hi im reading about multi leg options. wondering if smth like this has been discussed to transfer buying power from taxed brokerage to taxfree accounts.
- assume bid/ask of $0.10 / $0.15
- have 100 stock in standard taxed, roth accounts (can sell secured call).
- have cash to buy 100 more stock ATM in taxed, roth accounts (can sell cash secured put).
make the following butterfly across taxed, roth brokerage accounts:
1. STO ATM put in taxed brokerage. $0.1 credit
2. BTO ATM put in roth $0.15 debit
3. BTO ATM call in roth $0.15 debit
4. STO ATM call in taxed $0.1 credit
$0.30 debit in roth.
$0.2 credit in taxed.
if this was done in a single brokerage account, ive basically committed myself to a $0.10 loss (equal to bid/ask spread). seems pointless.
imagine if price goes up $1:
– roth PUT STC for $0.0; CALL STC $1.0; -$0.3 BTO = +$0.7 net credit to roth.
– taxed PUT BTC for $0 (OTM). CALL BTC -$1.0; $0.2 STO = -$0.8 STO debit to taxed.
– $0.1 net for $0.7 transferred to roth; $0.8 capital gains offset in taxed.
– $0.1 / $0.7 = 14.2% loss
if price goes down $1:
– roth PUT STC $1.0; CALL STC $0.0; -$0.3 BTO = +$0.7 net credit to roth.
– taxed PUT BTC -$1.0; CALL BTC -$0.0; $0.2 STO = -$0.8 STO debit to taxed.
– $0.1 net for $0.7 transferred to roth; $0.8 capital gains offset in taxed.
if price moves down $10:
– roth PUT STC $10.0; CALL STC $0.0; -$0.3 BTO = +$9.7 net credit to roth.
– taxed PUT BTC -$10.0; CALL BTC -$0.0; $0.2 STO = -$9.8 STO debit to taxed.
– $0.1 net for $9.7 transferred to roth; $9.8 capital gains offset in taxed.
– $0.1 / $9.7 = 1% loss
if price stays the same:
– this is the primary loss scenario
– you lose $0.3 from roth and gain $0.2 in taxed. net of -$0.1.
– (if volatility is light for the target stock, maybe condor instead of butterfly?)
i feel like such a strategy during periods of high volatility, high volume (earnings) might be doable?
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