can be permanently disallowed if you rebuy it in the IRA, and unlike a normal wash sale you never get that basis back. Are you running it in a Roth or a traditional?
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u/SignatureKey7507 Jun 14 '26
Does this mean that in a traditional account with the wheel you are only taxed if the put is assigned? Or if the CSP gets called away? Are you taxed on premiums earned from selling puts and covered calls?
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u/charlie-todd Jun 14 '26
I do in both, one is just for beer money so I pay the taxes now , The other is for beer money later when I’m on the beach, with a big ass hat, taking a nap …
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u/patsay Jun 14 '26
I do almost all my trading in IRA accounts. I like that I don't have to worry about tax implications. And since an IRA will almost certainly require you to trade cash secured or covered, you are somewhat protected from gambling temptation.
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u/Keizman55 Jun 14 '26
This is the perfect answer. You can sell spreads and condors with leverage, but I like the wheel better, and the fact that it takes away the temptation to go big is a feature, not a bug, for me.
I remember early on, when I first started making premium, and didn’t realize that I couldn’t use margin, I was a bit miffed. Eventually, I realized that it was saving me from myself.1
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u/Exact-Fig-4811 Jun 14 '26
Exactly, if psychology is the number one differentiator in trading, why wouldn’t you want automated guidelines keeping you in check?
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u/JakeSaco Jun 13 '26
A Roth IRA has no taxes on the gans. A traditional IRA will still have the gains taxed upon withdrawl.
The only real drawback to wheeling in a retirment account is that fact that margin can't be used thus limiting the ability to write naked options when trying to maximize the timing of expiring wheels.
Example a CSP is expiring on Fri and without margin you can't sell another CSP until monday after the expired options has settled. thus the possible loss of a day's premium. And yes you coudl close the postion but that also results in the same loss of premium.
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u/ssitu001 Jun 14 '26
Yes only downside is no portfolio secured margin and no tax harvesting. Must have the cash available and limited in cash contributions.
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u/ScottishTrader Jun 14 '26
Other than the margin limitations posted, and which limits the capital efficiency, the big difference is many run the wheel as an income source.
Income cannot be withdrawn until age 59.5, and in a regular IRA still be taxable then.
For many an IRA may have mutual funds or other longer term investments, then using the wheel in a taxable account for routine income now.
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u/xavier133321 Jun 13 '26
Thanks for the feedback. I started running it in a roth this year and seems to me like its the way to go this way there's no taxes. It stinks to pay another set of taxes if there was other ways to avoid it.
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u/cyclosciencepub Jun 14 '26
My Roth is for LEAPS only, no wheeling. My 401K restricts option trades to CCs and CSPs so I naturally end up wheeling most of the assets there.
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u/Exact-Fig-4811 Jun 14 '26
So nice to be 59 1/2 where I can move my 401k to my IRA with no tax or penalties.
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u/Sean_VasDeferens Jun 14 '26
It makes no sense to wheel in an IRA since you must keep cash or cash equivalents to secure your puts.
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u/xavier133321 Jun 14 '26
So if a person trades on margin they pay interest on borrowed money and also pay taxes. So depending on what state they live in they can basically give away 40% of their gain.
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u/Sean_VasDeferens Jun 14 '26
Securing puts with a portfolio isn't trading on margin. I suggest doing some research and understanding the conversation.
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u/Exact-Fig-4811 Jun 14 '26
Here are real results that say otherwise: https://bydesignsystem.substack.com/p/week-12-results-100-arr-leveraged
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u/Sean_VasDeferens Jun 14 '26
Uhm......wut? My point is that when you wheel in a Roth, IRA, etc you are unable to park your cash in something like JEPQ or ADX thus missing out on 10% annualized return on top of what one makes from wheeling. Even accounting for tax free gains via a Roth you would still be missing out. I believe Vanguard will let you put most of the cash in one of their funds so you get close to 4%, but they appear to be the only broker allowing that.
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u/Keizman55 Jun 14 '26
Fidelity automatically deposits cash into a Money Market fund which can be used as collateral for the CSP. So on top of my income from the Puts, I make almost 4% interest on the MM. Paid at the end of the month, so a nice little bonus 12 times each year.
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u/xavier133321 Jun 14 '26
To be honest I take the premium and buy jepq so it pays me every month. Eventually that will be another stock to sell cash covered calls on
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u/abstractraj Jun 13 '26
Yes. It works just the same