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Optrader

What if you die trading

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I dont know how to start with this topic. 
i was just wondering what happens to your trading account if you somehow not able to trade. Like you met an accident or hit by a bus.

i know we have all put our beneficiaries in our accounts but things may take time to realize them. Meaning nobody is going to call your broker to liquidate your account.

your broker may not know about you.

 

this opens up questions about strategies that may be we should not apply.

e.g short stock

if you had say tsla in your short stock and if you got hit by bus and unable to trade and tsla keeps going up , broker may start issuing margin calls which will go without response and so broker will start auto selling till your account gets liquidated.

this means well , we should never short ?

lets say you had a short vxx.

lokking at chart it may seem that you could have made millions by thousand percent drop. But that is not practical

because you have to short more stocks or keep shorting . But that means trading has to happen.

Option trades since they are timebound and will expire so they are ok . At least not bad as short stick , 

but things can get tricky here.

say you had a call position that is expiring in money.

you may get assigned and if you dont have equity to buy then ? What happens ?

broker will only liquidate to the amount in excess ? And leave rest in your account ?

this is not bad , now this is ok outcome.

But again if were long put ? You will be short stock ? And will suffer via margin calls ?

 

I dont know if we can give some directives to broker that always never exercise option ?

When you buy call you buy the right but not obligationn 

so broker should never auto assign on expiry ? Even if it is in money. ?

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@Optrader, this may sound like a morbid topic, but it's a very important one. I cannot address your specific questions about the trade types one should take or avoid, but in the last few years I have been thinking of the same situation, as I often travel for extended periods to relatively unsafe places (just came back from 4 months in LatAm with 3 months in Colombia). This is what I have done, and am happy to hear of other ideas/improvements :

 

1) Created Word/Excel documents which details ALL my family's assets (trading accounts, real estate, bank accounts etc etc) with broker details, bank names, account numbers, website links etc. Printed them out and placed them in a sealed envelope in a locked filing cabinet and physically shown it's location to two trusted family members, on the understanding that this envelope will only be opened if something was to happen to me. Inside are step-by-step instructions on how to login to the brokers platform, how to close trades etc, with usernames listed in the document (passwords have already been separately emailed to both people, but without the username/platform-name, these pwds are un-usable - they only make sense once the family open this envelope and read through the details).

 

2) I have created limited-access trader accounts for both of these people, and if I am gone, they will be able to login as themselves and close the trades using the information above. In IB's TWS there is an option to "Close all positions". Neither of my chosen people are familiar with trading, let alone options, and this may be the best option in practical terms - although not in financial terms. 

 

3) Included important documents in this envelope like Wills, insurance policies, copies of my passport etc

 

 

 

 

 

 

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@Optrader I've done pretty much the same thing as @zxcv64, but mine is simpler as we are empty nest'ers.  All property is in both my and my wife's name.  Even my trading accounts are in both, with the exception of my IRA.  Access instructions are on a sheet of paper filed safely away, and I agree the easiest way is to close all positions.   Here I differed in that it may be worth having your spouse (or whomever) call and have the closing trades made by the broker in a timely manner, but written instructions are a must.  Since the accounts are in both names, my wife can either login and transfer the funds to our joint checking or do it by phone since she is owner of the accounts too.  I don't think there is any way to avoid a bit of a haircut when closing active trades, but if you get hit by a beer truck, the haircut is probably less important.  Our will is filed with an attorney but that is just for exigent circumstances, it is available at home and Texas is a community property state.  But the best way to keep the lawyers and state from getting as much as they can is to have joint ownership, then for those items, probate and other BS don't matter.

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