Active traders, what’s it like to be you?

[OverThinkMuch]

Recently, I decided to sell a taxable asset, use the cash for my Roth IRA contribution, then rebuy the asset inside the Roth. Of course, all that takes several days.

To improve on this, have a margin account.

However much someone plans to contribute to their Roth IRA, borrow that on margin and contribute it. Wait for cash to be available in the Roth IRA. Then sell it in the margin account and buy it in the Roth IRA - at the same time. Upon settlement, pay off the margin loan.

Beware wash sale rules (caveat: I'm neither a lawyer nor CPA). If you sell something at a loss, then buy it in your Roth IRA, you could trigger a wash sale. And since you don't have taxable gains/losses in a Roth IRA, the capital loss can be lost forever.

 

[Markola]

To improve on this, have a margin account.



However much someone plans to contribute to their Roth IRA, borrow that on margin and contribute it. Wait for cash to be available in the Roth IRA. Then sell it in the margin account and buy it in the Roth IRA - at the same time. Upon settlement, pay off the margin loan.



Beware wash sale rules (caveat: I'm neither a lawyer nor CPA). If you sell something at a loss, then buy it in your Roth IRA, you could trigger a wash sale. And since you don't have taxable gains/losses in a Roth IRA, the capital loss can be lost forever.

^^^^^ The margin account is a good idea. Thanks. In this particular case that strategy would have left me with some short term capital gains but there is no free lunch. The thing I bought is my riskiest and most volatile asset and it can suddenly act like a Tasmanian Devil in a sack. It’s very difficult to hedge. I’m being careful because the topic brings out Porky but you can DM me if interested. I did check with my CPA first, who indicated my move was safe from current wash rules.

 

[MarieIG]

I can understand for mutual funds, but that really is odd for stocks and ETFs.

I agree. Of course if I buy a share, I can get market price, so this behaves differently, and I am not a fan.

If I remember to do so, I will call them on Monday.

 

[OverThinkMuch]

^^^^^ The margin account is a good idea. Thanks. In this particular case that strategy would have left me with some short term capital gains but there is no free lunch. The thing I bought is my riskiest and most volatile asset and it can suddenly act like a Tasmanian Devil in a sack. It’s very difficult to hedge. I’m being careful because the topic brings out Porky but you can DM me if interested. I did check with my CPA first, who indicated my move was safe from current wash rules.

At one point last year, I had options that I believed would take a loss owing to events that day. But you can't sell options in the pre-market... so I bought ETFs opposite to my options to cancel / hedge my exposure. In terms of hedging, it worked really well. When I sold both my options and ETFs, though, the amount of churning trigered Schwab's day trader detection. While I disagree, Schwab says I'm a day trader.

Oh. I think i can guess what is hard to hedge and dangerous to discuss on the forum. Yeah, let's not go there.

I tracked my active investment performance against the S&P 500. I'd recommend that to others considering active investment. Even for someone beating the market, if they pull $2,000 ahead but spend 100 hours a year doing it... was it worth $20/hour? It can be a benchmark that indicates if you beat the market, but it can also be a measure of how much your time is worth.