Hi, I opened a Questrade account a couple of years ago. It hasn't been performing the greatest, but now... well.. self-explanatory. I had activated Margin and am having a hard time understanding what is MY money and what is QUESTRADE's. Can someone help? Also a bit of a reddit newb. I am trading in both USD and CAD. There is also a section in the Investment Summary called "Allocations"... and a tab called BORROWED. Is that what I am borrowing from Questrade right now? And is the TOTAL EQUITY essentially, despite all borrowing, the amount that I would have if I closed ALL positions? What happens if the stocks continue to go in a downward direction. Aside from interest that I would pay, at the worst case, do I owe what is indicated in the negative CASH section? i.e. If TOTAL CASH was -$1,000 and Total MARKET VALUE was $5,000, if the markets continued to tumble to a point where everything went to ZERO value, and then I closed positions... would the MOST I owe be $6,000 plus interest? Or is there more that I am not seeing?
Hello everyone, I am from Canada and planning to do day trade options in U.S. stocks with Questrade. Can I use margin account for this? I would not be using margin though, I will only trade only with my cash. I am aware it is a taxable account (I think 50% on capital gains) Is there anything else I need to know? thanks
First time Questrade trading, TFSA or Margin? Stick to Canadian funds or USD?
Hey guys, I'm currently learning more about investing with Questrade, I've gone through the simulation and I feel I got it down and I'm pretty comfortable with their interface. I've opened up a TFSA and a Margin, however I have $1000 to fund 1 account which I'm willing to risk. My main questions are is it better to fund my TFSA or Margin account? I want to participate in day trading, not long term investments, I have investments already in plan for that through CCP. Should I stick to Canadian funds because of the record lows? (As of this post its 70 cents to the dollar), or buy using the margin conversions?
Initially I sold 50x $25p last week, and watched those bounce from -35% to +35%, and decided to leg into a straddle this week, selling $25c. It looks like I did alright in the end. https://i.imgur.com/5KceWBY.jpg I entered around $4.20 in credit (no joke), exited at $3.25 this morning, and had a bit of fomo when I saw that trade hitting a cost of $2.60 very briefly when prpl was around $23. “I’m playing both sides so I always come out on top” 🐌🐌🐌 Ps: get fucked, auto mod. “Your post is too short” bullshit means I’m going to type more to trick you, you stupid computer.
Can I use my TFSA Margin Power to trade option spreads in my Margin Account if I only deposit $1000?
So we’re all aware that it takes $5000 in a margin to get access to option spreads. Now I was looking to open a margin and deposit $1000 and therefore use it to trade with option spreads. Would the Margin Power of my TFSA (Value of around 14000$) enable me to trade spreads, bypassing that $5000 requirement? In other words, is the $5000 figure a Buying Power or a Cash balance figure to trade option spreads? Thanks!
Put credit spread - trouble closing, and question about assignment.
I sold 4x 1610/1600 credit spreads on TSLA :( I tried to enter an order to close it at, just as an example, 9.0 DR to maybe get lucky and not take the full loss. The UI says that my change in buying power would be tens of thousands of dollars and that I don't have enough. Has anyone else seen this? Despite saying "Buy to Close / Sell to Close", chat support says it looks like it's being calculated as an open and I need to call phone support in the morning, which I guess I will do. Even if I enter something unrealistic like 1.0 DR, I get: Trade value: 4 x 100 x 1.0 = DR $400 USD Comission $18.82 USD Change in buying power: (83,822.76 USD) Change in maintenance excess: (25,172.00 USD) I tried sending the order just to see if it was a UI glitch but it was rejected. Let's say I let it ride, and the stock closes at $1500. I get assigned 400 shares at 1610 -- will Questrade exercise my 1600 put to cover the obligation, or will they liquidate the shares at market? Should I request the put I am holding be exercised just to be sure?
You may have heard about off-shore tax havens of questionable legality where wealthy people invest their money in legal "grey zones" and don't pay any tax, as featured for example, in Netflix's drama, The Laundromat. The reality is that the Government of Canada offers 100% tax-free investing throughout your life, with unlimited withdrawals of your contributions and profits, and no limits on how much you can make tax-free. There is also nothing to report to the Canada Revenue Agency. Although Britain has a comparable program, Canada is the only country in the world that offers tax-free investing with this level of power and flexibility. Thank you fellow Redditors for the wonderful Gold Award and Today I Learned Award! (Unrelated but Important Note: I put a link at the bottom for my margin account explainer. Many people are interested in margin trading but don't understand the math behind margin accounts and cannot find an explanation. If you want to do margin, but don't know how, click on the link.) As a Gen-Xer, I wrote this post with Millennials in mind, many of whom are getting interested in investing in ETFs, individual stocks, and also my personal favourite, options. Your generation is uniquely positioned to take advantage of this extremely powerful program at a relatively young age. But whether you're in your 20's or your 90's, read on! Are TFSAs important? In 2020 Canadians have almost 1 trillion dollars saved up in their TFSAs, so if that doesn't prove that pennies add up to dollars, I don't know what does. The TFSA truly is the Great Canadian Tax Shelter. I will periodically be checking this and adding issues as they arise, to this post. I really appreciate that people are finding this useful. As this post is now fairly complete from a basic mechanics point of view, and some questions are already answered in this post, please be advised that at this stage I cannot respond to questions that are already covered here. If I do not respond to your post, check this post as I may have added the answer to the FAQs at the bottom.
How to Invest in Stocks
A lot of people get really excited - for good reason - when they discover that the TFSA allows you to invest in stocks, tax free. I get questions about which stocks to buy. I have made some comments about that throughout this post, however; I can't comprehensively answer that question. Having said that, though, if you're interested in picking your own stocks and want to learn how, I recommmend starting with the following videos: The first is by Peter Lynch, a famous American investor in the 80's who wrote some well-respected books for the general public, like "One Up on Wall Street." The advice he gives is always valid, always works, and that never changes, even with 2020's technology, companies and AI: https://www.youtube.com/watch?v=cRMpgaBv-U4&t=2256s The second is a recording of a university lecture given by investment legend Warren Buffett, who expounds on the same principles: https://www.youtube.com/watch?v=2MHIcabnjrA Please note that I have no connection to whomever posted the videos.
TFSAs were introduced in 2009 by Stephen Harper's government, to encourage Canadians to save. The effect of the TFSA is that ordinary Canadians don't pay any income or capital gains tax on their securities investments. Initial uptake was slow as the contribution rules take some getting used to, but over time the program became a smash hit with Canadians. There are about 20 million Canadians with TFSAs, so the uptake is about 70%- 80% (as you have to be the age of majority in your province/territory to open a TFSA).
Eligibility to Open a TFSA
You must be a Canadian resident with a valid Social Insurance Number to open a TFSA. You must be at the voting age in the province in which you reside in order to open a TFSA, however contribution room begins to accumulate from the year in which you turned 18. You do not have to file a tax return to open a TFSA. You do not need to be a Canadian citizen to open and contribute to a TFSA. No minimum balance is required to open a TFSA.
Where you Can Open a TFSA
There are hundreds of financial institutions in Canada that offer the TFSA. There is only one kind of TFSA; however, different institutions offer a different range of financial products. Here are some examples:
The Canadian big 5 bank branches and most other financial institutions offer a TFSA that allows you to buy mutual funds, hold cash, GICs, term deposits, and possibly ETFs. This is a good choice if you want guaranteed returns or diversified investing.
There are a number of on-line banks such as Tangerine, Simplii Financial, Oaken Financial, and many more that offer the TFSA.
The discount DIY brokerage arms of the big 5 banks give you more choices, including stocks, warrants, bonds and options. There are also standalone brokers like IBKR Canada, Questrade, Qtrade, and Virtual Brokers, among others, that offer this.
Some brokerages and financial advisors also offer TFSAs that give you these investment choices, in different formats such as:
Traditional brokerage, where a stockbroker invests your money (BMO Nesbitt Burns, RBC Dominion Securities and others)
Financial advisor who will invest your money according to a plan you put together with the advisor (TSI Network and many others)
"Robo" advisors such as Wealthsimple, RBC InvestEase, BMO SmartFolio, or Wealthbar
BMO's AdviceDirect, which is a semi-directed hybrid between standalone DIY investing and fully-advised investing, where you operate on a DIY basis but have access to a registered investment advisor (a live person) who can give you suggetions and advice.
Your TFSA may be covered by either CIFP or CDIC insuranceor both. Ask your bank or broker for details.
What You Can Trade and Invest In
You can trade the following:
GICS, mutual funds, term deposits
individual common and preferred stocks listed on an "approved exchange" which is the TSX, TSX-V, NASDAQ, NYSE, and about 20 other exchanges worldwide, but not the US OTC pink sheets. Many examples, such as Suncor, Linamar, Apple, any of the big banks, and many thousands of others, when you want to buy into an individual company
stock-like securities like REITS, ETFs and ETNs, including 2x and 3x leveraged
gold and silver certificates
cash of many countries (CAD/USD/EUGBP/AUD/NZD/JPY/CHF and many others)
government bills and bonds of most countries, subsovereigns like Canadian provincial bills and bonds, and most corporations
options that trade on the Montreal Exchange or various options exchanges in the USA and the rest of the word (see FAQ for details)
gold, silver bullion certificates
shares in certain private companies -- but consult your tax advisor on this
What You Cannot Trade
You cannot trade:
commodity futures contracts
option spread positions (see FAQ for details)
anything that requires a margin account, meaning, a special kind of account that allows you to borrow money directly from the broker against the assets you have in your account and the assets you intend to buy.
crypto (although there exist crypto ETNs that you can buy)
Again, if it requires a margin account, it's out. You cannot buy on margin in a TFSA. Nothing stopping you from borrowing money from other sources as long as you stay within your contribution limits, but you can't trade on margin in a TFSA. You can of course trade long puts and calls which give you leverage.
Rules for Contribution Room
Starting at 18 you get a certain amount of contribution room. According to the CRA: You will accumulate TFSA contribution room for each year even if you do not file an Income Tax and Benefit Return or open a TFSA. The annual TFSA dollar limit for the years 2009 to2012 was $5,000. The annual TFSA dollar limit for the years 2013 and 2014 was $5,500. The annual TFSA dollar limit for the year 2015 was $10,000. The annual TFSA dollar limit for the years 2016 to 2018 was $5,500. The annual TFSA dollar limit for the year 2019 is $6,000. The TFSA annual room limit will be indexed to inflation and rounded to the nearest $500. Investment income earned by, and changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributions.html If you don't use the room, it accumulates indefinitely. Trades you make in a TFSA are truly tax free. But you cannot claim the dividend tax credit and you cannot claim losses in a TFSA against capital gains whether inside or outside of the TFSA. So do make money and don't lose money in a TFSA. You are stuck with the 15% withholding tax on U.S. dividend distributions unlike the RRSP, due to U.S. tax rules, but you do not pay any capital gains on sale of U.S. shares. You can withdraw *both* contributions *and* capital gains, no matter how much, at any time, without penalty. The amount of the withdrawal (contributions+gains) converts into contribution room in the *next* calendar year. So if you put the withdrawn funds back in the same calendar year you take them out, that burns up your total accumulated contribution room to the extent of the amount that you re-contribute in the same calendar year.
E.g. Say you turned 18 in 2016 in Alberta where the age of majority is 18. It is now sometime in 2020. You have never contributed to a TFSA. You now have $5,500+$5,500+$5,500+$6,000+$6,000 = $28,500 of room in 2020. In 2020 you manage to put $20,000 in to your TFSA and you buy Canadian Megacorp common shares. You now have $8,500 of room remaining in 2020. Sometime in 2021 - it doesn't matter when in 2021 - your shares go to $100K due to the success of the Canadian Megacorp. You also have $6,000 worth of room for 2021 as set by the government. You therefore have $8,500 carried over from 2020+$6,000 = $14,500 of room in 2021. In 2021 you sell the shares and pull out the $100K. This amount is tax-free and does not even have to be reported. You can do whatever you want with it. But: if you put it back in 2021 you will over-contribute by $100,000 - $14,500 = $85,500 and incur a penalty. But if you wait until 2022 you will have $14,500 unused contribution room carried forward from 2021, another $6,000 for 2022, and $100,000 carried forward from the withdrawal 2021, so in 2022 you will have $14,500+$6,000+$100,000 = $120,500 of contribution room. This means that if you choose, you can put the $100,000 back in in 2022 tax-free and still have $20,500 left over. If you do not put the money back in 2021, then in 2022 you will have $120,500+$6,000 = $126,500 of contribution room. There is no age limit on how old you can be to contribute, no limit on how much money you can make in the TFSA, and if you do not use the room it keeps carrying forward forever. Just remember the following formula: This year's contribution room = (A) unused contribution room carried forward from last year + (B) contribution room provided by the government for this year + (C) total withdrawals from last year. EXAMPLE 1: Say in 2020 you never contributed to a TFSA but you were 18 in 2009. You have $69,500 of unused room (see above) in 2020 which accumulated from 2009-2020. In 2020 you contribute $50,000, leaving $19,500 contribution room unused for 2020. You buy $50,000 worth of stock. The next day, also in 2020, the stock doubles and it's worth $100,000. Also in 2020 you sell the stock and withdraw $100,000, tax-free. You continue to trade stocks within your TFSA, and hopefully grow your TFSA in 2020, but you make no further contributions or withdrawals in 2020. The question is, How much room will you have in 2021? Answer: In the year 2021, the following applies: (A) Unused contribution room carried forward from last year, 2020: $19,500 (B) Contribution room provided by government for this year, 2021: $6,000 (C) Total withdrawals from last year, 2020: $100,000 Total contribution room for 2021 = $19,500+6,000+100,000 = $125,500. EXAMPLE 2: Say between 2020 and 2021 you decided to buy a tax-free car (well you're still stuck with the GST/PST/HST/QST but you get the picture) so you went to the dealer and spent $25,000 of the $100,000 you withdrew in 2020. You now have a car and $75,000 still burning a hole in your pocket. Say in early 2021 you re-contribute the $75,000 you still have left over, to your TFSA. However, in mid-2021 you suddenly need $75,000 because of an emergency so you pull the $75,000 back out. But then a few weeks later, it turns out that for whatever reason you don't need it after all so you decide to put the $75,000 back into the TFSA, also in 2021. You continue to trade inside your TFSA but make no further withdrawals or contributions. How much room will you have in 2022? Answer: In the year 2022, the following applies: (A) Unused contribution room carried forward from last year, 2021: $125,500 - $75,000 - $75,000 = -$24,500. Already you have a problem. You have over-contributed in 2021. You will be assessed a penalty on the over-contribution! (penalty = 1% a month). But if you waited until 2022 to re-contribute the $75,000 you pulled out for the emergency..... In the year 2022, the following would apply: (A) Unused contribution room carried forward from last year, 2021: $125,500 -$75,000 =$50,500. (B) Contribution room provided by government for this year, 2022: $6,000 (C) Total withdrawals from last year, 2020: $75,000 Total contribution room for 2022 = $50,500 + $6,000 + $75,000 = $131,500. ...And...re-contributing that $75,000 that was left over from your 2021 emergency that didn't materialize, you still have $131,500-$75,000 = $56,500 of contribution room left in 2022. For a more comprehensive discussion, please see the CRA info link below.
FAQs That Have Arisen in the Discussion and Other Potential Questions:
Equity and ETF/ETN Options in a TFSA: can I get leverage? Yes. You can buy puts and calls in your TFSA and you only need to have the cash to pay the premium and broker commissions. Example: if XYZ is trading at $70, and you want to buy the $90 call with 6 months to expiration, and the call is trading at $2.50, you only need to have $250 in your account, per option contract, and if you are dealing with BMO IL for example you need $9.95 + $1.25/contract which is what they charge in commission. Of course, any profits on closing your position are tax-free. You only need the full value of the strike in your account if you want to exercise your option instead of selling it. Please note: this is not meant to be an options tutorial; see the Montreal Exchange's Equity Options Reference Manual if you have questions on how options work.
Equity and ETF/ETN Options in a TFSA: what is ok and not ok? Long puts and calls are allowed. Covered calls are allowed, but cash-secured puts are not allowed. All other option trades are also not allowed. Basically the rule is, if the trade is not a covered call and it either requires being short an option or short the stock, you can't do it in a TFSA.
Live in a province where the voting age is 19 so I can't open a TFSA until I'm 19, when does my contribution room begin? Your contribution room begins to accumulate at 18, so if you live in province where the age of majority is 19, you'll get the room carried forward from the year you turned 18.
If I turn 18 on December 31, do I get the contribution room just for that day or for the whole year? The whole year.
Do commissions paid on share transactions count as withdrawals? Unfortunately, no. If you contribute $2,000 cash and you buy $1,975 worth of stock and pay $25 in commission, the $25 does not count as a withdrawal. It is the same as if you lost money in the TFSA.
How much room do I have? If your broker records are complete, you can do a spreadsheet. The other thing you can do is call the CRA and they will tell you.
TFSATFSA direct transfer from one institution to another: this has no impact on your contributions or withdrawals as it counts as neither.
More than 1 TFSA: you can have as many as you want but your total contribution room does not increase or decrease depending on how many accounts you have.
Withdrawals that convert into contribution room in the next year. Do they carry forward indefinitely if not used in the next year? Answer :yes.
Do I have to declare my profits, withdrawals and contributions? No. Your bank or broker interfaces directly with the CRA on this. There are no declarations to make.
Risky investments - smart? In a TFSA you want always to make money, because you pay no tax, and you want never to lose money, because you cannot claim the loss against your income from your job. If in year X you have $5,000 of contribution room and put it into a TFSA and buy Canadian Speculative Corp. and due to the failure of the Canadian Speculative Corp. it goes to zero, two things happen. One, you burn up that contribution room and you have to wait until next year for the government to give you more room. Two, you can't claim the $5,000 loss against your employment income or investment income or capital gains like you could in a non-registered account. So remember Buffett's rule #1: Do not lose money. Rule #2 being don't forget the first rule. TFSA's are absolutely tailor-made for Graham-Buffett value investing or for diversified ETF or mutual fund investing, but you don't want to buy a lot of small specs because you don't get the tax loss.
Moving to/from Canada/residency. You must be a resident of Canada and 18 years old with a valid SIN to open a TFSA. Consult your tax advisor on whether your circumstances make you a resident for tax purposes. Since 2009, your TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada. Note: If you move to another country, you can STILL trade your TFSA online from your other country and keep making money within the account tax-free. You can withdraw money and Canada will not tax you. But you have to get tax advice in your country as to what they do. There restrictions on contributions for non-residents. See "non residents of Canada:" https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf
The U.S. withholding tax. Dividends paid by U.S.-domiciled companies are subject to a 15% U.S. withholding tax. Your broker does this automatically at the time of the dividend payment. So if your stock pays a $100 USD dividend, you only get $85 USD in your broker account and in your statement the broker will have a note saying 15% U.S. withholding tax. I do not know under what circumstances if any it is possible to get the withheld amount. Normally it is not, but consult a tax professional.
The U.S. withholding tax does not apply to capital gains. So if you buy $5,000 USD worth of Apple and sell it for $7,000 USD, you get the full $2,000 USD gain automatically.
Tax-Free Leverage. Leverage in the TFSA is effectively equal to your tax rate * the capital gains inclusion rate because you're not paying tax. So if you're paying 25% on average in income tax, and the capital gains contribution rate is 50%, the TFSA is like having 12.5%, no margin call leverage costing you 0% and that also doesn't magnify your losses.
Margin accounts. These accounts allow you to borrow money from your broker to buy stocks. TFSAs are not margin accounts. Nothing stopping you from borrowing from other sources (such as borrowing cash against your stocks in an actual margin account, or borrowing cash against your house in a HELOC or borrowing cash against your promise to pay it back as in a personal LOC) to fund a TFSA if that is your decision, bearing in mind the risks, but a TFSA is not a margin account. Consider options if you want leverage that you can use in a TFSA, without borrowing money.
Dividend Tax Credit on Canadian Companies. Remember, dividends paid into the TFSA are not eligible to be claimed for the credit, on the rationale that you already got a tax break.
FX risk. The CRA allows you to contribute and withdraw foreign currency from the TFSA but the contribution/withdrawal accounting is done in CAD. So if you contribute $10,000 USD into your TFSA and withdraw $15,000 USD, and the CAD is trading at 70 cents USD when you contribute and $80 cents USD when you withdraw, the CRA will treat it as if you contributed $14,285.71 CAD and withdrew $18,75.00 CAD.
OTC (over-the-counter stocks). You can only buy stocks if they are listed on an approved exchange ("approved exchange" = TSX, TSX-V, NYSE, NASDAQ and about 25 or so others). The U.S. pink sheets "over-the-counter" market is an example of a place where you can buy stocks, that is not an approved exchange, therefore you can't buy these penny stocks. I have however read that the CRA make an exception for a stock traded over the counter if it has a dual listing on an approved exchange. You should check that with a tax lawyer or accountant though.
The RRSP. This is another great tax shelter. Tax shelters in Canada are either deferrals or in a few cases - such as the TFSA - outright tax breaks, The RRSP is an example of a deferral. The RRSP allows you to deduct your contributions from your income, which the TFSA does not allow. This deduction is a huge advantage if you earn a lot of money. The RRSP has tax consequences for withdrawing money whereas the TFSA does not. Withdrawals from the RRSP are taxable whereas they are obviously not in a TFSA. You probably want to start out with a TFSA and maintain and grow that all your life. It is a good idea to start contributing to an RRSP when you start working because you get the tax deduction, and then you can use the amount of the deduction to contribute to your TFSA. There are certain rules that claw back your annual contribution room into an RRSP if you contribute to a pension. See your tax advisor.
Pensions. If I contribute to a pension does that claw back my TFSA contribution room or otherwise affect my TFSA in any way? Answer: No.
The $10K contribution limit for 2015. This was PM Harper's pledge. In 2015 the Conservative government changed the rules to make the annual government allowance $10,000 per year forever. Note: withdrawals still converted into contribution room in the following year - that did not change. When the Liberals came into power they switched the program back for 2016 to the original Harper rules and have kept the original Harper rules since then. That is why there is the $10,000 anomaly of 2015. The original Harper rules (which, again, are in effect now) called for $500 increments to the annual government allowance as and when required to keep up with inflation, based on the BofC's Consumer Price Index (CPI). Under the new Harper rules, it would have been $10,000 flat forever. Which you prefer depends on your politics but the TFSA program is massively popular with Canadians. Assuming 1.6% annual CPI inflation then the annual contribution room will hit $10,000 in 2052 under the present rules. Note: the Bank of Canada does an excellent and informative job of explaining inflation and the CPI at their website.
Losses in a TFSA - you cannot claim a loss in a TFSA against income. So in a TFSA you always want to make money and never want to lose money. A few ppl here have asked if you are losing money on your position in a TFSA can you transfer it in-kind to a cash account and claim the loss. I would expect no as I cannot see how in view of the fact that TFSA losses can't be claimed, that the adjusted cost base would somehow be the cost paid in the TFSA. But I'm not a tax lawyeaccountant. You should consult a tax professional.
Transfers in-kind to the TFSA and the the superficial loss rule. You can transfer securities (shares etc.) "in-kind," meaning, directly, from an unregistered account to the TFSA. If you do that, the CRA considers that you "disposed" of, meaning, equivalent to having sold, the shares in the unregistered account and then re-purchased them at the same price in the TFSA. The CRA considers that you did this even though the broker transfers the shares directly in the the TFSA. The superficial loss rule, which means that you cannot claim a loss for a security re-purchased within 30 days of sale, applies. So if you buy something for $20 in your unregistered account, and it's trading for $25 when you transfer it in-kind into the TFSA, then you have a deemed disposition with a capital gain of $5. But it doesn't work the other way around due to the superficial loss rule. If you buy it for $20 in the unregistered account, and it's trading at $15 when you transfer it in-kind into the TFSA, the superficial loss rule prevents you from claiming the loss because it is treated as having been sold in the unregistered account and immediately bought back in the TFSA.
Day trading/swing trading. It is possible for the CRA to try to tax your TFSA on the basis of "advantage." The one reported decision I'm aware of (emphasis on I'm aware of) is from B.C. where a woman was doing "swap transactions" in her TFSA which were not explicitly disallowed but the court rules that they were an "advantage" in certain years and liable to taxation. Swaps were subsequently banned. I'm not sure what a swap is exactly but it's not that someone who is simply making contributions according to the above rules would run afoul of. The CRA from what I understand doesn't care how much money you make in the TFSA, they care how you made it. So if you're logged on to your broker 40 hours a week and trading all day every day they might take the position that you found a way to work a job 40 hours a week and not pay any tax on the money you make, which they would argue is an "advantage," although there are arguments against that. This is not legal advice, just information.
The U.S. Roth IRA. This is a U.S. retirement savings tax shelter that is superficially similar to the TFSA but it has a number of limitations, including lack of cumulative contribution room, no ability for withdrawals to convert into contribution room in the following year, complex rules on who is eligible to contribute, limits on how much you can invest based on your income, income cutoffs on whether you can even use the Roth IRA at all, age limits that govern when and to what extent you can use it, and strict restrictions on reasons to withdraw funds prior to retirement (withdrawals prior to retirement can only be used to pay for private medical insurance, unpaid medical bills, adoption/childbirth expenses, certain educational expenses). The TFSA is totally unlike the Roth IRA in that it has none of these restrictions, therefore, the Roth IRA is not in any reasonable sense a valid comparison. The TFSA was modeled after the U.K. Investment Savings Account, which is the only comparable program to the TFSA.
The UK Investment Savings Account. This is what the TFSA was based off of. Main difference is that the UK uses a 20,000 pound annual contribution allowance, use-it-or-lose-it. There are several different flavours of ISA, and some do have a limited recontribution feature but not to the extent of the TFSA.
Is it smart to overcontribute to buy a really hot stock and just pay the 1% a month overcontribution penalty? If the CRA believes you made the overcontribution deliberately the penalty is 100% of the gains on the overcontribution, meaning, you can keep the overcontribution, or the loss, but the CRA takes the profit.
Speculative stocks-- are they ok? There is no such thing as a "speculative stock." That term is not used by the CRA. Either the stock trades on an approved exchange or it doesn't. So if a really blue chip stock, the most stable company in the world, trades on an exchange that is not approved, you can't buy it in a TFSA. If a really speculative gold mining stock in Busang, Indonesia that has gone through the roof due to reports of enormous amounts of gold, but their geologist somehow just mysteriously fell out of a helicopter into the jungle and maybe there's no gold there at all, but it trades on an approved exchange, it is fine to buy it in a TFSA. Of course the risk of whether it turns out to be a good investment or not, is on you.
Remember, you're working for your money anyway, so if you can get free money from the government -- you should take it! Follow the rules because Canadians have ended up with a tax bill for not understanding the TFSA rules. Appreciate the feedback everyone. Glad this basic post has been useful for many. The CRA does a good job of explaining TFSAs in detail at https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf
Unrelated but of Interest: The Margin Account
Note: if you are interested in how margin accounts work, I refer you to my post on margin accounts, where I use a straightforward explanation of the math behind margin accounts to try and give readers the confidence that they understand this powerful leveraging tool.
$28k this week from CSP, strangle, and straddle on DKNG
A little bit of fist pumping for myself, a little bit of bragging, and a lot of “you could do this too” motivating my post. I haven’t closed the 35c (no way it will hit over the weekend and I’m greedy and don’t want to pay the $80 commission +$0.05/contract to close it) and the 29p I tried to close for $0.05 but there were no sellers when my order reached the top of the book. I was fully leveraged this week, which can be bad news if it goes wrong, I know, and I’ve had some really close margin calls back in feb and March, but I’ve got cash accounts ready to cover if needed. These trades are a ~17% gain in account value for the week. https://i.imgur.com/OfHNgJv.jpg And all of this cost about $600 in fees with Questrade. Using IBKR would have saved me about $60 this week, which would definitely add up, but I’ve got some other positions to unwind before moving my whole account over.
Feeling really dumb and depressed this morning as I was margin called for 380k. Hoping for some advice. Here’s the story: 1) Sold 10x AAPL 375c 21Aug20 2) Bought 10x AAPL 380c 21Aug20 The credit spread was about $3,000 at the time (mid-July), and max loss therefore should have been $2,000. I believe the short position was ITM, and long was ATM at the time, although this is irrelevant. This morning I received an email saying my short position was exercised (fuck me, I didn’t realize ex-div for AAPL was today). I’m assuming they exercised it yesterday to qualify for the upcoming dividend. My broker (Questrade in Canada) did nothing with my long position, so I’ve gone from a max loss of $2,000 to a much steeper one. I don’t know what to do.. Questrade rep convinced me to exercise my long position and sell the shares upon receipt. However, the share price has dropped $10 already today, so my loss has likely gone from $2,000 to $12,000 and could get worse if this drop continues. I submitted the request to exercise the calls and I’m waiting for the shares. I entered this trade assuming my max loss would be $2,000. I thought questrade would require direction for the long position, cause I don’t have 380k to cover in my account. TLDR; entered what I thought was a covered credit position, to later be naked and forced into to a $380,000 long position.
I’m looking to set up an options trading account with Robinhood, however I’m in Canada and Robinhood currently won’t allow new accounts to be setup from Canada. Any real reason for this or any idea how long this will last? There’s no way to have this waived off to get an account started up? Perhaps there’s a better alternative options-trading platform to go with at this time? Any input/advice is much appreciated, thank you.
Hi, I've been using Questrade to trade options but the combined $22 to buy and sell options orders are pretty darn ridiculous. I've heard IB is a solid alternative and have sifted through some posts to highlight positives and negatives of their platform. Just wondering whether any current users of IB or people who have used both can attest to either or? Thank you
Best online platform for American and Canadian stocks
I’ve trying to figure out which online platform would be the best to purchase both Canadian and American stocks. I currently have a Wealthsimple Growth account. I want to try investing on my own for the long term and I’m not a day trader. I’ve done a fair bit research but I’d like to hear other people’s opinions and what they use. My potential picks so far
I saw qtrade has a “young investor pricing” offer on which I would qualify for. Any feed back is great, thanks!
April 15 - Received an unexpected email WealthSimple Trade asking me to confirm if I had sent a $25,000 transfer from Questrade. (They didn't say exactly why, but clearly it correctly triggered a fraud/error alert.) I immediately replied back with a no to WST, contact Questrade support, waited a couple hours on hold, and was told they'd investigate.
April 16 - Received a call from Questrade apologizing for the issue. It was explained that after reactivating my account earlier in the year, they had ran into a logic bug in their automated transfer system, which was causing any remaining balance to be drained at random times (yes, random, their words, not mine). During this call I repeatedly ask leading questions about the bug itself, as the conclusion seemed wrong to me, I had already withdrawn my balance a few days prior (i.e. $25,000 would have put my account balance to roughly -$25,000USD, not $0). Was assured it was already solved and taken care of.
April 24 - Questrade sends an email notice that I exceed my margin risk with a large negative cash balance, and had converted my remaining currency to mitigate risk. I discovered that a second unauthorized transfer (though much smaller) had been created the previous week. I asked WST if they can block Questrade.
April 29 - I contacted Questrade via chat after waiting on hold for a few hours. Was told they'd have to investigate again.
April 30 - WealthSimple Trade confirms they're now blocking Questrade. Kudos to WST's support team, they've been awesome
May 5 - Questrade automatically closed my support ticket as it's taken too long to resolve. I reopened the ticket.
May 17 - Questrade sends an email saying there's no record of any transfers on my account, and that I should contact WealthSimple Trade support.
May 18 - I reply back clarifying that there's likely no record of transfers because they were unauthorized. Also gave a reminder that Questrade had already apologized for the technical glitch on their end.
And finally, while making this post, I discovered that Questrade's chat system has a glitch where the downloaded transcript stops after the first "#" symbol in a message. So as soon as I mentioned my previous case #, my chat transcript log ends. Conclusion: Let's see if a Reddit post gains their attention. Stay tuned for part 3 of the story!
Hey guys, I just set up my account with IB and am contemplating what the most effecient and cost effective way to close down my old accounts at Questrade. I have both a TFSA and a Margin account with them and have heard horror stories about them dragging their feet with withdrawals and transfers. I also heard somewhere that IB doesnt transfer registered accounts. Assuming all of this is true Im thinking I should just move all of my positions over to the Margin account in Questrade in December and then shoot the whole thing over to IB. Once January hits and I get my contribution room back Ill redestribute my positions where I want them between the regular Margin accounts and the TFSA. In between now and then Ill just stop funding my QT accounts and start funding and learning the IB one Does this seem sensible?
Does the capital gains tax apply if gains are realized in a TFSA?
I just realized so huge gains (150%) in my TFSA and I'm wondering if I'll get hit with the capital gains tax since I'm using my TFSA. Furthermore, will the CRA care that I'm making huge gains in my TFSA? I'm making these gains from buying and selling penny stocks (3-4 trades per day) and I don't know i the CRA will care, or if I'll get the capital gain tax.
Taking advantage of TFSA margin power to sell option spreads in margin account
Lately I've been thinking a bit about ways I could take advantage of Questrade's Margin Power feature (QT is the only broker I'm aware of that does this). For those not familiar, it allows you to use assets in your TFSA as collateral for a margin account. Simply buying equity on margin isn't a great option, because of QT's terrible margin interest rates. But I figured that selling option (spreads) would allow you to leverage your assets, while avoiding paying any interest. Some assumptions I've made: 1. Most of your assets are in registered accounts, and you'd prefer to keep it that way. Normally Interactive Brokers would seem like a much better option for margin and/or option trading, but you can't leverage your TFSA investments with them (that I'm aware of anyway). 2. You're selling put options/spreads on broad indexes/ETFs (e.g. SPX), such that the chance of them going to zero/losing significant value forever are very low. This way, any time your options would end up ITM you could just roll it out and it will eventually end up OTM. 3. You're only using a fraction of your total available margin, such that even if the market goes down and both your TFSA investments and your options lose money, you aren't at risk of margin call. The risks I've identified are: 1. You could potentially have to roll out your options for months or years if you want to avoid taking a loss. Continuously rolling out would start racking up commissions, and you may end up taking a small loss every time depending on liquidity and what the bid/ask spread is looking like. Not ideal, but no risk of catastrophe. During this time you may also have to have a bunch of money essentially 'locked up', for margin maintenance (unless you're willing to close your options for a loss). 2. Black swan event, such that even though you had a had reasonable maintenance excess your whole portfolio tanks to the point you get margin called. With a diversified TFSA and a cautious use of your margin, it seems like you could make this possibility very unlikely. 3. Not a risk, but you'd be paying some capital gains tax (and adding a bit of complexity to your tax return), compared to purely investing in your TFSA. What are people's thoughts on this? Are their risks that I've missed? Additional optimizations that could be made? I'm not trying to act like this as a 'free money' approach, but it does seem like a reasonable way to leverage your TFSA a bit while avoiding paying interest, and avoiding buying leveraged ETFs with their associated downsides.
Before trading on margin please review the obligation to maintain margin under section 1.14 and margin risk disclosure under section 1.15 of Questrade's account agreements and disclosure document. For more information on Canadian regulatory margin requirements, visit the Investment Industry Regulatory Organization of Canada (IIROC) website. Here are some important things to know about margin accounts: Interest charges are applied to your account automatically. To view interest charges, log in to Questrade, click Reports, and tap Account activity.To view rates, visit our website; If your investments go down in value, your losses are magnified and you still have to pay back your loan, plus the interest Questrade is best known for offering rock-bottom commissions for trading stocks. You can buy and sell individual stocks for as low as $4.95 per trade. Questrade even introduced commission-free purchases for any ETF in North America. You can open your own self-directed investing account with Questrade with as little as $1,000. Unlike the big discount brokerages there’s no annual See Questrade’s low fees for trading, market data and margin trading. Active Trader Pricing. Active traders enjoy special pricing plans and fee rebates with Questrade. Questwealth Portfolios Pricing. Low-fees and no unnecessary fees on diversified ETF portfolios. Questrade is not responsible for how you use this information to make investment decisions. Margin requirements for securities vary due to market fluctuations. When making a deposit to a Questrade trading account, your bank account (where the money is coming from) and the Questrade account (where the money is going to) must have identical names.
How To Open A Questrade Account 2020 Stock Market ...
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