Self-Directed 401k Question Answered – How can I trade options in my self-employed solo 401k?
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Solo 401k FAQ: If you have TD Ameritrade account that can trade options? Will the account with the solo 401(k) paperwork also continue to allow you to trade options?
RESPONSE:
Certainly, if the Solo 401k plan documents (like our Solo 401k plan documents) allow for trading options it is certainly acceptable to invest Solo 401k funds in stock options.
Practically, the solo 401k owner will need to open an account at a brokerage that allows for investing in stock options. In our experience and based on client feedback, the brokerage firms that will open accounts for third-party Solo 401k plans that support stock options trading such trading will be limited to Level 1.
Additional considerations with regards to investing Solo 401k funds in stock options:
- With respect to “naked margins” specifically is that the account has the potential to go negative. In that case, the solo 401k owner may have no ability to deposit additional funds into the Solo 401k – for example, if no additional Solo 401k contributions can be made and/or there are no funds in other retirement accounts to roll over to the Solo 401k.
- Investing Solo 401k funds in stock options with margin will generally subject the Solo 401k to Unrelated Business Income Tax/Unrelated Debt Finance Income Tax: https://www.mysolo401k.net/yes-ubit-applies-to-margin-trading-court-case/
