How To Develop Synthetic Option Strategies In Your IRA Or Retirement Account

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Options trading is super easy in a regular account.

But it's a who different laboratory when you have a retirement account.

Getting creative with your positions can help boost your long-term portfolio profits. One way to do that is by trading synthetic options strategies.

Today I want to cover 1 way you can develop a synthetic short position in your retirement account.

First, The Big Problem With Brokers

I've got first to tell you that I have a huge problem with brokers limiting the strategies you can use in a retirement account.ff

They do this in the name of "unlimited risk" when in fact risk can be calculated based on IV levels and probabilities.

Yet the ban you the retail trader from getting to exotic with your trading. What a shame!

So, we have to figure out how to trade around this. . .

Selling An SPX Naked Put

Long options are easy to trade in these accounts because you are paying to enter the position. But what if you want to sell option premium?


In the example above I placed an order to sell 1 SPX 1650 Put. Right now based on where the SPX is trading at 1825 there is a 90% chance this trade is a winner at expiration.

Yet we have to put up more than $164,000+ in margin to hold this position. All for $590 in credit.

Not worth it if you ask me right?

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The Solution: Synthetic Credit Spread

With your usual credit spread you may only go 1 or 2 strikes away from your short strike. But when you want to really have an overall short position in a retirement account you have to get creative.


In this example I sold the SPX 1650/1600 Put spread by moving more than 50 points out in the strikes. You can go further if you want but this is just an example.

You see the broker just wants the position to have limited risk (so they can sleep well at night or something).

By doing this I do reduce the credit down to $215 but I also reduce the margin to a little over $4,700.

For a retirement account that's not too shabby making around 4.5% if held all the way through expiration.

More Art Than Science?

They say investing is more art than science but I think you owe it to yourselves to become scientists when it comes to creating synthetic positions.

Play around with some simulated trades before placing orders and see what you come up with. There is no right or wrong way to go about this.

And my hope is that by checking out this post you'll gain just 1 idea on how to make more money in your retirement accounts!

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.