Risk Disclosure

Last updated: 2025

Trading in options and derivatives can lead to a rapid and total loss of your capital. As per SEBI studies, a large majority of individual traders in the equity derivatives segment incur net losses. Only risk capital you can afford to lose.

1. High risk and leverage

Options are leveraged instruments. A small movement in the underlying can cause a large percentage change — up or down — in the value of your position. Leverage magnifies both gains and losses, and losses can exceed your initial premium in the case of option-selling (short) strategies.

2. Unlimited-loss strategies

Certain strategies discussed on this site — such as the Short Straddle and Short Strangle — carry theoretically unlimited risk. A single large gap move can produce losses many times the premium collected. These strategies are suitable only for experienced, well-capitalised traders with strict risk controls and are presented here for educational understanding, not as recommendations.

3. Time decay and volatility

Option buyers face time decay (Theta) — an option can lose value every day even if the underlying is unchanged. Changes in implied volatility (Vega) can move option prices sharply, and a post-event "volatility crush" can cause losses even when your directional view is correct.

4. Liquidity and execution risk

Far out-of-the-money strikes and non-index options may have wide bid-ask spreads and low liquidity, leading to slippage on entry and exit. Multi-leg strategies compound transaction costs and execution risk.

5. Assignment and settlement

Short option positions may be assigned before or at expiry. In India, stock options are physically settled, which can create delivery and margin obligations at expiry; index options are cash-settled. Understand your broker's rules on margin, square-off and settlement.

6. Margin risk

Option-selling requires margin that can increase intraday during volatile moves, potentially triggering margin calls or forced square-off of your positions at unfavourable prices.

7. No profit assurance

No strategy guarantees profit. Past performance and illustrative examples are not indicative of future results. Every trade carries the risk of loss.

8. Your responsibility

You are solely responsible for your trading decisions. Assess your financial situation, experience and risk tolerance, and consult a SEBI-registered adviser before trading. This platform provides education only.