As much as possible I try to trade in my IRA accounts—in order to defer taxes of course. It is a bit counter-intuitive to be doing more speculative activities in a retirement account, but this approach supports my goals:
- Achieving good returns
- With reasonable risks
- While compounding growth
If your money is in Roth accounts, all the better, but most people interested in trading in their IRAs are restricted to traditional IRAs.
There are restrictions on what trades you can do in an IRA account. For example, you can’t short a stock in an IRA account, but option restrictions have eased some over the years, and market innovations like short ETFs (e.g., SH, SDS) have effectively bypassed some of the more onerous restrictions. Brokers vary considerably in what they allow in IRA accounts, so pays to ask around. Fidelity & Schwab allow many types of option spreads that some brokers might not. Covered calls and protective puts on long positions are broadly available within IRAs. Interactive Brokers and TD Ameritrade both waive the 2-day settlement requirement on trades in IRAs so if you plan to do frequent trades they would definitely be worth a look.
For a more general treatment on trading in IRAs see “Top 15 Questions About Trading in IRAs.” The rest of this post will deal with free riding and how to avoid it.