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RISK DISCLOSURE

This brief statement does not disclose all of 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.

THIS MATERIAL IS CONVEYED PRIOR TO YOUR TRADING EDUCATION WITH MARTINKRONICLE.

THIS MATERIAL HAS BEEN PREPARED BY MARTINKRONICLE WHO PROVIDES TRADER EDUCATION; HOWEVER, MARTINKRONICLE DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. MARTINKRONICLE, ITS PRINCIPALS AND AFFILIATES MAY TRADE IN DERIVATIVES, COMMODITY FUTURES, EQUITIES, AND FOREIGN EXCHANGE FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS.

DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE EDUCATIONAL MATERIAL HEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

YOU SHOULD RISK ONLY FUNDS THAT YOU CAN AFFORD TO LOSE.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE “RISK DISCLOSURE DOCUMENT OF THE BROKER/DEALER, INTRODUCING BROKER, OR FUTURES COMMISSION MERCHANT YOU WISH TO DEPOSIT FUNDS WITH.

MARTINKRONICLE IS NOT AFFILIATED WITH ANY MEMBER FIRM NOR EXEMPT FIRM. MARTINKRONICLE IS NOT A PORTFOLIO MANAGEMENT FIRM, CTA, NOR RIA.

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 the 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 a cash settlement or in the purchaser acquiring or delivering the underlying interest. If the option is on a future, the purchaser will acquire a futures 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 transaction costs. If you are contemplating purchasing deep-out-of-the-money options, you should be aware that the chance of such options becoming profitable ordinarily is remote. Selling (“writing” or “granting”) an option generally entails considerably greater risk then 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 the 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.

Spreads

A spread is defined as the sale of one or more futures or option contracts and the purchase of one or more offsetting futures or option contracts. It should be recognized, though, that the loss from a spread can be as great as – or even greater than – that which might be incurred in having an outright futures or options position. An adverse widening or narrowing of the spread during a particular time period may exceed the change in the overall level of futures or option prices, and it is possible to experience losses on both of the futures or options contracts involved (that is, on both legs of the spread). In addition, spread trading increases transaction costs because the customers will be charged commissions on each leg of the spread.

Stop Orders

This website may make certain references to the use of stop orders as means of limiting losses or protecting profits. Please note that there is no guarantee that any stop loss order will be executed at the stop price. Therefore, there can be no guarantee that placing a stop order will limit losses or protect profits. Accordingly, no representation is being made that the trading in customers’ accounts will be profitable or will not result in losses as the result of placing stop orders.

Additional risks common to futures and options

Terms and conditions of contracts

You should ask the firm with which you deal about the terms and conditions of the specific futures or options which you are trading and associated obligations (e.g., the circumstances under which you may become obligated to make or take delivery of the underlying interest of a futures contract and, in respect of options, 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.

TRADING IS RISKY. YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR TO ESTABLISH THAT TRADING OF ANY KIND IS APPROPRIATE FOR YOUR FINANCIAL SITUATION UNDER NYSE RULE 405 OR ANY OTHER “KYC” EVALUATION.

YOU THE STUDENT AGREE TO HOLD HARMLESS MARTINKRONICLE AND ALL ITS FACULTY. YOU HEREBY AGREE THAT ANY AND ALL TRADES THAT YOU MAKE BEYOND TODAY’S DATE ARE ON YOUR OWN VOLITION. YOU AGREE THAT THERE ARE ENUMERABLE CIRCUMSTANCES AND OTHER EMOTIONAL AND PSYCHOLOGICAL ASPECTS OF TRADING THAT ARE TOO NUMEROUS TO LIST HERE.