Options trading is when an investor buys or sells an underlying asset at a specific price by a predetermined date. While options trading can increase cost-efficiency and deliver higher returns than other forms of investment, they can be risky and inadvisable for some investors.
If you’ve lost money due to an unsuitable investment strategy proposed by a financial advisor that involved options trading, an options loss lawyer can help you seek compensation. Let’s take a closer look at options trading and what an attorney can do to help you seek remedies.
Understanding Call Options and Put Options
When it comes to options trading, there are two different types of options: a call option and a put option. A call option gives an investor the right to buy, while a put option gives an investor the right to sell. A single options contract controls 100 stock shares, and investors are able to buy or sell multiple contracts.
When trading call options, the buyer must pay the seller a fee. In addition, the options must be purchased by a specific, predetermined date, or else they will expire. Trading call options gives investors the ability to make significant profits from changes in the underlying stock at a low cost.
Put options give an investor the right to sell a certain amount of shares of a stock at a specific price before an expiration date. Selling put options allows investors to profit on stocks that decrease in value, as they allow investors more time to safely sell declining stocks, thus offsetting losses.
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Options Trading Comes With Many Risks
Although options trading can lead to significant profits and comes with a number of benefits, it also comes with many risks that could lead to financial losses. Financial advisors must explain the risks associated with such investments when discussing them with clients. Familiarizing yourself with the following risks can help you decide if options trading is right for you:
- Since options trading involves high leverage, unfavorable changes in the market can lead to significant losses.
- Investors incur losses when options expire.
- Limited liquidity can make it hard to enter or exit positions.
- Margin requirements can amplify losses beyond the initial investment.
- Predicting market direction and timing accurately is challenging.
These are just a few of the risks that come with options trading. Due to the inherent risks of options, financial advisors should only recommend them to certain investors. If you’ve lost money due to an unsuitable options trading investment, you may have grounds for a claim against your advisor.
Types of Investors Who Should Avoid Options Trading
The risks involved in options trading make them an unsuitable investment strategy for several types of investors. You’ll want to think twice about investing in options if one or more of the following characteristics describe you as an investor:
- Investors with limited funds who can’t afford to lose a significant amount on one investment
- Investors who don’t have the time to actively monitor their investment
- Investors focused on long-term growth as opposed to short-term gains
- Retirees who need stable, steady income and can’t afford substantial losses
If one of these characteristics describes you as an investor, you might want to reconsider options trading. If options are an unsuitable investment for you, but your financial advisor has put your money in options anyway, you may be able to pursue compensation.
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A Lawyer Can Help You Seek Compensation for Options Losses
If you’ve lost money because your financial advisor made a recommendation that wasn’t in your best interest, you have the right to file a claim against them. That said, seeking financial remedies for options losses can be incredibly difficult.
To give yourself the best chance possible at getting a favorable result, you’ll want to work with a dedicated broker misconduct lawyer. An attorney can investigate your situation and represent you during arbitration. Arbitration is a process in which you and your advisor will meet with a third-party arbitrator to discuss the dispute and come to a resolution.
A skilled lawyer can advocate on your behalf during the arbitration process and push for a settlement that covers the losses you’ve taken on. No matter how serious your losses are, you can count on a committed attorney to represent your best interests.
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Schedule a Free Consultation With an Options Loss Lawyer Today
Losing a significant amount of money due to broker misconduct or negligence can be incredibly discouraging. Fortunately, the team at Meyer Wilson is here to offer the representation and legal counsel you need to get your money back. Our team has over 75 years of combined experience representing investors like yourself, and we’re eager to get started on your case.
Contact us today to schedule a free consultation with an experienced legal representative. We’ll explain what options trading is and how to pursue compensation for your investment loss. If you decide to hire an attorney from our team, you can rest assured that we have what it takes to get the results you deserve.
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