| |
DAY-TRADING RISK DISCLOSURE STATEMENT
PENSON
FINANCIAL SERVICES, INC.
You should consider the following
points before engaging in a day-trading strategy. For purposes of this notice,
a "day-trading strategy" means an overall trading strategy characterized
by the regular transmission by a customer of intra- day orders to effect both
purchase and sale transactions in the same security or securities.
Day
trading can be extremely risky. Day trading generally is not appropriate for someone
of limited resources and limited investment or trading experience and low risk
tolerance. You should be prepared to lose all of the funds that you use for day
trading. In particular, you should not fund day-trading activities with retirement
savings, student loans, second mortgages, emergency funds, funds set aside for
purposes such as education or home ownership, or funds required to meet your living
expenses. Further, certain evidence indicates that an investment of less than
$50,000 will significantly impair the ability of a day trader to make a profit.
Of course, an investment of $50,000 or more will in no way guarantee success.
Be cautious of claims of large profits from day trading. You should be wary
of advertisements or other statements that emphasize the potential for large profits
in day trading. Day trading can also lead to large and immediate financial losses.
Day trading requires knowledge of securities markets. Day trading requires in-
depth knowledge of the securities markets and trading techniques and strategies.
In attempting to profit through day trading, you must compete with professional,
licensed traders employed by securities firms. You should have appropriate experience
before engaging in day trading.
Day trading requires knowledge of a firm's
operations. You should be familiar with a securities firm's business practices,
including the operation of the firm's order execution systems and procedures.
Under certain market conditions, you may find it difficult or impossible to liquidate
a position quickly at a reasonable price. This can occur, for example, when the
market for a stock suddenly drops, or if trading is halted due to recent news
events or unusual trading activity. The more volatile a stock is, the greater
the likelihood that problems may be encountered in executing a transaction. In
addition to normal market risks, you may experience losses due to system failures.
Day trading will generate substantial commissions, even if the per trade
cost is low. Day trading involves aggressive trading, and generally you will pay
commissions on each trade. The total daily commissions that you pay on your trades
will add to your losses or significantly reduce your earnings. For instance, assuming
that a trade costs $16 and an average of 29 transactions are conducted per day,
an investor would need to generate an annual profit of $111,360 just to cover
commission expenses.
Day trading on margin or short selling may result
in losses beyond your initial investment. When you day trade with funds borrowed
from a firm or someone else, you can lose more than the funds you originally placed
at risk. A decline in the value of the securities that are purchased may require
you to provide additional funds to the firm to avoid the forced sale of those
securities or other securities in your account. Short selling as part of your
day-trading strategy also may lead to extraordinary losses, because you may have
to purchase a stock at a very high price in order to cover a short position.
Potential Registration Requirements. Persons providing investment advice
for others or managing securities accounts for others may need to register as
either an "Investment Advisor" under the Investment Advisors Act of
1940 or as a "Broker" or "Dealer" under the Securities Exchange
Act of 1934. Such activities may also trigger state registration requirements. |
| | |
| |  |
| | YOUR
FINANCIAL SUCCESS
Your financial success may depend on the type
of investment advice you get today. One of the most important decisions you can
make right now is determining who to turn to for good advice.
We believe
we offer an unmatched range of choices that can provide the best possible advice
for you. Advice that meets an exacting standard—a standard that always puts
your interests first.
All financial consultants are equipped with the
technology, research, prudence, and expertise to facilitate efficient, and intelligent
investment decisions. These capabilities, along with immediate access to the marketplace,
are critical to the investor's success.
| | |
