Series 3: 7.2.2.2. Domestic Commodity Options Risk Disclosure

Taken from our Series 3 Online Guide

7.2.2.2. Domestic Commodity Options Risk Disclosure

Other risk disclosure statements are also required for customers that intend to engage in certain transactions other than futures contracts. For example, no FCM or IB may open a commodity options account for a customer (other than an institutional customer), unless it furnishes the customer with an options risk disclosure statement. The statement must be a separate document or included in a booklet containing the customer account agreement and other required disclosure statements. It must also receive from the options customer an acknowledgment signed and dated that he received and understood the disclosure statement. The disclosure statement must be typed or printed in font of not less than 10-point size and in all capital letters.

Options Disclosure Statement

Because of the volatile nature of the commodities markets, the purchase and granting of commodity options involve a high degree of risk. Commodity option transactions are not suitable for many members of the public. Such transactions should be entered into only by persons who have read and understood this disclosure statement and who understand the nature and extent of their rights and obligations and of the risks involved in the option transactions covered by this disclosure statement.

Both the purchaser and the grantor should know that the option if exercised, results in the establishment of a futures contract. Both the purchaser and the grantor should know whether the particular option in which they contemplate trading is subject

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