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Meaning / Definition of

Roth 401(k)

Categories: Retirement and Pension,

The Roth 401(k) retirement plan, which was introduced in 2006, allows you to make after-tax contributions to your account. Earnings may be withdrawn tax free, provided that you are at least 59 1/2 and your account has been open five years or more.Both the Roth 401(k) and the traditional 401(k) have the same contribution limits and distribution requirements. You can add no more than the annual federal limit each year, and you must begin taking required minimum distributions (RMD) by April 1 of the year following the year you reach age 70 1/2. You can postpone RMDs if you are still working.You may not move assets between traditional and Roth 401(k) accounts, though you may be able to split your annual contribution between the two. If you leave your job or retire, you can roll Roth 401(k) assets into a roth ira, just as you can roll traditional 401(k) assets into a traditional ira.Most 401(k) plans, including the Roth, are self-directed, which means you must choose specific investments from among those offered through the plan.

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Definition / Meaning of

Naked Option

Categories: Options, Investing and Trading, Stocks, Legal, ,

When you write, or sell, a call option but don't own the underlying instrument, such as a stock in the case of an equity option, the option is described as naked. Similarly, you write a naked put if you don't have enough cash on hand or in liquid investments to purchase the underlying instrument. Because you collect a premium when you sell the option, you may make a profit if the underlying instrument performs as you expect, and the option isn't exercised. The risk you run, however, is that the option holder will exercise the option. In the case of a call, you'll then have to buy the instrument at the market price in order to meet your obligation to sell. Or, if it's a put, you'll have to come up with the cash to purchase the instrument. If that price of the underlying has moved in the opposite direction from the one you expected, meeting your obligation could result in a substantial net loss. Because of this risk, your brokerage firm may limit your right to write naked options or require that you write them in a margin account.

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