Trading permissions in an IRA account
IBKR offers Traditional, Roth and SEP IRAs any of which may be designated as a 'Cash' or 'Margin' type. The following article outlines the trading permissions provided under each type as well as restrictions which account holders should familiarize themselves with.
CASH TYPE PERMISSIONS
- Long stock, bond, mutual fund
- Long call and put options
- Short calls if covered by underlying stock (which is then restricted)
- Short puts if strike price is fully covered by cash (which is then restricted)
- Option spreads where exercise style is European and long leg expires simultaneously or after short leg
- Long or short futures contracts (subject to a margin requirement which is generally 2x that of the requirement for non-retirement accounts)
Restrictions:
- Must have sufficient (unrestricted) cash available to support all outstanding orders
- Cash proceeds from sales not available for withdrawal or trading until settlement (generally 2 business days for stocks and Forex and 1 for options)
- No short stock
- No negative or debit cash balance (subject to immediate position liquidation in an amount sufficient to restore cash to non-negative balance)
- Not allowed to hold a cash balance or position denominated in a currency different from the Base Currency of the account.
- If the exercise or assignment of an option results in the delivery of either a long stock position for which the account does not have sufficient cash to purchase (e.g., call exercise) or any short stock position (e.g. put exercise) the account will be subject to liquidation.
- IBKR does not allow trading or holdings of securities such as Master Limited Partnerships (MLPs) in retirement accounts that have the potential to generate UBTI (Unrelated Business Taxable Income) as this type of income has the potential to trigger taxes and tax reporting in an otherwise tax-deferred account type.
MARGIN TYPE ACCOUNT
- Long stock, bond, mutual fund
- Long call and put options
- Short calls if covered by underlying stock (which is then restricted)
- Short puts if strike price is fully covered by cash (which is then restricted)
- Option spreads where long leg expires simultaneously or after short leg (no exercise style restriction)
- Long balance in non-Base Currency
- Long or short futures contracts (subject to a margin requirement which is generally 2x that of the requirement for non-retirement accounts)
Restrictions:
- Reg T margin rules enforced (including Pattern day Trading rules)
- Cash proceeds from sales not available for withdrawal until settlement (generally 2 business days for stocks and Forex and 1 for options). Unsettled funds may be used for trading
- Cash proceeds from unsettled sales are available for trading as long as the subsequent purchase order does not settle prior to the sale order
- No short stock
- No negative or debit cash balance (subject to immediate position liquidation in an amount sufficient to restore cash to non-negative balance)
- If purchasing a security or trading a product denominated in a currency different from the Base Currency of the account, a currency conversion must first be executed
- If the exercise or assignment of an option results in the delivery of either a long stock position for which the account does not have sufficient cash to purchase (e.g., call exercise) or any short stock position (e.g. put exercise) the account will be subject to liquidation
- IBKR does not allow trading or holdings of securities such as Master Limited Partnerships (MLPs) in retirement accounts that have the potential to generate UBTI (Unrelated Business Taxable Income) as this type of income has the potential to trigger taxes and tax reporting in an otherwise tax-deferred account type.
- Not eligible for Portfolio Margining
- Not allowed for clients of IBKR Canada
See KB280 or click here for instructions on upgrading an account from Cash to Margin type.