Is there a stock option strategy that allows one to transfer money out of an IRA brokerage account into a non-IRA brokerage account without incurring penalty?

  • 2
    If there is, someone has already tried it and the IRS has clarified that it's illegal. – RonJohn Dec 25 '20 at 16:06
  • 3
    If there were, its intent would be circumventing income tax, not just penalty, right? I don’t believe such a strategy exists. – JTP - Apologise to Monica Dec 25 '20 at 16:07

There's no way to withdraw money from an IRA brokerage account without paying taxes and/or incurring a penalty unless it's one of the exceptions allowed under tax law.

You can hedge your IRA with options in a non sheltered account but that's an indirect transfer only if the IRA positions drop in value. Should they rise, your hedge will be a loss, deductible up to $3k per year (more if you have offsetting realized capital gains) ... but at least your IRA appreciated in value :->)

  • but in this article below it says "hackers drained out the roughly $300,000 through options trades," how did the hackers do it? bloomberg.com/news/articles/2020-12-22/… – Tiffany J Anguiano Dec 26 '20 at 0:37
  • It's a ridiculous description. Whatever type of security you trade in the account stays in the account as do the proceeds from the trades. The only way to get money out of an account is to transfer securities and/or cash to another account, ACH cash to a bank or have the broker send you a check. Since this was a achieved via hacking, there's more to the story than this. – Bob Baerker Dec 26 '20 at 1:06
  • From another Bloomberg story: "Bloomberg News reported last week on the experience of some users on Robinhood Markets’s brokerage app who say their money was STOLEN. It took Soraya Bagheri a day to learn that 450 shares of Moderna Inc. had been liquidated in her Robinhood account and that $10,000 in WITHDRAWALS were pending. Bagheri is among five Robinhood customers who recounted similar experiences to Bloomberg News, saying they’ve been left in limbo in recent weeks after someone sold their investments and WITHDREW funds." – Bob Baerker Dec 26 '20 at 1:08
  • @TiffanyJAnguiano: Robinhood doesn't have IRAs at all so how could that possibly be relevant to your question? – dave_thompson_085 Dec 27 '20 at 3:23
  • @dave_thompson_085: so it sounds like one can use options trade to move $$$ from one account to another. – Tiffany J Anguiano Dec 28 '20 at 0:47

You could buy a put in the IRA account while selling the same one (or something similar) in a regular margin taxable account. Assuming that the underlining does not go lower much and the put expire worthless, you end up with the put premium "transferred" from IRA into the margin account.

  • And with my "luck", the put would skyrocket in value. Packing more into the IRA, and creating a loss outside the account. – JTP - Apologise to Monica Dec 25 '20 at 18:15

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