In which account is it best to trade?

[OptionsPro]

 

Hi, I hope everyone's doing good.

I was hoping to trade options in my TFSA and/or my RRSP account for obvious tax advantages, but some of the Steady Options trades are not allowed because we can't write naked contracts in registered accounts. Is this right or am I missing something? Is there a brokerage that allows selling naked contracts? Is it a good idea to only trade in the registered accounts the trades that are allowed and the other ones in the margin account, or is it a bad idea because the SO performance is based on compound interest?

Thank you!

 

[CJ912]

I have never seen any naked options being used in SO strategies

[OptionsPro]

15 minutes ago, CJ912 said:

I have never seen any naked options being used in SO strategies

Is it because there is always a call/put option to offset the written contract in the SO strategies? If so, I agree, but when I called Questrade, they said I still cannot do the trade because I would actually need to own the 100 shares. If I don't, then it's not a covered contract and I can't do it.

I am looking to start using Interactive Brokers.

Edit: also be aware that I am still new to the options world so I may be wrong and I may be missing some stuff.

Edited May 22, 2020 by OptionsPro

[Kim]

Here is what you can trade with IB in RRSP and TFSA accounts:

• Stocks listed on designated US and Canadian exchanges (excluding Venture-NEX segment and CSE single listed stocks)
• Long equity call options
• Long equity put options
• Short equity call options with a fully covered position (covered call)
• Long equity put options with a fully covered position (protective put).
• Long put/call options on indices.
• Warrants/Rights if the underlying asset acquired under the right to purchase is a qualified investment.
• U.S. Bonds.
• FX conversions limited to USD/CAD

https://www.interactivebrokers.ca/en/index.php?f=13406&p=rsp

So unfortunately SO strategies will not be allowed. I suspect other Canadian brokers will be no different, not sure about US brokers. 

 

[Sam Chen]

1 hour ago, Kim said:

Here is what you can trade with IB in RRSP and TFSA accounts:

• Stocks listed on designated US and Canadian exchanges (excluding Venture-NEX segment and CSE single listed stocks)
• Long equity call options
• Long equity put options
• Short equity call options with a fully covered position (covered call)
• Long equity put options with a fully covered position (protective put).
• Long put/call options on indices.
• Warrants/Rights if the underlying asset acquired under the right to purchase is a qualified investment.
• U.S. Bonds.
• FX conversions limited to USD/CAD

https://www.interactivebrokers.ca/en/index.php?f=13406&p=rsp

So unfortunately SO strategies will not be allowed. I suspect other Canadian brokers will be no different, not sure about US brokers. 

 

Kim, can I ask a separate question regarding IB? How much commission do you pay for trading 1 contract SPX? I know IB has minimal $1.00 for option but exchange also charges extra fees. Is it $1.00 + exchange fee or $0.65 + exchange fee for 1 contract? I am trying to compare fees between IB and TD. TOS was down this morning again and that makes me want to switch to IB but the only concern is the minimal fee for options. The total fees for 1 SPX for TD is $0.65 + $0.58 which will be cheaper if IB charges minimal fee of $1.00 per contract. Thank you.

[Kim]

48 minutes ago, Sam Chen said:

Kim, can I ask a separate question regarding IB? How much commission do you pay for trading 1 contract SPX? I know IB has minimal $1.00 for option but exchange also charges extra fees. Is it $1.00 + exchange fee or $0.65 + exchange fee for 1 contract? I am trying to compare fees between IB and TD. TOS was down this morning again and that makes me want to switch to IB but the only concern is the minimal fee for options. The total fees for 1 SPX for TD is $0.65 + $0.58 which will be cheaper if IB charges minimal fee of $1.00 per contract. Thank you.

The minimum of $1 applies only if you trade only 1 contract - which I don't. Average fee is around 0.70, sometimes less. I haven't traded SPX for a while, but yes, index options like SPX or VIX are higher. The question is how often you trade them?

[Sam Chen]

1 hour ago, Kim said:

The minimum of $1 applies only if you trade only 1 contract - which I don't. Average fee is around 0.70, sometimes less. I haven't traded SPX for a while, but yes, index options like SPX or VIX are higher. The question is how often you trade them?

Not that often, probably three times a week. And 1 contract each time, so it will make a small difference.