Your financial newsletter publisher may or may not be registered and inclusion in the eOption Auto Trade program does not imply that they either are or are not required to be so registered. Because of the general nature of this document, the ODD does not encourage investors to invest in any particular standardized option. There may be multiple, unlinked after hours trading facilities trading the same security but operating independently of one another. As a result, customers may receive partial executions, or no executions at all. Margin maintenance requirements may change without prior notice. Unauthorized access is prohibited. Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies.
Characteristics & Risks of Standardized Options Prior to buying or selling an option, investors must read a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD).
Option strategies involve multiple purchases; therefore your transaction costs may be significant for option strategy trades.
Please check our Brokerage Fees page for further details. Any investment product, educational material, statistic, quote or other representation about a product or service should be verified. Information provided does not constitute a recommendation by eOption to buy or sell or hold a particular investment or any other product or service. In addition, if eOption knows or has a reasonable basis to believe that a client is a pattern day trader, the customer must be designated as a pattern day trader immediately, instead of delaying such determination for five business days.
You should consider the following points before engaging in a day-trading strategy. Day trading can be extremely risky. Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance.
You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Be cautious of claims of large profits from day trading. You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading.
Day trading can also lead to large and immediate financial losses. Day trading requires knowledge of securities markets. Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms.
You should have appropriate experience before engaging in day trading. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction.
In addition to normal market risks, you may experience losses due to system failures. Day trading will generate substantial commissions, even if the per trade cost is low. Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings.
Day trading on margin or short selling may result in losses beyond your initial investment. When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account.
Short selling as part of your day-trading strategy also may lead to extraordinary losses, because you may have to purchase a stock at a very high price in order to cover a short position. Such activities may also trigger state registration requirements.
Day-Trading Risk Disclosure Statement. Option rates apply to each side of spread orders. Short option day trades executed by pattern day traders PDT will be subject to naked requirements unless an intraday hedge exists. The following strategies qualify as an intraday hedge for the purpose of day trade calculations: Debit spreads, Credit spreads, Box spreads, Long and short butterflies including calendar butterflies, Calendar spreads, Condors including calendar condors, Long and short iron butterflied including calendars, Covered calls and puts.
Money market funds are not applied towards calculating day trade buying power. Please contact us to have money market funds journaled to the margin type prior to the effective date if you would like to use all funds to calculate day trade buying power.
Also, please note it is necessary to shut off sweeps to money market upon trade settlement in order to use all available funds to day trade without interruption.
This request must be in writing with a signature. Nothing contained herein should be considered an offer to buy or sell any security or securities product and all trade orders placed are at your sole risk and responsibility. Online trading, including the use of the eOption mobile application has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data.
You are solely responsible for any losses from your reliance on simulated trading for investment decisions and eOption Paper Trading should not serve as the primary basis for your investment decisions. Extended Hours investing involves unique risks that investors should fully understand before placing an order after hours. Prior to participating in this unique Extended Hours session, you should review and be aware of the various risks and requirements involved in Extended Hours Trading.
While trading in the Extended Hours sessions is not new, in the past it has been a mostly institutional market with institutional traders working primarily on behalf of banks, insurance companies, mutual funds and pension funds. Extended hours trades must be placed as a limit order. Due to the illiquid nature of extended hours markets, market orders are not accepted.
Extended hours trading is available from 8: EST and from 4: Extended hours trades cannot be placed online, and must be placed with a broker with no additional charge. To place an extended hours trade please call the trade desk at ECNs provide a service to investors that want to trade during traditional and nontraditional hours. Since Extended Hours Trading for retail customers is still a relatively small market, many brokerage firms staff for the traditional trading hours, with a smaller staff during the Extended Trading sessions.
The availability of customer support staff and other services relating to policies and operations during Extended Hours Trading may also be limited, including access to account information and account representatives and support staff such as margin clerks and cashiers especially in the event of heavy Internet traffic, phone usage, or system capacity problems.
Essentially, the ECN systems simply list orders to buy and sell, and when they detect a match, the system automatically executes the trades. Regardless of whether or not a particular ECN allows market orders or sticks to limit orders only, it is good practice for investors to place only limit orders, thus protecting themselves somewhat from the wide price swings that might occur in the Pre and Post-trading sessions, when trading volume is lower.
Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy or sell securities, and as a result, investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in Extended Hours trading as compared to regular market hours.
Only specific stocks, or groups of stocks, and other securities will be available for trading in Extended Hours sessions. Not all stocks may be traded during Extended trading sessions. Trading volume may be lighter than regular trading sessions, resulting in less liquidity for certain securities. As a result, customers may receive partial executions, or no executions at all. Volatility refers to the changes in price that securities undergo when trading.
Generally, the higher the volatility of a security, the greater its price swings. There may be greater volatility in Extended Hours Trading than in regular market hours. As a result, your order may only be partially executed, or not at all, or you may receive an inferior price in Extended Hours Trading than you would during regular market hours.
Depending on the Extended Hours Trading system or the time of day, the prices displayed on a particular Extended Hours Trading system may not reflect the prices in other concurrently operating Extended Hours Trading systems dealing in the same securities.
There may be multiple, unlinked after hours trading facilities trading the same security. You may receive an inferior price in one Extended Hours Trading system than you would in another Extended Hours Trading system. As a protection, only limit orders should be used in after hours trading. The spread refers to the difference in price between what you can buy a security for and what you can sell it for. Lower trading volumes and higher volatility, as well as other characteristics of Extended Hours Trading sessions, could result in wider than normal spreads.
As a result, customer orders could be executed away from prices that prevailed during regular market sessions, or not be executed at all. There may be multiple, unlinked after hours trading facilities trading the same security but operating independently of one another. Accordingly, investors may pay more or receive less for their securities purchases or sales when trading in a particular after hours trading facility in comparison to the securities primary market or other Extended Hours Trading facility.
Normally, issuers make news announcements that may affect the price of their securities after regular market hours. Similarly, important financial information is frequently announced outside of regular market hours. In Extended Hours Trading, these announcements may occur during trading. The impact of news announcements immediately preceding or during an Extended Hours session could cause an exaggerated effect on the market due to fewer market participants, less liquidity, and less trading volume than during regular trading sessions.
If securities have been halted during the regular trading session, such trading halts will continue to be in effect during the after-hours trading session.
No trading halts will be initiated by the after-hours trading session itself during the after hours trading session. The prices of securities traded in Extended Hours Trading may not reflect the prices either at the end of regular market hours, or upon the opening the next morning. As a result, you may receive an inferior price in Extended Hours Trading than you would during regular market hours.
Understand what it means to trade on margin. While practiced by many knowledgeable investors, trading with borrowed funds may result in magnified losses, even to the point of exceeding your initial investment. Investigate before you invest. Clients should take special care in understanding all of the risks involved prior to investing in Fixed Income and Structured Products as they are not suitable for all investors.
Although bonds generally present less short-term risk and volatility than stocks, bonds do entail interest rate risk as interest rates rise, bond prices usually fall and vice versa and the risk of default, or the risk that an issuer will be unable to make income or principal payments. Additionally, bonds and short-term investments entail greater inflation risk, or the risk that the return on investment will not keep up with increases in the prices of goods and services, than stocks.
In this economic environment, please be aware that bond ratings may change and may affect the value of the bond. Structured products are subject to market, liquidity, interest rate, and volatility risks. Though a structured product can be issued a ticker symbol and be approved for listing on an exchange, an active and liquid trading market may not develop.
Limits or caps in the appreciation of the underlying asset can limit upside appreciation while investors are still exposed to downside risk and can lose part or all of their original investment. Returns of principal may not be obtained if the investment is sold prior to maturity, thus an investor may experience loss of principal.
Principal protection and payment at maturity is subject to the credit risk of the issuer. Before purchasing a CD, investors should fully understand all of its terms and carefully read all disclosure statements. For more information about federal deposit insurance, the FDIC offers an online tool, Electronic Deposit Insurance Estimator to estimate your total coverage at any particular bank. When acting as principal, eOption will add a markup to any purchase, and subtract a markdown from every sale.
This markup or markdown will be included in the price quoted to you. All fixed income products are subject to availability. You should seek the advice of your independent financial advisor or tax advisor before making any investment and consider your overall financial status, tax status and investment objectives.
Your account can be charged with a Good Faith Violation GFV if you sell a security that was purchased with unsettled funds and then sold prior to the settlement of the first sell see examples below. Please note that stocks settle in two business days and options settle in one business day. Due to rapidly changing market conditions, and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.
Clients should take special care in understanding all of the risks involved prior to investing. Option trading in IRAs includes call buying, put buying, cash-secured put writing, spreads, and covered calls.
Unsecured naked puts and naked call transactions are not permitted in IRAs. We reserve the right to determine what trading is suitable for an IRA. When trading options in an IRA, there are significant limitations as to how potential losses can be covered. In order to protect against potential cyber-terrorism and hackers who target financial firms, eOption has policies and procedures ensuring Cyber security, Identity Theft, and General Security Preparedness. While we take numerous steps to help protect the security of your account, there are steps that you, the customer, can take to protect your account as well.
Unsecured wireless networks pose a significant risk to computing assets and information. In general, unsecured wireless networks should be avoided and should never be used as a primary networking resource.
Additionally, the following brochures describe the critical steps you can take to safeguard your financial accounts and help prevent identity theft. If you have any questions about how we keep your account information safe, please email us at support eoption. Non-traditional ETPs Exchange Traded Products employ sophisticated financial strategies and instruments, such as leverage, futures, and derivatives, in pursuit of their investment objectives.
Leveraged and inverse ETPs are considered risky. The use of leverage and inverse strategies by a fund increases the risk to the fund and magnifies gains or losses on the investment.
You could incur significant losses even if the long-term performance of the underlying index showed a gain. Typically, these products have one-day investment objectives, and investors should monitor such funds on a daily basis. Having a highly concentrated position in these types of products can also pose significant risks. Non-traditional ETPs are generally categorized as leveraged, inverse, or leveraged-inverse:. Additional risks may include adverse market condition risks, investment strategy risk, aggressive investment techniques risk, concentration risk, correlation risk, counterparty risk, credit risk and lower-quality debt securities risk, energy securities risk, equity securities risk, financial services companies risks, interest rate risk, inverse correlation risk, leverage risk, market risk, non-diversification risk, shorting risk, small and mid-cap company risk, tracking error risk, and special risks of exchange traded funds, among others.
We are furnishing this document to you to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account, you should carefully review the margin agreement provided by your broker.
Consult your broker regarding any questions or concerns you may have with your margin accounts. When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from your brokerage firm. If you choose to borrow funds from your firm, you will open a margin account with the firm. It is important that you fully understand the risks involved in trading securities on margin.
These risks include the following:. It describes the terms under which we extend credit and charge interest and how your obligations are secured by property in your Account. We will charge interest on a daily basis on the credit we extend to you. If your daily-adjusted debit balance is reduced because you deposit a check or other item that is later returned to us unpaid, we may adjust your account to reflect interest charges you have incurred.
We reserve the right to charge interest on debit balances in the Cash Account. Periodically, we will send you a comprehensive statement showing the activity in your account, including applicable interest charges, interest rates and adjusted daily debit balances.
Daily Margin Interest Rate. It is calculated for each day by dividing the base margin interest rate by Note that the use of a day year results in a higher effective rate of interest than if a year of days were used. Your margin interest rate will be adjusted automatically and without notice to reflect any change in the Base Rate.
We compound interest on a daily basis. Interest charges will accrue to your account each day. The interest rates described above do not reflect compounding of unpaid interest charges; the effective interest rate, taking into effect such compounding, will be higher.
The Federal Reserve Board and various stock exchanges determine margin loan rules and regulations. When you purchase securities on margin, you agree to deposit the required initial equity by the settlement date and to maintain your equity at the required levels. If the market value of stock held as collateral increases after you have met the initial margin requirements, your available credit may increase proportionately.
Conversely, if the market value decreases, your available credit may proportionately decrease. Initial margin requirements may change without prior notice. We may impose anytime and without prior notice more stringent requirements on positions that in our sole discretion involve higher levels of risk; for example, higher limits may apply for thinly traded, speculative or volatile securities, or concentrated positions of securities.
You may purchase only certain securities on margin or use them as collateral in your Margin and Short Account. Most stocks traded on national securities exchanges, and some over-the-counter OTC securities are marginable. At our discretion, we reserve the right not to extend credit on any security.
You must maintain a minimum amount of equity in your account to collateralize your outstanding loans and other obligations. Margin maintenance requirements are set:. You agree to maintain in your Margin and Short Account collateral of the type and amount required by:. This can happen for various reasons. The most common reasons are a decrease in the value of long securities held as collateral or an increase in the value of securities held short.
As a general guideline and when it is practicable to do so, we may but are not required to issue a margin call when the equity in your Margin and Short Account falls below a predetermined percentage of the market value of assets at risk that is, the sum of the market values of the long and short equity security positions in your Margin and Short Account. The amount of additional collateral we require usually is an amount sufficient to raise your equity to minimum standards.
For information on the current equity requirements, please contact your broker. We retain absolute discretion to determine whether, when and in what amounts we will require additional collateral. Option descriptions contain a lot more information than stock symbols.
The expiration date for all listed equity options in the United States is the last trading day in the life of the contract, usually a Friday. However, the expiration day may be a Thursday when the normal Friday expiration is a market-observed holiday. Other exceptions may include quarterly options, which expire on the last business day of the quarter, or end of month options, which expire on the last trading day of the month. The price at which the underlying security will be delivered in the event that the option is exercised or assigned.
With stocks, you are limited to buying, selling and selling short. Options allow more possibilities, including strategies:. While options do provide a lot of flexibility, it is important to realize that with any option strategy used on dividend-paying stocks, you will not be entitled to any dividends unless you purchase the actual stock before the ex-dividend date.
With option strategies, you also will not be entitled to voting rights or any other benefits of stock ownership unless you own the actual stock.
Finally, since all options eventually expire, they will generally lose value as their expiration date approaches, and may end up being completely worthless, whereas the holder of a stock position can hold the stock for a long duration without selling it. Watch this video from Randy Frederick, Schwab's Managing Director of Trading and Derivatives, for more information on the benefits and opportunities provided by options trading.
Apply for options approval. Up to , shares can be placed per trade. Online trades are trades placed through Schwab. Multiple-leg options strategies will involve multiple commissions. Spread trading must be done in a margin account. Covered calls provide downside protection only to the extent of the premium received and limit upside potential to the strike price plus premium received. Writing uncovered options involves potentially unlimited risk. Options carry a high level of risk and are not suitable for all investors.
Certain requirements must be met to trade options through Schwab. Please see the Charles Schwab Pricing Guide for detailed information. Commissions for equity or option trades resulting from an option exercise or assignment will be subject to the corresponding online commission pricing schedule. The Charles Schwab Corporation provides a full range of brokerage, banking and financial advisory services through its operating subsidiaries.
Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons. This site is designed for U. Learn more about our services for non-U.
Unauthorized access is prohibited. Usage will be monitored. Hi, have questions about our investment products? I can help …. Read article Additional essential options education is available from the OIC. Case Studies and examples will be used to demonstrate these strategies. Sign Up Option Hedging Strategies with Lee Bohl Market volatility is always an important factor that investors and traders need to contend with when making their trading decisions.
Investors can help reduce downside market exposure through the proper use of hedging strategies. This session explores ways to help reduce or limit the market risk of equities trading, through the use of covered calls, protective puts and collars.
How to use collars and cash-secured equity puts CSEPs to help limit the risks of equity positions. Read article Reducing Risk with Credit Spreads by Randy Frederick Credit spreads allow you to substantially limit risk by forgoing a limited amount of profit potential.
Read article Bullish Spreads: Finding Good Candidates by Randy Frederick Find out how to select an expiration date and strike prices for these two-legged option strategies.
Try Using Options with Randy Frederick Listen to this webcast and hear about the Option Repair Strategy which is a technique intended to help you get back to breakeven sooner. Sign Up Bearish Spreads: Finding Good Candidates by Randy Frederick How to structure a bearish spread to help match your level of bearishness. Read article Additional advanced options education is available from the OIC.
Enlarge Image Support from Options Specialists Get access to our special options support team for help with risk analysis, implementing trade strategies, placing complex orders and more. Watch Video Experience you can count on Rely on a dedicated team for your options trading needs. Benefit from an analysis of your options strategies. Get specialized support on advanced options tools.
Options Trading Prior to buying or selling an option, investors must read a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD). It explains the characteristics and risks of exchange traded options. There are risks involved in any option strategy. Individuals should not enter into option transactions until they have read and understood the option disclosure document titled "Characteristics and Risks of Standardized Options," which outlines the purposes and risks of option transactions. currency options will be based on an exchange rate for the underlying foreign currency from a source selected by the market on which the options trade as set forth in exchange rules. In the case of rate-modified foreign cur-rency options, the options market on which the options are traded would calculate and disseminate the underly-ing rate.