The goal of this post is to share some information regarding trading retirement accounts for those unfamiliar with it.
For those that don't know, we are able to trade many of our retirement accounts. While, it's important to carefully assess our competency before doing so, it can be a great way to enhance our overall returns. I actively trade my ROTH IRA (and continue to contribute via the backdoor method). While my methodology for my IRA is different than my margin account - primarily, I trade it less frequently, I've found ways to amplify my annual returns with extremely simple strategies.
I primarily trade the ratio covered strangle on index ETFs (similar to what I do in my margin account), like IWM. I simply adjust the positions less.
This year, my ROTH is up slightly (the main benefit coming from trading bullish index strategies and the comparative benchmark is down over 18%). Last year, I was a little more aggressive and had a better overall return. Below are the statement recaps for 2022 and 2021 - note the gain is return on invested capital, not return on capital - so it inflates the return a bit and makes things look better than they are. ROC (or return on the account) so far for 2022 is just over 2% and for 2021 was around 30%. The blacked out sections are the total figures (Cost and Proceeds).
There are a few nuances to how I deploy the covered strangle in the ROTH vs my margin account:
I am SURE to maintain a short call ratio at all times to ensure upside potential is not capped. This has been absolutely critical to exceeding market returns.
I scale into the underlying itself via a mix of short put assignments and outright stock purchases. By purchasing stock at perceived lows, I DCA in and reestablish spot price sensitivity which is critical to keeping the strategy moving during bear markets and to actually make money during them.
Since I actively am trading my Margin account, I visit this account less frequently. What that means is I place my trades, log them in excel, then come back near expiration to adjust as needed. This has actually greatly benefited the portfolio since I'm not taking partial profits on the short legs when they're out.
I primarily trade IWM because the variance risk premium is typically more robust as well was the volatility in the product - which means I enjoy increased premium / $ to cash secure positions. IWM also has much better diversification than something like the SP500.
By keeping it simple in the IRA, I enjoy a slightly enhanced return profile compared to the market outright, reduce my overall risk, and don't add a bunch of time managing another account by keeping it simple.