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Risk Disclosure

Last updated: April 2025

⚠️ Trading and investing in financial markets involves substantial risk of loss. You may lose some or all of your invested capital. Only trade with money you can afford to lose.

General Market Risks

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Price Volatility

  • •Stock prices can fall sharply due to market, economic, or geopolitical events
  • •Intraday volatility can exceed 5–10% within minutes for individual stocks
  • •Circuit breakers may halt trading, preventing you from exiting positions
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Liquidity Risk

  • •Small-cap and mid-cap stocks may have low trading volumes
  • •Wide bid-ask spreads can increase transaction costs significantly
  • •Exiting large positions in illiquid stocks may move the market against you
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Market/Systemic Risk

  • •Broad market downturns can affect all stocks regardless of fundamentals
  • •Global events (recession, pandemics, geopolitical conflicts) impact portfolios
  • •Correlation between assets typically increases during market stress
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Regulatory Risk

  • •SEBI, RBI, or SEC rule changes can affect specific sectors or instruments
  • •Taxation on capital gains may change, affecting net returns
  • •Trading restrictions (e.g., short-sale bans) can be imposed without notice

Equity-Specific Risks

  • ▸Company risk: Poor earnings, management changes, accounting fraud, or business failure can cause permanent capital loss in individual stocks.
  • ▸Concentration risk: Holding too few stocks or being overweight in a single sector amplifies losses when that sector underperforms.
  • ▸Currency risk: Investments in US equities from India are subject to USD/INR exchange rate fluctuations that can erode or amplify returns.
  • ▸Dividend risk: Dividends are not guaranteed and can be cut or eliminated, especially during economic downturns.

Futures & Options (F&O) Risks

Derivatives are complex instruments with a high risk of losing money rapidly due to leverage. The majority of retail investors lose money trading derivatives. Ensure you understand how derivatives work before trading them.

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Leverage Risk

  • •F&O allows controlling large notional values with small margin deposits
  • •A 1% move against your position can wipe out 10–50% of your margin
  • •Losses can exceed your initial margin, resulting in margin calls
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Time Decay (Theta)

  • •Options lose value as expiry approaches — even if the underlying moves in your favour
  • •Buying options has a built-in time-decay cost that accelerates near expiry
  • •Out-of-the-money options frequently expire worthless
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Volatility Risk (Vega)

  • •IV crush after events (earnings, budget) can sharply reduce option premiums
  • •Options bought before high-IV events often lose value even on correct directional calls
  • •Selling options during low-volatility periods increases gap-risk exposure
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Assignment & Expiry Risk

  • •Short option positions can be assigned at any time (American-style options)
  • •In-the-money options at expiry result in physical or cash settlement
  • •Failure to close positions before expiry can lead to unexpected obligations

Commodity Futures Risks

  • ▸Price volatility: Commodity prices are influenced by weather, geopolitics, supply-chain disruptions, and currency movements — often more volatile than equities.
  • ▸Leverage: Commodity futures require only a fraction of the contract value as margin. A small adverse move can result in losses larger than your margin.
  • ▸Rollover cost: Futures contracts have fixed expiry dates. Rolling positions forward incurs contango or backwardation costs that erode returns.
  • ▸Physical delivery risk: Some commodity contracts result in physical delivery if not closed before expiry. Settlement obligations must be understood before trading.

Algo Trading Risks

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System & Technical Risk

  • •Software bugs, API failures, or network interruptions can cause missed orders or unintended executions
  • •Slippage between signal and execution can reduce or reverse expected profitability
  • •Server downtime means no automated stop-losses or position management
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Strategy Risk

  • •Backtested strategies do not guarantee future performance — markets evolve
  • •Overfitted signals may perform poorly in live conditions
  • •Always start with Paper Trading before deploying real capital

Responsible Trading Guidelines

✓Never invest money you cannot afford to lose
✓Diversify across stocks, sectors, and asset classes
✓Always use stop-losses to limit downside on every trade
✓Size positions appropriately — never overleverage
✓Keep emotions out of trading decisions
✓Review and understand every signal before acting
✓Paper trade first before going live with any strategy
✓Consult a SEBI-registered advisor for personalised advice

Acknowledgement

By using StockPulse and its F&O, Intraday, Algo, and other trading-related features, you confirm that you have read and understood this Risk Disclosure Statement. You accept full responsibility for all trading decisions and their financial consequences. StockPulse and its creators accept no liability for losses arising from use of this platform.

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