MW 'This is unbelievable': My adviser made $300,000 trading options. Now I'm being killed by taxes. Do I fire him?
By Quentin Fottrell
'I am getting hit with IRMAA in two years'
"The windfall came from investing in the AI/tech sector during March's downturn and capturing the April turnaround." (Photo subject is a model.)
Dear Quentin,
My registered investment adviser (RIA) made a profit of $300,000 in a few weeks trading options during the recent market turmoil.
I am getting hit with IRMAA in two years. I use three different RIAs at three firms, employing various strategies. I have about 20 accounts, using both platform managers, asset-allocation models that each firm provides (which managers can adjust), diversified strategies, and IPO access that I self-manage. Overall, my allocation is about 65/35. The windfall came from investing in the AI/tech sector during March's downturn and capturing the April turnaround. Also, remember that returns are relative to the amount invested.
My actual gain in April is significantly higher, but much of it is unrealized or tax-deferred in qualified accounts. The gain I'm referring to here is the realized portion in one taxable account that took advantage of market conditions. Just look at Facebook (META). It had about a $150 increase from March to April. At 2,000 shares, that's a $300,000 gain. I rarely use margin, but I did in this case. Nvidia (NVDA) had a similar percentage increase.
Sharp market pullbacks offer incredible upside (as well as risk). I'm generally a conservative investor, but my RIA provides extraordinary advice when these opportunities arise. Over 20 years, I've more than offset advisory management fees through access to IPOs. My overall allocation captures or exceeds the indices while reducing downside risk. I don't even include IPO allocations since they're not under management (and incur no fees). I first learned about using RIAs 30 years ago from many of my wealthy clients.
Even within the same firm, each RIA group offers both overlapping and distinct strategies, tailoring them to each client based on their risk profile. Everyone loves to say, "Don't pay an adviser fee," but almost nobody understands what they're actually comparing. One major factor that gets overlooked is access to institutional share classes. Retail investors often end up in higher-cost mutual funds, whereas RIAs can access institutional versions of the same funds - same managers, same strategy - with lower expense ratios.
Still, what am I going to do about IRMAA? This is unbelievable! I'm debating whether to fire this adviser.
The Client
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You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.
Your adviser made you a lot of money. That's not a reason to fire him.
Dear Client,
Oof!
Options trading, for those who are unaware, is based on contracts that give you the right, but not the obligation, to buy or sell a particular asset like stocks or ETFs at an agreed "strike" price before a predetermined expiration date. They are highly speculative, highly volatile and highly leveraged. They come with significant risk; you can lose big or you can win big. Traders use "call" options when they expect prices to rise and "put" options when they expect prices to fall.
Your adviser made you a lot of money. That's not necessarily a reason to fire him. If so, he's in a lose-lose situation between a rock (enviable investment returns) and a hard place (taxes and, yes, the implications of those taxes). Did you discuss the strategy and tax impact with him ahead of time and/or did you give him carte blanche to make these kinds of decisions on your behalf? If the answer is yes, he is doing his job.
Your issue is mainly how the trade was managed.
An RIA may make options trades, but they typically do so in a measured and strategic way, rather than aggressive - or even reckless - speculation. After all, it's easier to take risks with other people's money than it is with your own. They might trade options to manage your risk, to limit downside, and/or to generate income with covered calls on your existing holdings. For high-net-worth clients, an adviser might use options strategically as part of an agreed-upon plan.
However, if your adviser is engaging in frequent and/or complex options trading without your knowledge and without coordinating this activity across different accounts - taking on extremely speculative positions or short-term leveraged bets - that's a red flag, particularly for long-term goals like retirement investing. While options can enhance returns, they can just as easily amplify losses - and for many long-term investors, a well-diversified portfolio with minimal reliance on options is often the more suitable path.
Some readers may have a kneejerk response to your story and express little sympathy given the size of your return. However, the issue for you is not the gain, but how the trade was managed. Spreading returns across multiple years, offsetting them through tax-loss harvesting, or executing those trades inside tax-advantaged accounts may have been a more tax-efficient approach. But sometimes, with large gains, it may be unavoidable. You have yielded high returns, but you clearly also have high expectations, and there's nothing wrong with that.
Related: 'I hope to retire at 59': I have $950,000 in my 401(k)s. When do I do a Roth conversion?
A network of tax-efficient portfolios
This investment gain has opened you up to potential Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharges. IRMAA surcharges are based on your modified adjusted gross income (MAGI) from two years prior, so the gain will matter in two years because it will be included in the income data used to calculate your Medicare premiums at that time. You can only avoid or reduce surcharges if the gain resulted from a "life-changing event," such as retirement or death of a spouse.
The IRMAA surcharge is not a penalty. Exceeding Medicare's IRMAA thresholds, which are tiered, can result in higher Part B and Part D premiums. You may also be subject to the 3.8% net investment income tax on investment earnings. For 2026, the maximum IRMAA surcharge for a married couple in the highest bracket is roughly $6,936 per person per year or $13,872 for a couple. Even after you pay capital-gains tax, the net gain will still likely be substantial relative to the tax drag.
It is possible to trade options without incurring taxes this or next year if the trades are executed in a tax-advantaged account. In a traditional or rollover IRA, gains from options trading aren't taxed when they occur. Rather, the tax is deferred until those funds are withdrawn, which allows more staggered drawdowns to help minimize taxes. You can't always avoid taxes, but you can reduce them depending on what dollars you use. Short-term gains are taxed at ordinary income rates and impact your MAGI.
You have a lot of cooks and a lot of pots.
One member of The Moneyist's Facebook group recalled a conversation he had with his longtime accountant: "I remember whining about how much of my income was going to taxes, and he stopped me with a stern look and said, 'Let's keep it simple. If you make $1,000 and pay $350 in taxes, you still have $650. You invest that $650, let it compound over time, and before you know it, you're a multimillionaire retiring by 60. Do you get it?' I just sat there, stunned, nodded, and never complained again."
Given your sheer number of accounts and advisers, having one RIA in charge could help coordinate decisions and avoid any similar tax shock. The usual strategies to achieve this include timing Roth conversions before IRMAA kicks in, planning for qualified charitable distributions, or managing future income to stay below surcharge thresholds. You have a lot of cooks and a lot of pots, and you don't want to get burned in this way again, even if the $300,000 is the perfect tonic.
IRA accounts have a limit on contributions, so it may be that your RIA had more flexibility using taxable accounts for options trading. Given the myriad investments that you have created with multiple advisers and numerous accounts, it seems likely that some of those gains will inevitably occur in taxable accounts. As you have 20 accounts across different managers, it also raises the question of whether you have set up your own finances in a way to prevent avoidable (for now, at least) taxable events.
This adviser, all things being equal, did what you hired him to do.
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-Quentin Fottrell
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April 23, 2026 18:30 ET (22:30 GMT)
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