Option Contracts. Buying options carries less risk than selling them because if the price moves against the Client’s position, the Client could simply let the contract expire. Total loss would thus be limited to the premium cost, in addition to commission or any other additional costs and fees associated with the Transaction. Buyers may thus choose to settle the options contracts or allow them to expire. Selling an option generally entails considerably greater risk than purchasing options. Although the premium received by the seller is fixed, the seller may sustain a loss well in excess of that amount. The seller shall be liable for additional margin to maintain the position, if the market moves against its position. The seller shall also be exposed to the risk of the purchaser exercising the option and the seller shall be obligated to either settle the option in cash or to acquire or deliver the underlying instrument. If the option is on a future, the seller shall acquire a position in a future with associated liabilities for margin )see the section on Futures Contracts above(. If the position is covered by the seller holding a corresponding position in the underlying instrument or a future or another option, the risk may be reduced. If the option is not covered, the risk of loss can be unlimited. 22.4
