There is absolutely no IRS or other legal prohibition

against selling naked calls in an IRA. Yes, most brokerage

firms will not allow it. But they have their reasons.

They do not want to take the perceived risk that the

sale may be imprudent.

There are substantial tax advantages to selling calls in

IRAs especially if you own ESOs.

For example there are "Options Experts" that claim that

there is one tax problem with selling calls to hedge your

ESOs. That is: in the event of large up moves in the

stock after the hedge is made, the loss on the written

calls is short term capital loss. That is the probable

interpretation, by the IRS today. The gain on the ESOs

would be ordinary income creating a mismatch.

However, if the sale was done in an IRA, there would be no

current tax on the gain and any losses would not be

deductible at all currently. So, in order to counter the

possible dilema, the employee should sell fewer calls.

If he has ESOs to purchase 10,000 shares and he wants

to hedge, he should sell listed slightly out of the money

calls on 4000 to 5,000 shares if he is doing it in an IRA.

The margin requirement is half of the requirement on the

sale of twice as many calls and the transaction costs are

half as much.

For the rest of the article email me olagues@hotmail.com

The author, JOHN OLAGUES, is a former member of the Chicago Board Options Exchange and the Pacific Stock Exchange for over ten years. He offers a unique view of employee stock options from a trader’s standpoint rather than from the standpoint of an accountant, compensation planner or academic. To contact JOHN OLAGUES email olagues@hotmail.com and  see www.optionsforemployees.com.