FINRA member firms are required to provide customers with a standardized options disclosure document. This disclosure outlines the risks associated with options trading, including the potential for loss of the entire investment, the obligation to meet margin calls, the effect of time decay on options’ value, and the complexities of advanced strategies like spreads and straddles. The disclosure also explains the exercise and assignment process, tax considerations, and the customer’s responsibility to understand the terms and conditions of the options contract. Firms must obtain the customer’s written acknowledgment of receiving and understanding the options disclosure prior to accepting any options orders and make the disclosure readily available to customers throughout the life of the account.
