Originally Posted by
Jiggawatt
Marcal, Misspoken, Seneca—interesting discussion on the risks of options. But couldn’t someone argue the exact opposite—that it’s better to start learning in a retirement account?
In an IRA, the brokerage literally won’t allow you to make high risk trades such as naked calls/puts. This guards you from getting into trouble. In a non-retirement account, I could make a mistake while putting in an order, or just think that selling this put on Amazon is really going to pay off because my buddy said so, and then the market moves against me and I get a margin call... this is simply not possible within an IRA.
Either way, I agree that a new trader needs to start slow and limit risk. It just seems like using some IRA capital to learn options is a way to force that limited risk on a newbie.
You cannot refill an IRA account if it gets wiped out. If you lose the capital in an IRA, you have not only lost money you have lost years of tax benefits. If you get wiped out in a taxable account, you can refill it. Start with paper trading to learn the process, then you can try IRA eligible strategies in a taxable account. As others have pointed out, using real money changes the game. The discussion of real vs paper trading reminds me of the movie Ender's Game.