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Saturday, April 9, 2016

Hooray! -- New Fiduciary Rule Allows Options in Retirement Accounts

In a Covered Calls Advisor post last September (Link), you were alerted to a proposed rule from the Dept of Labor (DOL) that included an elimination of trading options in IRA accounts.  Many, including covered calls investors, use options in our retirement accounts.  We do so not for the speculative, risky purposes feared by Federal government regulators, but for the exact opposite reason -- to reduce risk in our portfolio.  In fact, for covered calls, several reputable academic studies have confirmed that covered calls have only two-thirds the risk of comparable buy-and-hold stock portfolios.

Fortunately, the new fiduciary rule just released has removed the sections that eliminated the use of options in our retirement accounts.  Here is a quote from an article today in Barron's: " WHY THE GOVERNMENT backed down from banning options isn’t entirely clear. But that came after many investors had written to the Labor Department, explaining that they use options to enhance stock returns and reduce risks, rather than speculate on stock moves."  This letter from the Options Clearing Corporation (OCC) and TD Ameritrade (Link) is a very good example of a compelling argument that might well have influenced the DOL to retain options trading in their new rule.

Here is another article summarizing this issue: Link 

Thank you to those of you who wrote letters advocating (successfully) to retain options trading in our retirement accounts.

Best Wishes and Godspeed,