Last updated: June 22, 2025
This Risk Disclosure Statement (“Statement”) applies to all persons and entities (“Clients,” “you”) engaging with [Abra Securities] (“we,” “our,” “us”) in the discretionary trading of U.S. equities and listed options on behalf of client capital. By entering into our trading agreement or utilizing our platform, you acknowledge and accept the risks described herein.
1. General Warning
1.1 All forms of trading—particularly leveraged trading in stocks and options—carry the potential for substantial or total loss of invested capital. No strategy, model, or historical performance guarantees future results.
1.2 You should only trade if you fully understand these risks and can bear potential losses without jeopardizing your financial security.
2. Market Risk
2.1 Price Volatility
- Equities: Even blue‐chip stocks can experience rapid price swings due to earnings surprises, macroeconomic news, or market sentiment.
- Options: Option premiums fluctuate with underlying price movement, implied volatility, time decay (theta), and changes in interest rates (rho).
2.2 Gaps & Limit Moves
- Overnight news, earnings gaps, or circuit‐breaker halts can cause a stock to open at a materially different price.
- Options strikes can become illiquid or untradable in extreme moves.
2.3 Liquidity Risk
- Thinly traded stocks or out‐of‐the‐money options may have wide bid‐ask spreads, leading to poor fills or inability to exit positions quickly.
- In stressed markets, overall market liquidity can evaporate.
3. Leverage & Margin Risk
3.1 Amplification of Gains & Losses
- Margin trading amplifies both profits and losses. A 1% adverse move on a fully margined position can result in a far greater percentage loss of your equity.
3.2 Margin Calls & Liquidation
- If your account equity falls below maintenance requirements, we will issue a margin call requiring immediate deposit of additional funds.
- If you fail to meet a margin call, we reserve the right to liquidate all or part of your positions—potentially at unfavorable prices—without prior notice.
3.3 Interest Charges
- Margin financing incurs daily interest charges. High margin balances or extended hold periods can accumulate significant financing costs, eroding returns.
4. Options‐Specific Risks
4.1 Time Decay (Theta)
- Options lose value as expiration approaches. Long option holders may see rapid premium erosion, especially in low‐volatility environments.
4.2 Volatility Risk (Vega)
- Implied volatility changes can drastically affect option prices. A drop in implied volatility can decimate the value of long option positions even if the underlying stock moves favorably.
4.3 Assignment & Exercise
- Writing (selling) options exposes you to exercise risk, including early assignment on American‐style options. An assignment can force delivery/delivery on underlying shares or cash settlement.
4.4 Complex Strategy Risk
- Multi‐leg strategies (spreads, straddles, butterflies) involve non‐linear payoff profiles and can carry hidden margin requirements. Misunderstanding the payoff can lead to unforeseen losses.
5. Counterparty & Operational Risk
5.1 Brokerage Execution
- We route orders through one or more brokers or execution venues. Each intermediary may impose its own rules, delays, or rejections, which can affect execution quality.
5.2 System Failures
- Trading platforms, connectivity, or internal systems may suffer outages. Inability to enter, modify, or exit orders promptly can exacerbate losses.
5.3 Data Integrity
- We rely on real‐time data feeds. Errors, lags, or corrupt data can lead to incorrect valuations, mispriced orders, or unintended exposures.
6. Model & Strategy Risk
6.1 Model Assumptions
- Any quantitative or algorithmic strategy is based on historical relationships, which can break during regime changes.
6.2 Backtest Overfitting
- Strategies optimized to past data may perform poorly out‐of‐sample. Excessive curve‐fitting increases vulnerability to unanticipated market scenarios.
6.3 Parameter Sensitivity
- Small changes to model inputs or parameter settings can yield large differences in trade signals and P&L.
7. Legal & Regulatory Risk
7.1 Regulatory Changes
- New SEC rules, exchange-imposed restrictions, or market structure reforms (e.g., limit up/down, short-sale bans) can limit strategy viability.
7.2 Unregistered Activity
- Because we operate under a private trading mandate, you acknowledge there is no SEC-registered broker-dealer oversight. You bear counterparty credit risk related to our business stability.
8. Tax & Accounting Risk
8.1 Complex Tax Treatment
- Options and margin trading can generate short‐term gains, wash sale implications, and transaction costs that affect after-tax returns. Clients should consult tax professionals.
8.2 Reporting Requirements
- You are responsible for accurate reporting of all trades, P&L, and margin financing costs to tax authorities.
9. Market Conduct & Conflict Risk
9.1 Principal Trading
- We may act as principals in some transactions. Clients should be aware of potential conflicts where we trade against our own positions.
9.2 Order Prioritization
- In periods of extreme volume or system constraints, order handling prioritization will follow our internal policy, which may affect execution timing.
10. Force Majeure
10.1 “Force Majeure” events—including natural disasters, cyberattacks, system failures, war, or government intervention—may delay or prevent order execution, margin calls, or settlement. We shall not be liable for failure or delay resulting from such events.
11. Client Acknowledgment
By engaging our services, you confirm that you have carefully read and understood this Statement, that you are financially capable of bearing the risks, and that no part of this document constitutes an offer or guarantee of performance.
End of Risk Disclosure Statement
