Options are touted as a great way to make money by investing limited amounts. Stockbrokers and financial advisors cite how you can take advantage of the huge swings in the markets and realize significant gains. During the pandemic, options trading increased by 35%. When the markets are doing well, you might see much larger returns than the average investor.
The flip side is that when the option underperforms, you can lose unlimited amounts of money. Many stockbrokers and financial advisors will tout options as a way to benefit from the volatility in the markets. They will talk about how you can play both sides by purchasing a pair of puts and calls. This is supposed to be a risk-free way of trading that allows you to benefit regardless of whether it goes up or down.
The reality is that not getting your timing right means the odds increase of your losing money. This is something many investors are realizing with the markets becoming increasingly volatile. Options are one of the riskiest forms of investing, and you must know the hazards involved.
Why Choose Us?
If you lost money in options, you can hold your broker or financial advisor accountable. They have to show that the use of options was appropriate for you, given your investment experience, age, income, net worth, risk tolerance, and comfort levels.
It is not enough for them to have you fill out all of the paperwork and give you the options disclosure brochure. They must let you know of the risks and how this aligns with your investment objectives. Options are for sophisticated investors and traders that have an understanding of the financial markets. They are comfortable with the risks and are willing to accept the consequences if things don’t work out.
FINRA sets standards for their firms to minimize these risks, including approving all options trades. This is to monitor the actions of the broker/financial advisor and make sure that it follows your overall investment objectives.
If you lost money in options, you want to call the Wolper Law Firm, P.A. now. Our investment lawyers know what to do to help you to recoup what you lost. Your broker, financial advisor, and their firm have a legal responsibility to let you know the risks of investing in options.
How Our Options Investment Attorney Can Help
Our founder, Matt Wolper, started the firm to give ordinary investors the tools they need to hold financial professionals accountable for their actions. He spent 14 years working with some of the biggest Wall Street firms and saw the unfair advantages they have over investors. These firms have deep pockets and use their money to make everything seem like it is your fault.
Matt has successfully litigated cases affecting investors who lost their money because of unscrupulous brokers, financial advisors, and their firms. We can do the same for you. We have five-star reviews from our clients for the results we provide.
Reach out to an investment attorney at Wolper Law Firm, P.A. to explore your options. Call Wolper Law Firm, P.A. today at 954.406.1231 / 800.931.8452 and get your free consultation.
The Dangers of Buying and Selling Options
Your stockbroker or financial advisor will make options seem like an easy way to make money. They will point out how you can invest limited amounts of capital and don’t have to worry about your losses’ multiplying. They may not be giving you all the information you need to make informed decisions about options.
Sometimes, your broker or financial professional will let you know that options limit your risks. This involves what is known as a put option where you are playing the downside of the markets. The idea is that, as the market declines, the value of the put option will increase and offset any losses in your portfolio. The problem is that this sounds good, but the strategy is filled with risks and might not do what was promised. Your broker or financial advisor is not telling you everything.
This is why the Financial Industry Regulatory Authority (FINRA) has clear guidelines that outline what must be done. FINRA oversees the financial industry and sets standards that all investment professionals and their firms must follow. They know that options are full of risk and have added disclosures for this type of trading. Here are some of the risks of buying and selling options.
- You can lose unlimited amounts of money: Some options strategies involve unlimited risks. This is referred to as call or put writing/selling. It involves writing/selling an options contract on a stock, commodity, or currency at a particular price. In return, you will receive a premium for writing/selling this contract. The problem arises if the option increases in value. You will have to buy the stock or deliver the funds into your account. This means that losses can be unlimited, depending on how high the value goes up.
- You must meet certain requirements: All brokerage firms will have specific requirements to become involved in options. You have to fill out the paperwork and receive an options disclosure booklet explaining the risks. You must also keep a minimum of $2,000 in your account. These standards are not appropriate for all investors and require understanding your risk tolerance and comfort levels.
- You might have to take out a loan: Anytime you write/sell calls or puts, the brokerage firm will require you to open a margin account. This is a loan to write/sell the options, and it is required for opening these accounts. The problem is that if the value of the account falls, the brokerage firm will issue a margin call. This is when you must deposit additional funds into the account to bring the value back up to a certain level. If you don’t, the brokerage firm sells out the position as collateral for the loan. You will lose everything that you have invested in the position.
Options have many risks, and you should know all of them before investing. Call Wolper Law Firm, P.A. today to at 954.406.1231 / 800.931.8452
FAQs to Ask an Options Loss Attorney
If you have lost money in options, you may have many questions for an attorney. Here are some answers to some frequently asked questions.
Your broker or financial advisor will have you complete an options agreement, and you will be sent a risk disclosure brochure. The firm must approve you to trade options. It will assign you one of several different levels, including standard cash, standard margin, and advanced trading. These levels are determined based on the investment objectives you provide and your ability to assume the risk.
Trading options are risky, and your broker or financial advisor must make you aware of everything. Their brokerage firm has a legal obligation to ensure that all trades are suitable and that you fully understand what is involved.
If you lost money in options, contact Wolper Law Firm, P.A. today at 954.406.1231 / 800.931.8452 to get your free consultation.
Get the Help You Need from an Options Investment Attorney at Wolper Law Firm, P.A.
Your broker or financial advisor may not have let you know about the possible risks; this means you can get compensation. They have a duty to ensure that all investments take into consideration your age, investment objectives, income, and net worth. Failing to disclose everything means that they violate FINRA’s policies.
Contact the Wolper Law Firm, P.A. today and speak with an options loss attorney. Your broker, financial advisor, and their firms have attorneys that look out for their interests. You can level the playing field by letting our option loss attorney help you explore your responses. We offer a free no-obligation consultation where we will discuss your case and what we can do for you. Contact us today at 954.406.1231 / 800.931.8452 and let us help you.