Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 1

You wrote, I would like input on the legality of options trading in 401k plans by the Trustee. Schwab tells me margin is not permitted in 401k accounts and that limits the level of trading authorization a trustee can obtain and use. Any input on this subject would be much appreciated, and knowledge of other brokers who might not share this position, if it is legal.

I'm not aware of a rule preventing margin in a 401(k) account - only in an IRA. But I'm also not personally aware of any 401(k) providers that offer margin. Many brokers do offer limited options trading without margin in their various retirement account products. As long as the broker can ensure there is no chance exercising the option would result in a loan against other assets, they should be able to offer options in an IRA (or 401k). But just because they can doesn't mean most 401(k) providers do even that.

Also the selection of a 401(k) trustee is handled by your employer. If your employer selected Schwab, you would need some pull with their benefits group to get the 401(k) trustee changed. Of course if you are your own employer, you can always set up a Solo-401(k) wherever you want.

- Joel
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.