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.
FUTURES
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.
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
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 in either 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 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 than 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.
ADDITIONAL RISKS COMMON TO FUTURES AND OPTIONS
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 clearinghouse to reflect changes in the underlying interest.
Market conditions (e.g. illiquidity) and/or the operation of the rules of certain markets (e.g. the suspension of trading in any contract or contract month because of price limits or ‘circuit breakers’) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/ offset positions. If you have sold options, this may increase the risk of loss.
Further, normal pricing relationships between the underlying interest and the future, and the underlying interest and the option may not exist. This can occur when, for example, the futures contract underlying the option is subject to price limits while the option is not. The absence of an underlying reference price may make it difficult to judge ‘fair’ value.
You should familiarize yourself with the protections accorded money or other property you deposit for domestic and foreign transactions, particularly in the event of a firm insolvency or bankruptcy. The extent to which you may recover your money or property may be governed by specific legislation or local rules. In some jurisdictions, property which had been specifically identifiable as your own will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall.
Before you begin to trade, you should obtain a clear explanation of all commission, fees and other charges for which you will be liable. These charges will affect your net profit (if any) or increase your loss.
Transactions on markets in other jurisdictions, including markets formally linked to a domestic market, may expose you to additional risk. Such markets may be subject to regulation which may offer different or diminished investor protection. Before you trade you should inquire about any rules relevant to your particular transactions. Your local regulatory authority will be unable to compel the enforcement of the rules of regulatory authorities or markets in other jurisdictions where your transactions have been effected. You should ask the firm with which you deal for details about the types of redress available in both your home jurisdiction and other relevant jurisdictions before you start to trade.
The profit or loss in transactions in foreign currency-denominated contracts (whether they are traded in your own or another jurisdiction) will be affected by fluctuations in currency rates where there is a need to convert from the currency denomination of the contract to another currency.
Most open-outcry and electronic trading facilities are supported by computer-based component systems for the order-routing, execution, matching, registration or clearing of trades. As with all facilities and systems, they are vulnerable to temporary disruption or failure. Your ability to recover certain losses may be subject to limits on liability imposed by the system provider, the market, the clearing house and/or member firms. Such limits may vary: you should ask the firm with which you deal for details in this respect.
Trading on an electronic trading system may differ not only from trading in an open-outcry market but also from trading on other electronic trading systems. If you undertake transactions on an electronic trading system, you will be exposed to risks associated with the system including the failure of hardware and software. The result of any system failure may be that your order is either not executed according to your instructions or is not executed at all.
In some jurisdictions, and only then in restricted circumstances, firms are permitted to effect off-exchange transactions. The firm with which you deal may be acting as your counterparty to the transaction. It may be difficult or impossible to liquidate an existing position, to assess the value, to determine a fair price or to assess the exposure to risk. For these reasons, these transactions may involve increased risks. Off-exchange transactions may be less regulated or subject to a separate regulatory regime. Before you undertake such transactions, you should familiarize yourself with applicable rules and attendant risks.
Business Continuity Statement
Introduction
The policy of DNA Brokerage LLC (“DNA”) is to respond to a Significant Business Disruption (“SBD”) by safeguarding employees’ lives and Firm property, making a financial and operational assessment, quickly recovering and resuming operations, and using its best efforts to protect the firm’s books and records with a view towards, allowing its customers to transact business, where practical, as soon as possible following an SBD. In the event that DNA Brokerage determines that it is unable to continue its business, the Firm’s officers will take appropriate steps to assure customers prompt access to investments and the underlying issuers of those investments.
Plan Overview
The Plan anticipates two kinds of SBDs, internal and external. Internal SBDs affect only
the ability of DNA Brokerage to communicate and do business, such as a fire in its building.
External SBDs prevent the operation of the commodities markets or a number of firms, such as a
terrorist attack, a city flood, or a wide-scale, regional disruption. The response of DNA Brokerage
to an external SBD relies more heavily on other organizations and systems. The Business Continuity Plan (BCP) will reasonably insure its critical business operations continue to function as developed. The Plan addresses the following areas: (1) data backup and recovery; (2) mission critical systems; (3) financial and operational assessments; (4) alternate communications between customers and DNA; (5) alternate communications between DNA and its employees; (6) alternate physical location of operations; (7) critical vendors and other business contacts; and (8) communication and reporting to regulators.
Mitigation and Response
To diminish risks posed by significant disruptions, Tradovate maintains system redundancies and/or off-site backup of business critical systems and records. In the event of an emergency at our main office, business critical staff can be relocated to an off-site location to facilitate business continuity. Tradovate also has a dedicated team that works with business units and the Information Technology functions to carry out the BCP and maintain business continuity in the event of business disruptions.
Emergency Contact Persons
Executive management is aware of the potentially devastating financial, organizational, and
political consequences of the failure of one or more mission-critical information systems. The
emergency contact persons for DNA Brokerage are:
Name and Title Cell Phone Email Address
Ron Wetzel, CFO 847-363-1374 ron@strands.finance
Dax Rodriguez, CCO 312-731-1305 dax@strands.finance
Limitations Disclaimer
Due to the unpredictable nature of events causing significant business disruptions, Tradovate can not guarantee that systems will always be available or recoverable after such events. Tradovate’s business continuity plans are also subject to modification.
Electronic Trading Risks
Market volatility, order volume, and system availability could result in delay or failure of order placements, order cancellations, trade executions or account access.
As a result, trade executions could be at prices significantly different from prices quoted at the time of order entry or trades might not be executed at all. The risks of delays and failures are assumed by the account holder. Tradovate recommends that you have a back-up plan to place, cancel, execute and confirm orders if you experience problems while using Tradovate’s systems.
Social Media Disclosure
Social media hosted by Tradovate may include links to unaffiliated third party websites. Tradovate has not endorsed or recommended for use any product, service or statement offered or presented by any third party websites, nor does Tradovate assume responsibility for the accuracy or content of any website or service offered by third parties.