Important information about the risks of trading futures, options on futures, and related products through Discount Trading.
This Risk Disclosure Statement describes the principal risks of trading futures, options on futures, and related products through Discount Trading. Anyone considering an account with us, or already trading through us, should read it in full before placing orders.
It is part of, and should be read alongside, the customer account agreement and any product- or platform-specific disclosures provided when you open an account.
It does not catalog every possible risk — it summarizes the main ones we want you to be aware of. If anything here is unclear, contact us before trading.
The risk of loss in trading futures and options can be substantial. Futures and options on futures are leveraged products, so a relatively small market movement can have a disproportionately large impact on your account, magnifying losses as well as gains.
Such trading is not suitable for everyone. You should carefully consider whether it is appropriate for you in light of your financial condition, resources, and trading experience.
Only risk capital should be used — that is, funds whose loss would not jeopardize your financial security or way of life. You may sustain a total loss of the funds you deposit, and your losses can exceed your initial deposit.
Futures contracts are leveraged. The margin you deposit to open a position is small relative to the contract’s full notional value, so a small move in the market produces a proportionally larger change in your account. Leverage can work for you as well as against you — it magnifies gains as well as losses.
If the market moves against your position, the value of your account can fall below the required margin. When that happens, you may be called to deposit additional funds on short notice to maintain the position.
If you do not meet a margin call in time, or if your account falls below required levels, your positions may be liquidated — at a loss — without further notice, and you remain responsible for any resulting deficit.
Day-trade margins, end-of-day margins, and liquidation procedures vary by product and platform. See our Margin page for Discount Trading’s specific margin requirements and liquidation policies.
Under certain market conditions, you may find it difficult or impossible to liquidate a position at the price you want, or at all.
Futures contracts have daily price limits set by the exchange. When a market reaches a limit move, trading at prices outside that range is halted, and you may be unable to exit a position until the market opens within the permitted range again.
Exchanges may also halt or suspend trading during periods of extreme volatility through circuit breakers or other measures. During a halt, you may be unable to enter, exit, or adjust your positions, which can increase the risk of loss.
Stop-loss and stop-limit orders are intended to limit risk, but they do not guarantee an exit at the stop price. In fast or thinly traded markets, your order may fill at a significantly worse price, or in the case of stop-limit orders, may not fill at all.
A spread position — holding offsetting long and short futures contracts — is not automatically less risky than a single outright long or short position. The two legs of a spread can move independently in ways that produce losses on both sides at once, particularly when liquidity dries up or when the relationship between two related contracts breaks down.
The same applies to multi-leg strategies more broadly — straddles, strangles, butterflies, and other combinations each carry their own risk profile, which is not always lower than a simpler position.
All trading at Discount Trading takes place on electronic platforms and order-routing systems provided by third parties. These systems depend on hardware, software, internet connectivity, exchange matching engines, and the systems of the platform vendor, the clearing firm, and the exchanges themselves. Any one of them can slow down, behave unexpectedly, or fail outright.
When that happens, your order may be delayed, executed at a price you did not expect, executed when you tried to cancel it, or not executed at all. Existing orders can lose their place in queue, and you may temporarily lose the ability to place, modify, or cancel orders.
If you cannot reach the market through your platform, our trade desk is available by phone during market hours to help you manage positions. Contact information is on our contact page.
Discount Trading does not provide compensation for losses arising from platform malfunctions, system outages, connectivity issues, or any other technology failure that affects the entry, modification, cancellation, or execution of orders. The exchanges, platform vendors, and routing providers we work with limit their own liability for the same events under their own terms.
Customer funds for futures trading are held at a futures commission merchant (FCM) that clears your trades. These funds are not insured by the FDIC, the SIPC, or any similar program, and they are not generally guaranteed by a derivatives clearing organization in the event of an FCM’s bankruptcy or insolvency.
CFTC rules require an FCM to keep customer funds segregated from its own, but customer funds are commingled in one or more pooled segregated accounts rather than held in a separate account for any individual customer. If the FCM does not have sufficient capital to cover its obligations or other customers’ losses, your funds may be exposed to losses.
An FCM is permitted to invest segregated customer funds in instruments approved by the CFTC under Regulation 1.25 — such as U.S. government securities, money market funds, and certain corporate notes — and to retain any earnings from those investments.
FCMs are also permitted to deposit customer funds with affiliated entities such as banks or brokers. Whether that increases the risk to your funds depends on the FCM and its affiliates, and you should weigh it as part of your due diligence.
The CFTC requires every FCM to publish firm-specific financial information and disclosures on its website. Before opening an account, review those disclosures for the clearing firm that will hold your funds.
If you trade futures or options listed on a foreign exchange — such as Eurex, ICE Europe, or other non-U.S. markets — the transaction is executed and cleared under the rules of that foreign exchange and the laws of that country, not under U.S. regulation.
No U.S. regulator has authority to enforce the rules of a foreign exchange or the laws of a foreign country, and customer protections that apply to U.S. transactions — including certain dispute resolution rights — may not extend to foreign trades.
Funds posted as margin for foreign futures may be held under different segregation and protection rules than the funds you post for U.S. futures. Before placing your first foreign order, ask us what arrangement applies to the specific market.
Foreign futures are priced and settled in a foreign currency. Even if the contract itself moves in your favor, fluctuations in the exchange rate between that currency and the U.S. dollar can reduce your profit or add to your loss.
Options on futures have their own risk characteristics that differ from outright futures positions. Before trading options, make sure you understand whether you are buying or selling, whether the option is a put or a call, the strike price, the expiration date, and what happens if the option is exercised or expires worthless.
When you buy an option, your maximum loss is limited to the premium you paid plus transaction costs — but options can expire worthless, and deep out-of-the-money options often do.
Writing (selling) an option is a fundamentally different risk than buying one. The premium you receive is fixed, but your potential loss is much larger and, for uncovered positions, can be far greater than the premium received.
Discount Trading permits uncovered (“naked”) options writing only on a case-by-case basis. If you are interested in writing uncovered options, contact customer service before placing any such order so we can review whether the account is appropriate for that strategy.
If an option is exercised or assigned, the result is a futures position with all the margin obligations and risks of futures described in the sections above.
Commissions, exchange fees, clearing fees, regulatory fees, platform fees, and data fees all reduce your net profit on winning trades and increase your net loss on losing trades. Before you place an order, make sure you understand every fee that applies to that product, that platform, and that account type.
Current rates are published on our Commission Rates page. Pricing depends on the platform you use, the products you trade, your trade route, and applicable exchange, clearing, and routing fees. Accounts that need trade desk assistance are charged at different rates — contact us if anything is unclear.
Fees and rates can change. You are responsible for reviewing your daily account statement and reporting any question or discrepancy promptly. Discount Trading does not retroactively credit fees, so check your statements every day and contact us immediately if you have any questions.
This statement does not describe every risk involved in trading futures, options on futures, or related products. New risks can emerge from changes in market structure, regulation, technology, or your own circumstances, and you remain responsible for understanding them.
Discount Trading is a registered introducing broker. Customer futures accounts are opened and held at a Futures Commission Merchant (FCM) that clears your trades and holds your funds in segregated customer accounts in accordance with CFTC rules. Discount Trading introduces the relationship and provides ongoing service to the account.
This Risk Disclosure is informational and does not replace the account opening documents completed when establishing an account. Those documents — including, but not limited to, the customer agreement, arbitration agreement, and any product- or platform-specific disclosures and acknowledgments — are separate and carry their own terms you should read before signing.
By opening and maintaining a futures account introduced by Discount Trading, you confirm that you have read and understood this disclosure and that you accept the risks of trading the products you have chosen.
If any part of this statement is unclear, or if you have questions about a specific product, platform, or account feature, contact us before you trade.
