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Old 01-23-2011, 07:59 PM   #21
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Originally Posted by jdw_fire View Post
thanks for all the great info but i am not finding this in IRS Pub 590 and because of that 1-year waiting period on rollovers it is kinda key that it does not apply to a TIRA conversion to a Roth.
Here, this link will take you directly to the paragraph:

Publication 590 (2009), Individual Retirement Arrangements (IRAs)
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Old 01-24-2011, 12:43 AM   #22
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IMHO juggling sharp knives would offer less risk of injury than attempting this tax strategy.
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Old 01-24-2011, 12:47 AM   #23
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Originally Posted by 79protons View Post
Here, this link will take you directly to the paragraph:

Publication 590 (2009), Individual Retirement Arrangements (IRAs)
thank you. given this, i think your plan has definite possibilities! i need to investigate the iron butterflies actual pricing and transaction costs.
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Old 01-24-2011, 10:26 AM   #24
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Originally Posted by 79protons View Post
You are not on margin in this trade. You buy a put and a call to protect the put and call you sell and also you have cash in the account from the net credit you received from the sale in the event the stock moves past both of your put and call prices. Anyway, this is just a net credit spread, which is allowed at etrade in ira and roth at option level 3, which I am approved for.
I have read an academic paper about this sort of thing, though with different types of offsetting derivatives. So it is not unknown, and very likely these sorts of risk free strategies sooner or later will be shut down. Once something is all over the internet it is usually about over.

Two possible issues that I see. One, your IRA custodian may not allow you to do it. So before you spend much time here, call your broker and be sure that it can be done.

And two, the IRS could question the business pupose of these transactions, (correctly) assuming that it is a tax fiddle, and invalidate one or more of them.

SSRN-High Volatility, Negative Correlation, Roth IRA Conversions, and the Codified Economic Substance Doctrine by Gregg Polsky

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