Please review the following risk disclosures relating to your Seven Points Capital account.
Day Trading Risk Disclosure:
Day trading is extremely risky
Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success.
Be cautious of claims of large profits from day trading
You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.
Day trading requires knowledge of securities markets
Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading.
Day trading requires knowledge of a firm's operations
You should be familiar with a securities firm's business practices, including the operation of the firm's order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures.
Day trading will generate substantial commissions, even if the per trade cost is low
Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 transactions are conducted per day, an investor would need to generate an annual profit of $111,360 just to cover commission expenses.
Day trading on margin or short selling may result in losses beyond your initial investment
When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day-trading strategy also may lead to extraordinary losses, because you may have to purchase a stock at a very high price in order to cover a short position.
Extended Hours Trading Risk Disclosure:
Risk of Lower Liquidity
Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy or sell securities, and as a result, investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in extended hours trading as compared to regular market hours. As a result, your order may only be partially executed, or not at all.
Risk of Higher Volatility
Volatility refers to the changes in price that securities undergo when trading. Generally, the higher the volatility of a security, the greater its price swings. There may be greater volatility in extended hours trading than in regular market hours. As a result, your order may only be partially executed, or not at all, or you may receive an inferior price in extended hours trading than you would during regular market hours.
Risk of Changing Prices
The prices of securities traded in extended hours trading may not reflect the prices either at the end of regular market hours, or upon the opening the next morning. As a result, you may receive an inferior price in extended hours trading than you would during regular market hours.
Risk of Unlinked Markets
Depending on the extended hours trading system or the time of day, the prices displayed on a particular extended hours trading system may not reflect the prices in other concurrently operating extended hours trading systems dealing in the same securities. Accordingly, you may receive an inferior price in one extended hours trading system than you would in another extended hours trading system.
Risk of News Announcements
Normally, issuers make news announcements that may affect the price of their securities after regular market hours. Similarly, important financial information is frequently announced outside of regular market hours. In extended hours trading, these announcements may occur during trading, and if combined with lower liquidity and higher volatility, may cause an exaggerated and unsustainable effect on the price of a security.
Risk of Wider Spreads
The spread refers to the difference in price between what you can buy a security for and what you can sell it for. Lower liquidity and higher volatility in extended hours trading may result in wider than normal spreads for a particular security.
Options Trading Risk Disclosure:
Options involve risks and are not suitable for all investors. It is very important that option investors read the Characteristics and Risks of Standardized Options before engaging in options trading. The risk disclosure document explains the characteristics and risks of exchange-traded options. You may also request a copy of the Option Disclosure Document by writing to the Options Supervisor at Seven Points Capital, 825 Third Avenue, 2nd Floor, New York, NY 10022.
Seven Points Capital also would like to inform investors of the inherent risks of trading the following strategies.
1. Bullish strategies have greater risk of loss in falling markets.
2. Neutral strategies have greater risk of loss in volatile markets.
3. Bearish strategies have greater risk of loss in rising markets.
There are many factors that an investor should be aware of when trading options including interest rates, volatility, stock splits, stock dividends, stock distributions, currency exchange rates, etc.
Seven Points Capital or its clearing firm shall reduce any accounts that exceed applicable position limits to a level that is in compliance with such limits. Any losses as a result of these actions will be the sole responsibility of the investor.
Typically, the exercise of in-the-money equity options is automatic at expiration, if the equity options is $0.25 or more in the money. Index options will be exercised automatically, if in-the-money by $0.01. For equity options in the money less than $0.25 or out of the money, it will be your responsibility to request exercise by 4.00 pm EST before expiration on the last day of trading. We may exercise any open equity option that is $0.25 or more in the money on the date of expiration. You are obligated to monitor your options position(s) especially as the expiration date approaches. If you exercise an in-the-money equity option, you must have sufficient equity in your account to meet margin requirements. Seven Points Capital or its clearing firm may, at its own discretion, reduce or close-out your options positions priors positions prior to the close of business on the last day before exercise, if the account has insufficient equity to meet margin requirements.
Investors should only engage in options trading that is best suited to their financial condition and option experience and which considers current market conditions. Orders are accepted only on an unsolicited basis. Investors are solely responsible for any and all orders placed in their account(s) and at their own risk. Seven Points Capital does not make any recommendations whatsoever regarding any options or options strategies. Additionally, your account(s) are accepted on a fully disclosed basis and solely at the discretion of Seven Points Capital and Penson Financial Services, Inc., the company's clearing firm.
There are special risks associated with uncovered option writing, which exposes the investor to potentially significant loss. Therefore, this type of strategy may not be suitable for all customers approved for options transactions. The potential loss of uncovered call writing is unlimited. The writer of an uncovered call is in an extremely risky position, and may incur large losses if the value of the underlying instrument increases above the exercise price. As with writing uncovered calls, the risk of writing uncovered put options is substantial. The writer of an uncovered put option bears a risk of loss if the value of the underlying instrument declines below the exercise price. Such loss could be substantial if there is a significant decline in the value of the underlying instrument. Uncovered option writing is thus suitable only for the knowledgeable investor who understands the risks, has the financial capacity and willingness to incur potentially substantial losses, and has sufficient liquid assets to meet applicable margin requirements. In this regard, if the value of the underlying instrument moves against an uncovered writer's options position, the investor's broker may request significant additional margin payments. If an investor does not make such margin payments, the broker my liquidate stock of options positions in the investor's account with little or no prior notice in accordance with the investor's margin agreement. For combination writing, where the investor writes both a put and a call on the same underlying instrument, the potential risk is unlimited. If a secondary market in options were to become unavailable, investors could not engage in closing transactions, and an option writer would remain obligated until expiration of assignment.
OTC Bulletin Board and Pink Sheet Risk Disclosure:
Seven Points Capital does not solicit or recommend transactions, or provide investment advice, to investors in OTC/Bulletin Board and Pink Sheet securities. All transactions in OTC Bulletin Board and Pink Sheet securities are accepted on an unsolicited basis only.
OTC Bulletin Board and Pink Sheet securities represent low priced shares of new or small companies that do not qualify for trading on NASDAQ or on a national stock exchange. OTC Bulletin Board and Pink Sheet securities include national, regional, and foreign equity issues, warrants, units, American Depositary Receipts (ADRs), Direct Participation Programs (DPPs), and penny stocks.
The inherent risks in trading these securities include, but are not limited to, the following:
- Trading in these securities can be very risky, and may not be appropriate or suitable for you.
- When trading in these securities, you may lose all or part of your invested capital. Any adverse report of a company's deteriorating financial condition, or news which would affect the company's financial condition, may lead to a dramatic decline in the price of a security.
- Frequent name or symbol changes, stock splits, and delistings occur in these securities.
- Typically, all stocks falling into these categories are non-marginable. They cannot be purchased on margin or be used as collateral against margin loans.
- Accurate quotation information, immediate executions, execution reporting, and the delivery of legal trade confirmations might not be readily available.
- Heavy market volatility may prevent or delay order processing.
- These types of securities are frequent targets of fraud or market manipulation, not only because of their generally low price, but also because the reporting requirements for these securities are less stringent than for listed or NASDAQ traded securities, and no exchange requirements are imposed.
- Due to lower trading volumes in many of these securities, there may be a lower likelihood of orders receiving executions, and current prices may differ significantly from the price quoted at the time of placing your order.
Prior to trading in these types of securities, you should consider your investment objectives, financial resources, risk tolerance and experience. As described above, trading in OTC Bulletin Board and Pink Sheet securities differs significantly from trading in NASDAQ and listed securities, and you may experience greater market risk. You should be familiar with these risks before trading in them. You should also take the time to read available prospectuses and any other filings, including quarterly and annual financial reports, for a company carefully before trading.
Disclaimer: There is a substantial risk involved in trading Futures, Options and Forex markets. Therefore, you should carefully consider whether trading is suitable for you in light of your circumstances and financial resources.
Please Note: "The risk of loss in electronic active investing can be substantial. You should, therefore, carefully consider whether such trading is suitable for you in light of your circumstances and financial resources."