FUTURES
AND OPTIONS
RISK DISCLOSURE
STATEMENT
This
brief statement
does not disclose
all the risks
and other significant
aspects of
trading in
futures and
options. In
light of the
risks, you
should undertake
such transactions
only if you
understand
the nature
of the contracts
(and contractual
relationships)
into which
you are entering
and the extent
of your exposure
to risk. Trading
in futures
and options
is not suitable
for many members
of the public.
You should
carefully consider
whether trading
is appropriate
for you in
light of your
experience,
objectives,
financial resources
and other relevant
circumstances.
Futures:
Effect
of "Leverage" or "Gearing"
Transactions
in futures
carry a high
degree of risk.
The amount
of initial
margin is small
relative to
the value of
the futures
contract so
that transactions
are "leveraged" or "geared".
A relatively
small market
movement will
have a proportionately
larger impact
on the funds
you have deposited
or will have
to deposit:
this may work
against you
as well as
for you. You
may sustain
a total loss
of initial
margin funds
and any additional
funds deposited
with the firm
to maintain
your position.
If the market
moves against
your position
or margin levels
are increased,
you may be
called upon
to pay substantial
additional
funds on short
notice to maintain
your position.
If you fail
to comply with
a request for
additional
funds within
the time prescribed,
your position
may be liquidated
at a loss and
you will be
liable for
any resulting
deficit.
Risk-reducing
orders or strategies
The placing
of certain
orders (e.g. "stop
loss" orders,
where permitted
under local
law, or "stop–limit" orders)
which are intended
to limit losses
to certain
amounts may
not be effective
because market
conditions
may make it
impossible
to execute
such orders.
Strategies
using combinations
of positions,
such as "spread" and "straddle" positions
may be as risky
as taking simple "long" or "short" positions.
Options:
Variable
degree of risk
Transactions
in options
carry a high
degree of risk.
Purchasers
and sellers
of options
should familiarize
themselves
with the type
of option (i.e.,
put or call)
which they
contemplate
trading and
the associated
risks. You
should calculate
the extent
to which the
value of options
must increase
for your position
to become profitable,
taking into
account the
premium and
all transaction
costs.
The
purchaser of
options may
offset or exercise
the options
or allow the
options to
expire. The
exercise of
an option results
either in cash
settlement
or in the purchase
acquiring or
delivering
the underlying
interest. If
the option
is on a future,
the purchaser
will acquire
a future position
with associated
liabilities
for margin
(see the section
on Futures
above). If
the purchased
options expire
worthless,
you will suffer
a total loss
of your investment
which will
consist of
the option
premium plus
transactions
cost. If you
are contemplating
purchasing
deep-out-of-the-money
options, you
should be aware
that the chance
of options
becoming profitable
ordinarily
is remote.
Selling
("writing" or "granting")
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
will be liable
for additional
margin to
maintain
the position
if the market
moves unfavorably.
The seller
will also
be exposed
to the risk
of the purchaser
exercising
the option
and the seller
will be obligated
to either
settle the
option in
cash or to
acquire or
deliver the
underlying
interest.
If the option
is on a future,
the seller
will acquire
a position
in a future
with associated
liabilities
for margin
(see the
section on
futures above).
If the option
is "covered" by
the seller
holding a
corresponding
position
in the underlying
interest
or a future
or another
option, the
risk may
be reduced.
If the option
is not covered,
the risk
of loss can
be unlimited.
Certain
exchanges in
some jurisdictions
permit deferred
payment of
the option
premium, exposing
the purchaser
to liability
for margin
payments not
exceeding the
amount of premium.
The purchaser
is still subject
to the risk
of losing the
premium and
transaction
costs. When
the option
is exercised
or expires,
the purchaser
is responsible
for any unpaid
premium outstanding
at that time.
Additional
risks common
to futures
and options:
Term
and conditions
of contracts
You should
ask the firm
with which
you deal about
the terms and
conditions
of specific
futures or
options which
you are trading
and associated
obligations
(e.g., the
circumstances
under which
you become
obligated to
make or delivery
of underlying
interest of
a futures contract
and, in respect
of option,
expiration
dates and restrictions
on the time
for exercise).
Under certain
circumstances
the specifications
of outstanding
contracts (including
the exercise
price of an
option) 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 you have
sold options,
this may increase
the risk of
loss.
Further,
normal pricing
relationships
between the
underlying
interest and
the future,
and the underlying
interest and
the option
may not exist.
This can occur
when, for example,
the futures
contract underlying
the option
is subject
to price limits
while the option
is not. The
absence of
an underlying
reference price
may make it
difficult to
judge "fair" value.
Deposited
cash and property
You should
familiarize
yourself with
the protections
accorded money
or other property
you deposit
for domestic
and foreign
transactions,
particularly
in the event
of a firm insolvency
or bankruptcy.
The extent
to which you
may recover
your money
or property
may be governed
by specific
legislation
or local rules.
In some jurisdictions,
property which
had been specifically
identifiable
as your own
will be pro-rated
in the same
manner as cash
for the purposes
of distribution
in the event
of shortfall.
Commission
and other charges
Before you
begin to trade,
you should
obtain a clear
explanation
of all commission,
fees, and other
charges for
which you will
be liable.
These charges
will affect
your net profit
(if any) or
increase your
loss.
Transactions
in other jurisdictions
Transactions
on markets
in other jurisdictions,
including markets
formally linked
to a domestic
market, may
expose you
to additional
risk. Such
markets may
be subject
to regulation
which may offer
different or
diminished
investor protection.
Before you
trade you should
inquire about
any rules relevant
to your particular
transactions.
Your local
regulatory
authority will
be unable to
compel the
enforcement
of the rules
of regulatory
authorities
or markets
in other jurisdictions
where your
transactions
have been affected.
You Should
ask the form
with which
you deal for
details about
the types of
redress available
in both your
home jurisdiction
and other relevant
jurisdictions
before you
start to trade.
Currency
risks
The profit
or loss in
transactions
in foreign
currency-denominated
contracts (whether
they are traded
in your own
or another
jurisdiction)
will be affected
by fluctuations
in currency
rates where
there is a
need to convert
from the currency
denomination
of the contract
to another
currency.
Trading
facilities
Most open-outcry
and electronic
trading facilities
are supported
by computer-based
component systems
for the order-routing,
execution,
matching, registration,
or clearing
of trades.
As with all
facilities
and systems,
they are vulnerable
to temporary
disruption
or failure.
Your ability
to recover
certain losses
may be subject
to limits on
liability imposed
by the system
provider, the
market, the
clearing house
and/or member
firms. Such
limits may
vary: you should
ask the firm
with which
you deal for
details in
this respect.
Electronic
trading
Trading on
an electronic
trading system
may differ
not only from
trading in
an open-outcry
market but
also from trading
on other electronic
trading systems.
If you undertake
transactions
on an electronic
trading system,
you will be
exposed to
risks associated
with the system
including the
failure of
hardware and
software. The
result of any
system failure
may be that
your order
is either not
executed according
to your instructions
or is not executed
at all.
Off-exchange
transactions
In some jurisdictions,
and only then
in restricted
circumstances,
firms are permitted
to effect off-exchange
transactions.
The firm with
which you deal
may be acting
as your counterparty
to the transaction.
It may be difficult
or impossible
to liquidate
an existing
position, to
assess the
value, to determine
a fair price,
or to assess
the exposure
to risk. For
these reasons,
these transactions
may involve
increased risks.
Off-exchange
transactions
may be less
regulated or
subject to
a separate
regulatory
regime. Before
you undertake
such transactions,
you should
familiarize
yourself with
applicable
rules and attendant
risks.
ADDITIONAL
INFORMATION
The
following legal
information
has been furnished
for your convenience.
PAMCO may modify
any of the
information,
and such modifications
shall take
effect immediately
upon their
posting upon
this Web site.
|
