Can I Short a Fidelity Roth IRA?
You cannot short a Fidelity IRA, or any other IRA, for that matter. The reason is that IRS rules forbid pledging assets in an IRA as collateral for any debt. In order to sell short, you must have a margin account at a brokerage. You cannot use an IRA in a margin account.
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Background and Regulation
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IRAs, or Individual Retirement Arrangements, are subject to strict limitations under IRS rules. You can only invest a certain amount (subject to income limitations, but capped at $5,000 for the 2010 tax year, and you are prohibited from investing in certain kinds of assets, like collectibles. You also are specifically prohibited from pledging any part of an IRA as collateral for a loan. If you do so, the IRA is considered distributed, and taxes and a 10 percent penalty for early withdraw (for individuals younger than age 59 1/2) may apply.
Short Selling
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Short selling is the act of borrowing a stock and selling it, in the hope that the stock price will fall. The investor then buys back the shares at the new, lower price, returns them to the lender or broker, and keeps the difference in price. There is the chance the stock will go up in price, however, in which case the short seller loses money.
In order to hedge against this risk, brokerage companies only allow you to short sell using a margin account. You pledge the securities in the margin account as collateral, in case the transaction moves against you.
This is why you cannot short sell within an IRA--as soon as you pledge the asset, the IRA is deemed distributed and ceases to exist.
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Alternatives
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If you want to sell short, you will have to open up a separate, taxable account at a brokerage, such as Charles Schwab, E*Trade, or Scottrade, or a full-service house such as Merrill Lynch.
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References
Resources
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