Additional Risks Common to Options. Terms and conditions of contracts: The Client should ask the firm with which the Client deals about the terms and conditions of the specific Options which the Client is trading and associated obligations (e.g. the circumstances under which the Client may become obliged to make or take delivery of the underlying interest of an Option and, in respect of Options, expiration dates and restrictions on the time for exercise). Under certain circumstances the specifications of outstanding contracts (including the exercise price of an Options) may be modified by the exchange or clearing house to reflect changes in the underlying interest. Suspension or restriction of trading and pricing relationships: Market conditions (e.g. illiquidity) and/or the operation of the rules of certain markets (e.g. the suspension of trading in any contract or contract month because of price limits or “circuit breakers”) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/offset positions. If the Client has sold Options, this may increase the risk of loss. Further, normal pricing relationships between the underlying interest and the Options may not exist. This can occur when, for example, the futures contract underlying the Options is subject to price limits while the Options is not. The absence of an underlying reference price may make it difficult to judge “fair” value. Deposited cash and property: The Client should familiarise himself/herself with the protections accorded money or other property the Client deposits for domestic and foreign transactions, particularly in the event of occurrence of an Insolvency Event. The extent to which the Client may recover the Client’s money or property may be governed by specific legislation or local rules. In some jurisdictions, property, which had been specifically identifiable as the Client’s own, will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall. Commission and other charges: Before the Client begins to trade, the Client should obtain a clear explanation of all commission, fees and other charges for which the Client will be liable. These charges will affect the Client’s net profit (if any) or increase the Client’s loss. Transactions in other jurisdictions: Transactions on markets in other jurisdictions, including markets formally linked to a domestic market, may expose the Client to additional risk. Such markets may be subject to regulation,...
