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Market Measures

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Capital Allocation for IRAs

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

tastytrade developed a set of rules regarding capital allocation in margin accounts. Today, we found a way to apply the same rules to IRAs with one key adjustment.

When utilizing undefined risk strategies in IRAs, simply buy the 5 delta option to accompany the short option position. This will make your average buying power required for that trade roughly the same as a margin account while keeping the risk/return profile of the overall position the same. The capital allocation rules we have for margin accounts will now apply to IRAs as well.

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