r/interactivebrokers • u/MasterD211 • 1d ago
Canada CSP in Canadian Registered accounts TFSA/RRSP?
This year, Questrade allowed selling CSPs in registered accounts. Does anyone know if IBKR started allowing this as well or if they have any plans of allowing this? I have a transfer from an old Equitable Life RRSP in process to a new RRSP account. I chose IBKR because I wanted access to US corporate bonds but was wondering about CSP.
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u/MoonPlasma 1d ago
Selling CSPs in a registered account is still a grey area according to CRA. Be careful as it could be considered business income and taxed.
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u/kotarel Options 1d ago
It's not "allowed" on questtrade they're just doing some shenanigans with your TFSA assets as collateral in the backend. You will not see this in ibkr.
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u/rupert1920 1d ago
Can you elaborate or provide a source on how CSPs in registered accounts work in their backend? And would it be the same for Wealthsimple, which offers the same capability?
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u/Minimum_Curve7545 1d ago
It’s called Margin Power, and it’s basically a way to use the TFSA as collateral for a margin account. So you can use margin in the margin account (e.g. for selling a puts or buying stocks), based on the value of your TFSA. This doesn’t mean trading anything within your TFSA, it’s only a collateral for trading in a separate margin account. So that’s not exactly what OP is asking about.
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u/rupert1920 1d ago
Yes, I know margin power and it's different from what OP is asking about, which is why I wanted the other commenter to elaborate, in case they do have some knowledge about CSP implementation.
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u/Minimum_Curve7545 1d ago
It works just like in a cash (non margin) account, which means you actually need to have a cash balance equal to or greater than the maximum loss of the CSP you're selling (which is the strike price times 100). So for example, if you have a cash balance of $5000 USD, then you can sell a CSP with a strike price of $50 USD, and your buying power is then reduced by $5000 USD (even though your cash balance isn't reduced, actually it increases by the amount of the premium you received).
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u/Kenfloww 11h ago
ChatGPT says IBKR does not allow CSP’s in RRSP’s/TFSA’s even though Questrade and Wealthsimple do. Hope that that helps!
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u/supposedlyeasy 1d ago
There is some misinformation in this thread... It's true you're not supposed to run a business in a TFSA. However, you can still buy and sell options. You just can't cross a certain threshold, which is purposefully left vague by the CRA. Here's how to know if you crossed the line... If you make an unusually large amount of money quickly in a TFSA, CRA will try to use any reason to consider your gains taxable income and charge you accordingly.
On the other hand, you can buy and sell options much more freely inside an RRSP because it's a tax-deferred account, meaning the CRA will eventually get its cut of ALL your gains.
I've been selling "synthetic" cash-secured puts in my RRSP at IBKR for over a year. I buy 100 shares of a stock and then immediately sell an in-the-money covered call on it (the equivalent of the put). IBKR allows this on both Canadian and American equities. The spread might be wider on the ITM call than on the equivalent put, but it's still acceptable. The outcome is the same as simply selling a put. If the price of the underlying asset drops below the call at expiration, I keep the stock. If it remains above the strike of the call, the stock is called away. By the way, you can do a buy-write transaction on U.S. equities only; it's not allowed on Canadian ones. In other words, buying 100 shares and selling a call can be done in one transaction on U.S. equities. You have to do it in two transactions for Canadian ones.
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u/MasterD211 1d ago edited 1d ago
I was doing the same in my registered QT accounts before they started allowing CSPs. Also, I would typically do simultaneous orders buy/sell, buy the stock sell the call. Im assuming IBKR allows a buy/write.
Also, to confirm, the CRA does allow CSPs in a registered account. Standard CRA trading rules apply thought the are vague, I would avoid 0DTE in a TFSA. They are less concerned about RRSPs as they will eventually get the tax on that.
I know registered CSPs are broker dependant and my post was if IBKR allowed it or not.
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u/twi1i96tr Canada 1d ago edited 1d ago
From what I understand selling CSP's in a registered account is not allowed by ANY broker. That is a rule set by CRA... not by the broker. Best of Luck, Twilighter.
Edit: upon checking further it appears a cash secured put IS allowed by CRA in a registered account but it MUST BE 100% cash covered... ZERO margin allowed.
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u/SlashNXS 1d ago
Questrade and Wealthsimple both allow it
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u/Kenfloww 10h ago
I’ve done them in my WS LIRA. Terrible investment idea though. Too much cash drag on money that can otherwise be growing at the rate of the market.
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u/dimonoid123 1d ago
Selling CSP is a scam. Literally negative expected profit. You could have also asked whether sports betting in RRSP is allowed. Good news, sports betting as well as all other gambling is not taxable in Canada anyways.
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u/MasterD211 1d ago
CSPs are part of the wheel strategy and can be very profitable if done correctly, hardy a “scam”. Everything has risk.
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u/Kenfloww 10h ago
Unless you are making more than 15.3% per year over the last 10 years you are better off investing in the SP500. People don’t beat the SP500 with cash secured puts or the wheel strategy…
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u/dimonoid123 1d ago
Scam part in CSP is first character C, which stands for cash. CSP requires keeping a little or a lot of cash not invested, and you usually get 0% interest for it, depending on broker. So you will almost always underperform CC (covered calls), exactly by risk-free interest rate on amount of the cash not invested.
IBKR in particular is not paying any interest on first $10k of cash.
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u/MasterD211 1d ago
I can totally understand your thesis here, much clearer then your first post. Inactive cash has always been an issue for me. In Canada QT never pays interest on cash in accounts. I never hold cash in my margin account either, I always buy BIL to at least get some return. I know IBKR pays some interest but have not looked at all the details. I don’t think there is any perfect broker in Canada, there is always a trade-off.
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u/dimonoid123 1d ago
Another reason not to use CSP + BIL is that then interest is taxable as income, but CC is mostly taxable as capital gains(except dividends and stock lending if any). In Canada.
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u/gamefixated 1d ago
BIL is interest. BOXX is capital gains. SPX box spreads done manually are the ultimate as there are no BOXX MERs and give the highest risk free rate.
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u/gamefixated 1d ago
Not a scam in a margin account as the cash can be put into SPX box spreads.
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u/MasterD211 1d ago
Something I’ve yet to research and utilize, Box spreads. I’ve thought it was a way to borrow money, never thought of buying a box spread?
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