Call Now For a Free Consultation:
(614) 502-6165

Did Your Broker Engage in Unsuitable Options Trading on Your Behalf?

Although options can add flexibility to a client's portfolio, clients are often enticed into unsuitable options trading with high risks, speculative returns, and big losses.

Understanding the Basics of Options Trading

An option is a type of security that constitutes a binding contract with specific terms. Options allow buyers the right to buy or sell underlying assets at a certain price by a specific predetermined date. There are two types of options in options trading, call options and put options. The right to buy is called a call option, and the right to sell is called a put option. One option contract controls 100 shares of stock, but clients can buy or sell as many contracts as they want.

Call Options

Call options give the owner the right to buy a specific number of shares of an underlying stock at a previously determined price. The client must pay the seller a fee, and the option must be purchased by a certain date or it expires. Call options provide opportunities to profit from price gains in the underlying stock at a fraction of the cost of owning the stock.

Put Options

Put options give the owner the right to sell a specific number of shares of an underlying stock at a specific price on or before a certain date. Put options act like an insurance policy because they allow the client to profit on stocks that fall in value. Put options will offset the losses on the stock by allowing the owner more time to sell safely.

Options involve risks and are not suitable for every investor. Using the wrong strategy in options trading can lead to disastrous results. Taking unnecessary risks can result in big investment losses. Stockbrokers have a duty to make suitable recommendations for investments based on certain factors:

  • The client's age
  • The client's financial status
  • The client's short-term and long-term objectives
  • The client's investment knowledge
  • The client's ability to tolerate risks and losses

If a client loses money in unsuitable options trading, the broker and brokerage firm may be held liable for broker misconduct. An appropriate investment for one person can be a very inappropriate investment for another. To protect investors, the broker must carefully consider an investor’s personal circumstances before recommending investments and options trading. If your broker bought unsuitable put or call options on your behalf and you lost money, contact a securities litigation attorney with Meyer Wilson at 888-390-6491.

Related Posts:

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

Share This Story
If you found the information provided by this article useful, consider sharing to your social media channels to help others in their search for reliable resources.
Consult with Our Legal Team
There is never a cost associated with a consultation
Columbus Office

614-224-6000
305 W. Nationwide Blvd
Columbus, OH 43215
Meyer Wilson
New Orleans Office

900 Camp Street 
Suite 337
New Orleans, LA 70130
Los Angeles Office

310-905-8688
2029 Century Park East,
Suite 400N
Los Angeles, CA 90067
Cleveland Office

216-600-1355
4781 Richmond Rd.
Suite 400
Warrensville Heights, OH 44128
Bloomfield Hills Office

248-817-8214
41000 Woodward Ave.,
Suite 350
Bloomfield Hills, MI 48304
Quick Links
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. Read More
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Read More
chevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram