u/AI_FTW

Sorry in advanced, currency is a confusing topic for me & the CFA's alternative notation compared to industry makes things even more confusing. Is my understanding below correct?

For BRL = Brazilian real and USD = US dollar:

Long a currency call:

• If you are long a call option on BRL/USD with some expiration T and strike price X, this gives you the right to buy (as it's a call) the underlying (BRL/USD) if it's favorable to do so for you at time T.
• Buying the underlying (BRL/USD) would mean you paying BRL and receiving USD at the exchange rate X. You would only do this if the USD is getting more expensive, i.e., if the USD is appreciating with respect to BRL (which is equal to the BRL depreciating with respect to the USD).
• You would use this instrument to gain protection if you for instance anticipate that you will need USD in the future (at approx time T) and currently hold BRL, and are worried about the BRL depreciating from now until T.
• In the event that BRL appreciated, the option is not exercised, you still benefit from the gain (it'd be cheaper to buy the same USD); the cost you pay for this asymmetrical position is the call premium.

Long a currency put:

• The currency call described above would be exactly equivalent to being long a put option on USD/BRL (note that it's flipped wrt before) with same expiration T and strike price 1/X. This gives you the right to sell (as it's a put) the underlying (USD/BRL), which you would do only if it's favorable to you.
• Selling USD/BRL means you sell USD and buy BRL, like before. You would only do this if the USD is getting more expensive, i.e., if the USD is appreciating with respect to BRL (which is equal to the BRL depreciating with respect to the USD).
• Same as before: you protect against BRL depreciating while preserving the upside if BRL appreciated, and pay in exchange the premium of the put for this right.
• Therefore, assuming same T and X & 1/X, the premium for both options is the same.

Being short the call and the put would be the respective opposite sides to the description above. You are exposed to the risk of BRL appreciating with respect to USD, and are paid the premium in return for this risk.

Did I get any of this wrong? I keep getting confused. Much appreciated!

Hi all, looking for a sanity check on my plan & understanding. Income is over the AGI limit for direct Roth contributions.

My situation:

• Opened a Traditional IRA (non-deductible contributions since I'm over the AGI limit)
• Contributed $6,500 in 2024 for tax year 2023
• Contributed $7,000 + $7,000 in 2025 for tax years 2024 and 2025
• Total contributions (cost basis): ~$20,500
• Current approximate value: ~$39,770
• I want to make my 2026 contribution of $7,500

My plan:

Rather than deal with the pro-rata rule on an ongoing basis, I'm considering converting the entire Traditional IRA balance to a Roth IRA — the existing ~$39,770 plus a new $7,500 contribution for 2026, totaling ~$47,270. This "cleans the slate" so future backdoor Roth conversions are simple (contribute + convert immediately).

My understanding of the tax impact:

• Cost basis (non-deductible contributions): $28,000 ($6,500 + $7,000 + $7,000 + $7,500)
• Total conversion amount: ~$47,270
• Taxable portion: $47,270 − $28,000 = $19,270 (the gains)
• At the 24% marginal bracket: ~$4,625 additional tax for 2026 (due April 2027)
• All future growth in the Roth is tax-free, and I no longer need to track basis going forward

Forms involved:

• Form 8606 – Required to document that my contributions were non-deductible, so the IRS doesn't treat the full $47,270 as taxable
• 1099-R – Brokerage will issue this with Box 2a likely blank (taxable amount not determined), which is why the 8606 is critical
• Form 5498 – Brokerage sends for my records confirming the conversion

Am I getting all of this right? Anything I'm missing?

Also, according to a friend of mine, I should have been filing Form 8606 for each year I made a non-deductible Traditional IRA contribution (2023, 2024, and 2025 tax returns), which I did not. Is this a big problem? Do I need to amend my 2023, 2024 and 2025 tax returns? Will I be taxed twice?

Many thanks!