Trading options is covered by special supervisory rules under FINRA, which apply to all brokers executing options trades for customers. This is because options trading can be very risky—and large losses can occur very quickly.
By definition, options are traded on margin. If a position goes bad—losses can be collected against the customer’s other assets by the brokerage firm.
Because options trading can result in losses for both customers and brokerage firms, FINRA has strict supervision rules for options trading. Violation of these is serious and can result in the firm covering the customer’s losses.
Firms are required to:
- Allow only brokers who have passed an examination to trade options for customers.
- Make sure the trading is suitable for the customer.
- Have an options principal review all trades and all options accounts every day.
- Check for possible use of options to trade on inside information.
- Make sure that a customer is aware of losses and that the options trading is reasonable.
- Make sure that excessive fees aren’t being charged customers.
If you have lost money as a result of options trading through a stockbroker or financial advisor, please contact Diane Nygaard at (913) 485-5014 for a free consultation.Contact Us