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.
1. assume bid/ask of $0.10 / $0.15
2. have 100 stock in standard taxed, roth accounts (can sell secured call).
3. 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?