US citizen investing abroad

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dionisis
Posts: 4
Joined: Mon Aug 08, 2022 3:57 am

US citizen investing abroad

Post by dionisis »

Hello Everyone,

I am a US citizen living in Greece and I am looking to invest some money into ETF and stocks, for the long term so I can have an early retirement.

Based on my previous post, I find it difficult to cope with all the tax procedures in the US and Greece.

I am looking for advice from any fellow countrymen in the same situation as me.

I have family members in the US and could potentially use their home address, would that help, and how?

The advice doesn't have to do necessarily with investing, any ideas are greatly welcomed.

Thank you for your time!
homebuyer6426
Posts: 1830
Joined: Tue Feb 07, 2017 8:08 am

Re: US citizen investing abroad

Post by homebuyer6426 »

Do you have a US bank account with a US address on file with them? This is what I have seen recommended by people on this forum for US citizens living abroad.
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Valuethinker
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Joined: Fri May 11, 2007 11:07 am

Re: US citizen investing abroad

Post by Valuethinker »

dionisis wrote: Fri Aug 12, 2022 7:20 am Hello Everyone,

I am a US citizen living in Greece and I am looking to invest some money into ETF and stocks, for the long term so I can have an early retirement.

Based on my previous post, I find it difficult to cope with all the tax procedures in the US and Greece.

I am looking for advice from any fellow countrymen in the same situation as me.

I have family members in the US and could potentially use their home address, would that help, and how?

The advice doesn't have to do necessarily with investing, any ideas are greatly welcomed.

Thank you for your time!
Because of PFIC rules you basically have to use US funds & ETFs. Because of PRIIP rules, no European broker (in EU) will sell you US funds - they lack the required customer disclosures that European listed funds will have (UCITS VI etc).

You need a US broker. We are not allowed to discuss illegal activities here (such as giving a false address).

You also need to know how Greek taxes would treat US funds.

Pensions are one area often covered by Treaty (not EU Treaty, but a Greek-American Treaty). In those scenarios you can often save money in a pension without triggering the onerous IRS PFIC rules.

If you cannot find a US broker that would take you as a customer, then all you can do is:

- buy individual stocks - there are wikis here about doing that. To try to synthesise index performance

- there was a post here about using derivatives (options or futures) listed in Europe to buy the S&P 500 index. Quite clever and gets you aruond PRIIP. You'd have to search for it
Lazerr
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Joined: Fri Aug 12, 2022 2:41 pm

Re: US citizen investing abroad

Post by Lazerr »

For specific ETFs, a very deep in-the-money call option is something to look at. The underlying ETF would be a US ETF, e.g. SPY, QQQ. You would be paying a little time value on this, so going with the most distant expiration date would be advisable.

Technically this could also be done with Euro ETFs, but you would have to pay attention that the option is not auto exercises on its expiration date, so you need to sell it before then, as you really don't want to hold a non-US ETF. Also, options on US ETFs are much more liquid.

I have heard that options can be used by EU residents to purchase non-PRIIP ETFs, but that might be broker-dependent. There might also be weird local tax issues from holding the ETFs or getting paid dividends. The best way to purchase US ETFs through options should be through writing put options at-the-money, where you would would collect premium or effectively buy the ETF at a small discount to its current market price. Again, this might not work depending on your broker and taxes in your country of residence might get weird. Additionally, every single put option you write sets you up to purchase about $43000 worth of SPY, which is not particularly handy.

A bit more complex would be a synthetic long position, where you buy a call option and sell a put option at the same strike. It is a bit cheaper than the plain call option, at the risk that you might have to buy the ETF at the strike price. I would also go deep in-the-money here to make this very unlikely. Due to the assignment risk from the short put option, I would only do this with a US ETF. You do not want non-US ETFs.

Note that this is not investment advice, I am just trying to give some pointers where to start research. Investing in options can be very risky and even with heavily diversified ETFs, there is a significant chance of a total loss due the leverage that can be involved.

This can be avoided by understanding the leverage of options: If you put all your money into SPY ETFs and SPY drops to $200, you would have roughly a 53% loss. If you put all your money into SPY $200 calls and SPY drops to $200 by the expiration date, you would have a 100% loss. Contrarily, if SPY went to $600, the ETF directly would be at a 40% gain, while the options would be at 72% gain.

This leverage can be avoided by only putting about half of your money into the options and keeping the rest uninvested. If SPY drops below $200, the options are just as worthless, but you still have your 50% uninvested money left, so like with holding the ETF, only about a 50% loss. If SPY goes to 600, your cash is unchanged, save for maybe a little interest, but your options would be up about 72% and your total cash plus investments up about 36% in the end. Leverage gone, risk and benefit is now essentially like owning the ETF.
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typical.investor
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Re: US citizen investing abroad

Post by typical.investor »

dionisis wrote: Fri Aug 12, 2022 7:20 am
I have family members in the US and could potentially use their home address, would that help, and how?
You open a US brokerage account using their address. Otherwise, if you use your address in Greece, EU regulation will stop brokers from selling you US ETFs. The only issue then is reporting earnings on your Greek taxes.

Note: to be on the safest side, I would only use ETFs. US Mutual funds are only supposed to be distributed to residents of the US. ETFs have no such criteria and expats use them all the time.

I'd recommend Schwab or Interactive Brokers.
Last edited by typical.investor on Sat Aug 13, 2022 1:44 am, edited 2 times in total.
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typical.investor
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Re: US citizen investing abroad

Post by typical.investor »

Valuethinker wrote: Fri Aug 12, 2022 9:32 am
- there was a post here about using derivatives (options or futures) listed in Europe to buy the S&P 500 index. Quite clever and gets you aruond PRIIP. You'd have to search for it
Lazerr wrote: Sat Aug 13, 2022 12:53 am For specific ETFs, a very deep in-the-money call option is something to look at.

I have heard that options can be used by EU residents to purchase non-PRIIP ETFs, but that might be broker-dependent.
Options are complicated. Why not just use straight futures? I find futures almost as easy as ETFs. *** note: this discussion is if using the address in Greece at a broker like Interactive Brokers or perhaps a foreign broker.

PRIIPs regulations in the EU requires a KID in order to be sold to retail investors. Well, KIDs are available for futures so I don't see why these would be unavailable.
https://www.cmegroup.com/market-regulat ... ducts.html
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typical.investor
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Re: US citizen investing abroad

Post by typical.investor »

dionisis wrote: Fri Aug 12, 2022 7:20 am
Based on my previous post, I find it difficult to cope with all the tax procedures in the US and Greece.
I know, right!

Please do not give up.
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typical.investor
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Re: US citizen investing abroad

Post by typical.investor »

FYI, here is how to use options to get ETF shares (if buying in Europe).

viewtopic.php?p=4386305#p4386305

I thinks it’s easier to use a relatives address in the US, but then there is the issue and cost of transferring money.
Lazerr
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Re: US citizen investing abroad

Post by Lazerr »

typical.investor wrote: Sat Aug 13, 2022 1:41 am Options are complicated. Why not just use straight futures? I find futures almost as easy as ETFs. *** note: this discussion is if using the address in Greece at a broker like Interactive Brokers or perhaps a foreign broker.
I'm pretty sure deep in-the-money calls are more cost effective. The December 2022 ES contract is at 4300 vs 4280 SPX spot, the December $200 SPY call is at 227.50 (427.50 effectively) vs $427 spot. Besides, you'd have to roll much more often. Options you can do 2+ years out, futures get illiquid at 6 months.

That is assuming that options on ETFs are still good. They were in 2020, but the current state I don't know.
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typical.investor
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Re: US citizen investing abroad

Post by typical.investor »

typical.investor wrote: Sat Aug 13, 2022 1:41 am
Valuethinker wrote: Fri Aug 12, 2022 9:32 am
- there was a post here about using derivatives (options or futures) listed in Europe to buy the S&P 500 index. Quite clever and gets you aruond PRIIP. You'd have to search for it
Lazerr wrote: Sat Aug 13, 2022 12:53 am For specific ETFs, a very deep in-the-money call option is something to look at.

I have heard that options can be used by EU residents to purchase non-PRIIP ETFs, but that might be broker-dependent.
Options are complicated. Why not just use straight futures? I find futures almost as easy as ETFs. *** note: this discussion is if using the address in Greece at a broker like Interactive Brokers or perhaps a foreign broker.

PRIIPs regulations in the EU requires a KID in order to be sold to retail investors. Well, KIDs are available for futures so I don't see why these would be unavailable.
https://www.cmegroup.com/market-regulat ... ducts.html
Ok, but it’s absurd for someone new to investing to jump right into deep-in-the-money call options. It’s not so easy getting an account with options.

With futures it’s just buy the contract and roll it over (sell and buy a new one) every quarter. Not simple but to me easier.
Lazerr
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Joined: Fri Aug 12, 2022 2:41 pm

Re: US citizen investing abroad

Post by Lazerr »

I think a cash account to trade long options is much easier to get than a margin account to trade futures. Overall, it just seems much lower maintenance to me. Both futures and options will require some research to understand first.
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