The following is content from a typical Risk Disclosure that is usually required to be read by any individual prior to the opening of a futures and options trading account. It appears here only to highlight the risks associated with trading high-leverage instruments such as futures and options and, by extension, forex.

Effect of Leverage

Initial margin is small relative to the value of a futures contract so that transactions are "leveraged" or "geared". As such, transactions in futures carry a high degree of risk. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: leverage can work against you as well as for you. Because of the inherent risk of futures, you should only trade with risk capital, that is, money that you can afford to lose.

Because of leverage, you may sustain a total loss of initial margin funds and any additional funds deposited with the FCM to maintain the equity in your position. If the market moves adversely or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your futures position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit.

Limits of Risk-Reducing Orders

The placing of certain contingent orders such as stop-loss or stop-limit orders which are intended to limit loss of an outstanding futures position to certain amounts may not be effective because market conditions may make it impossible to execute such orders. In these cases, the trader will continue to own the outstanding futures position and will be liable for any loss that continues to accrue on the position. During periods of especially volatile price movements and in markets where price limits apply, the risk that stop-loss orders cannot be executed becomes greater.

While strategies that employ combinations of positions such as spread and straddle trades are often less risky than outright long or short positions, there may be times when such strategies expose the trader to as much risk as simple long or short positions.

Changing Contract Terms and Conditions

You should be aware of the terms and conditions of the specific futures or options contracts which you are trading, especially the circumstances, if any, under which you will become obligated to make or take delivery of the underlying interest in the case of a futures contract. Under certain circumstances specified in the exchange rules, the specifications of outstanding contracts may be modified by the exchange or clearing house to reflect changes in the underlying interest. The context of your exposure may, as a result, change. Typically, though, changes to contract specifications are effective for up-coming futures contract months yet to be listed, and not futures contract months outstanding.

Market Disruptions: Suspension of Trading

Market conditions, such as illiquidity, and/or the operation of the rules of certain markets (specifically, the suspension of trading in any contract or contract month because of price limits) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate your positions in the event that prices move adversely.

Further, during these instances, normal pricing relationships between the underlying interest and the futures, and the futures and the corresponding futures option may not exist. The latter can occur when, for example, the futures contract underlying the option is subject to price limits while the option is not. The absence of an underlying reference price may, in turn, make it difficult to judge fair value of your futures position and, consequently, equity in your account.

Safety of Deposited Cash and Property

Protection accorded money or other property you deposit for domestic and foreign transactions in futures vary, particularly in the event of insolvency or bankruptcy of the recipient FCM. The extent to which you may be able to recover your money or property may be governed by specific legislation or local rules. In some jurisdictions, property which had been specifically identifiable as your own will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall.

Trades in Other Jurisdictions

Foreign futures transactions involve executing and clearing trades on a foreign exchange. This is the case even if the foreign exchange is formally "linked" to a domestic exchange, whereby a trade executed on one exchange liquidates or establishes a position on the other exchange. No domestic organization regulates the activities of a foreign exchange, including the execution, delivery and clearing of transactions on such an exchange, and no domestic regulator has the authority to compel enforcement of the rules of the foreign exchange or the laws of the foreign country. Moreover, such laws or regulations will vary depending on the foreign country in which the transaction occurs.

For these reasons, customers who trade on foreign exchanges may not be afforded certain of the protections which apply to domestic transactions, including the right to use domestic alternative dispute resolution procedures. In particular, funds received from customers to margin foreign futures transactions may not be provided the same protection as funds received to margin futures transactions on domestic exchanges. Before you trade, you should familiarize yourself with the foreign rules which will apply to your particular transaction.

Finally, you should be aware that the price of any foreign futures or options contract (so long as such contracts are denominated in a currency other than the U.S. dollar) and, therefore, the potential profit and loss resulting therefrom, may be affected by any fluctuation in the U.S. dollar exchange rate between the time the order is placed and the foreign futures contract is liquidated or the foreign option contract is liquidated or exercised.

Trading Facilities

Most exchange open-outcry and electronic trading facilities are supported by computer-based component systems for the order-routing, execution, matching, registration or clearing of trades. As with all facilities and systems, they are vulnerable to temporary disruption or failure. Your ability to recover certain losses may be subject to limits on liability imposed by the system provider, the market, the clearing house and/or member firms.

Trading on an electronic trading system, such as Globex or Access, may differ not only from trading in an open out-cry market, but also from trading on other electronic trading systems. If you undertake transactions on an electronic trading system, you will be exposed to risks associated with the system including the failure of hardware and software. The result of any system failure may be that your order is either not executed according to your instructions, or is not executed at all.

Special Concerns for Option Traders

Because of the volatile nature of the commodities markets, the purchase and granting of commodity options involve a high degree of risk. Commodity option transactions are not suitable for many members of the public. Such transactions should be entered into only by persons who have read and understood the disclosure statement and who understand the nature and extent of their rights and obligations and of the risks involved in the option transactions covered by the disclosure statement. The following is NOT a complete representation of the disclosure statement for options on futures (this is made available to persons wishing to open a futures and futures options trading account), but it does identify some of the pertinent risks involved with options trading.

Underlying Instrument

Both the purchaser and grantor should know whether the particular option in which they contemplate trading is an option which, if exercised, results in the establishment of a futures contract (an "option on a futures contract") or results in the making or taking of delivery of the actual commodity underlying the option (an "option on a physical commodity"). Both the purchaser and grantor of an option on a physical commodity should be aware that, in certain cases, the delivery of the actual commodity underlying the option may not be required and that, if the option is exercised, the obligations of the purchaser and grantor will be settled in cash.

In the case of an option on a futures contract, both the purchaser and grantor of an option on a futures contract should realize that the option, if exercised, will result in the establishment of a futures position. The buyer of a call option will be assigned a long position in the underlying futures if excercised, while the buyer of a put option will be assigned a short position in the underlying futures if exercised. The purchaser of an option should be aware that some option contracts provide for only a limited period of time during which an option may be exercised.

Risk of Loss

The purchaser of a put or call option is subject to the risk of losing the entire purchase price of the option, in addition to commissions paid. A person should therefore not purchase a commodity option unless they are able to sustain such a loss. In other words, money used to purchase options should be risk capital.

While option purchasers pay the full premium up front and are not required to pay additional margin, option grantors or sellers may be required to deposit additional margin if the market moves against them (a market price rise in the case of the call option grantor and a market price decline in the case of a put option grantor). A person should not, therefore, grant a commodity option unless they are able to meet such additional calls for margin and, in such circumstances, to sustain a very large financial loss. In cases where it is difficult to offset a losing option position on an exchange, the option grantor will be subject to the full risk of their positions until the options expire.

Liquidity Concerns

Exchange trading mechanics are designed to provide for competitive execution and to make available to buyers and to sellers a continuous market in which an option once purchased can later be sold; and in which an option, once granted, can later be liquidated by an offsetting purchase. Although each exchange's trading system is designed to provide market liquidity for the options traded on that exchange, there can be no assurance that a liquid offset market on the exchange will exist for any particular option, or at any particular time, and for some options no offset market on that exchange may exist at all. In such an event, it may not be possible to effect offsetting transactions in particular options. Thus, to realize any profit, a holder will have to exercise their option and have to assume all risks and to comply with margin requirements for the underlying futures contracts or, in the event of an option on a physical commodity, incur the costs and risks of holding the physical good. A grantor could not terminate their obligation until the option expired or they were assigned an exercise notice. You may exercise your option but be unable to liquidate your resulting futures position because of daily price limits or lack of liquidity in the futures market.

Price Limits

The individual should be aware that an option may not be subject to daily price fluctuation limits even if the underlying futures has such limits and, as a result, normal pricing relationships between options and the underlying futures may not exist. Also, futures positions assigned as a result of an expiring option may not be capable of being offset if the underlying futures is at a price limit.

Deep Out-of-the-Money Options

A person contemplating the purchase of a deep out-of-the-money option (that is, an option having a strike price significantly above, in the case of a call, or significantly below, in the case of a put, the current price of the underlying futures contract) should be aware that the chance of such an option becoming profitable is ordinarily remote. On the other hand, a potential grantor of an out-of-the-money option should be aware that such options normally provide small premiums while exposing the grantor to all of the potential losses of an option sale.

Other Risks

The grantor of a call option who does not have a long position in the underlying futures contract, that is, the case of a naked sale or short, is subject to risk of loss should the price of the underlying futures be higher than the strike price of the option, and this loss may exceed the premium received for the initial sale of the call option. The grantor of a call option who has a long position in the underlying futures, that is, the case of a covered sale or short, is subject to the risk of decline in price of the underlying futures, less the premium received for granting the call option. In exchange for the premium received, the call option grantor gives up all of the potential gain resulting from an increase in the price of the underlying futures above the strike price of the option.

The grantor of a put option who does not have a short position in the underlying futures contract, that is, the case of a naked sale or short, is subject to risk of loss should the price of the underlying futures be below the strike price of the option, and this loss may exceed the premium received for the initial sale of the put option. The grantor of a put option who has a short position in the underlying futures, that is, the case of a covered sale or short, is subject to the risk of a rise in price of the underlying futures, less the premium received for granting the put option. In exchange for the premium received, the put option grantor gives up all of the potential gain resulting from a decrease in the price of the underlying futures below the strike price of the option.