Risk Disclosure

Important information about risks associated with trading in equity, derivatives, and commodities.

IMPORTANT: Trading in equity, derivatives, and commodities involves substantial risk and may not be suitable for all investors. Please read this risk disclosure carefully before engaging in any trading activities.

The value of investments can go down as well as up, and you may receive back less than your original investment. Past performance is not indicative of future results. It is important to understand the risks involved before making any investment decisions.

WARNING: Derivatives trading involves high risk and may result in loss of your entire investment. Please ensure you fully understand the risks before trading in derivatives.

1. GENERAL TRADING RISKS

1.1. Market Volatility

  • Stock markets are subject to extreme volatility and can experience significant price fluctuations.
  • Past performance of securities does not guarantee future results or returns.
  • Market conditions can change rapidly due to economic, political, or other factors.
  • Investors may lose part or all of their invested capital.
  • No trading strategy can guarantee profits or protect against losses.

1.2. Liquidity Risk

  • Some securities may have limited trading volumes, making it difficult to buy or sell.
  • Lack of liquidity can result in wider bid-ask spreads and higher transaction costs.
  • During volatile market conditions, liquidity may further deteriorate.
  • Investors may not be able to exit positions at desired prices.
  • Illiquid securities may experience more dramatic price movements.

1.3. Systemic Risk

  • Entire market systems can be affected by economic, political, or regulatory changes.
  • Technology failures or cyber attacks can disrupt trading operations.
  • Regulatory changes may impact trading rules and market access.
  • Economic recessions or financial crises can affect all market participants.
  • Currency fluctuations can impact returns for international investments.

2. EQUITY TRADING RISKS

2.1. Stock-Specific Risks

  • Individual stocks can experience significant price volatility independent of market conditions.
  • Company-specific events such as earnings reports, management changes, or legal issues can impact stock prices.
  • Dividend payments are not guaranteed and may be reduced or eliminated.
  • Stock prices can decline to zero in case of company bankruptcy or delisting.
  • Sector-specific risks can affect groups of related stocks simultaneously.

2.2. Margin Trading Risks

  • Margin trading involves borrowing funds to purchase securities, amplifying both potential gains and losses.
  • Investors can lose more than their initial investment in margin trading.
  • Margin calls may require immediate deposit of additional funds or forced liquidation of positions.
  • Interest charges on borrowed funds reduce overall returns.
  • Volatile markets can trigger automatic margin calls and position closures.

2.3. Intraday Trading Risks

  • Intraday trading involves higher frequency transactions and increased transaction costs.
  • Positions must be squared off within the same trading day, limiting flexibility.
  • Rapid price movements can result in significant losses within short time periods.
  • Higher leverage in intraday trading amplifies both profits and losses.
  • Technical analysis and timing become crucial factors affecting profitability.

3. DERIVATIVES TRADING RISKS

3.1. Futures Trading Risks

  • Futures contracts are highly leveraged instruments that can result in large losses.
  • Margin requirements can change frequently, requiring additional capital deployment.
  • Futures contracts have expiration dates and may result in physical delivery obligations.
  • Price movements in underlying assets can cause significant profit or loss.
  • Futures trading requires sophisticated understanding of market mechanics.

3.2. Options Trading Risks

  • Options can expire worthless, resulting in total loss of premium paid.
  • Writing options involves unlimited loss potential for certain strategies.
  • Time decay (theta) continuously erodes option values as expiration approaches.
  • Volatility changes can significantly impact option prices regardless of underlying movement.
  • Complex options strategies involve multiple risk factors and require advanced knowledge.

3.3. Derivative Complexity

  • Derivatives are complex financial instruments requiring specialized knowledge.
  • Multiple factors including time, volatility, and interest rates affect derivative pricing.
  • Hedging strategies may not always provide expected protection against losses.
  • Correlation between derivatives and underlying assets may not always hold.
  • Regulatory changes can impact derivative trading rules and margin requirements.

4. COMMODITY TRADING RISKS

4.1. Price Volatility

  • Commodity prices are highly volatile and influenced by supply and demand factors.
  • Weather conditions, geopolitical events, and economic policies can cause sudden price changes.
  • Seasonal patterns and storage costs affect commodity pricing.
  • Currency fluctuations can impact commodity prices in international markets.
  • Speculative trading can amplify price movements in commodity markets.

4.2. Delivery and Storage Risks

  • Physical delivery of commodities involves additional costs and complexities.
  • Storage, insurance, and transportation costs can significantly impact returns.
  • Quality specifications and delivery locations may affect final settlement prices.
  • Perishable commodities have additional spoilage and deterioration risks.
  • Warehouse receipts and delivery mechanisms require proper understanding.

4.3. Regulatory and Policy Risks

  • Government policies on import/export duties can affect commodity prices.
  • Agricultural policies and subsidies can influence food commodity markets.
  • Environmental regulations may impact production and pricing of certain commodities.
  • International trade agreements and tariffs affect global commodity flows.
  • Regulatory changes in commodity exchanges can impact trading conditions.

5. TECHNOLOGY AND OPERATIONAL RISKS

5.1. System Failures

  • Technology failures can prevent order execution or modification during critical market periods.
  • Internet connectivity issues may disrupt access to trading platforms.
  • System maintenance and upgrades may temporarily limit trading capabilities.
  • Data feed delays or errors can affect trading decisions and order execution.
  • Backup systems may not always prevent all technology-related disruptions.

5.2. Cybersecurity Risks

  • Cyber attacks can compromise trading platforms and client data security.
  • Phishing attempts and fraudulent communications can lead to unauthorized access.
  • Malware and viruses can affect trading software and personal devices.
  • Identity theft and account compromization can result in unauthorized trading.
  • Regular security updates and vigilance are essential for protection.

5.3. Order Execution Risks

  • Orders may not be executed at expected prices due to market volatility.
  • Slippage can occur between order placement and execution, affecting returns.
  • Partial fills may result in incomplete position building or closing.
  • Stop-loss orders may not execute at intended prices during volatile markets.
  • Order routing and execution algorithms may not always optimize pricing.

6. REGULATORY AND COMPLIANCE RISKS

6.1. SEBI Regulations

  • SEBI regulations are subject to change and may impact trading activities.
  • Non-compliance with regulations can result in penalties or trading restrictions.
  • Disclosure requirements must be met for certain types of transactions.
  • Insider trading laws strictly prohibit trading on material non-public information.
  • Margin requirements and position limits are subject to regulatory oversight.

6.2. Tax Implications

  • Trading activities may have complex tax implications requiring professional advice.
  • Short-term and long-term capital gains are taxed differently.
  • Securities Transaction Tax (STT) and other charges reduce overall returns.
  • Tax laws may change and affect the profitability of trading strategies.
  • Proper record-keeping is essential for tax compliance and reporting.

6.3. Legal Risks

  • Legal disputes may arise from trading activities or broker relationships.
  • Contractual obligations must be understood and fulfilled.
  • Regulatory actions can impact market access and trading rights.
  • International trading may involve additional legal complexities.
  • Arbitration and dispute resolution mechanisms have specific procedures.

7. RISK MANAGEMENT GUIDELINES

7.1. Position Sizing and Diversification

  • Never invest more than you can afford to lose in any single position.
  • Diversify investments across different sectors, asset classes, and time horizons.
  • Maintain appropriate position sizes relative to total portfolio value.
  • Avoid concentrating investments in highly correlated assets.
  • Regular portfolio rebalancing helps maintain desired risk levels.

7.2. Stop-Loss and Risk Control

  • Use stop-loss orders to limit potential losses on individual positions.
  • Set realistic profit targets and risk-reward ratios for trades.
  • Avoid emotional decision-making during volatile market conditions.
  • Maintain adequate cash reserves for margin calls and opportunities.
  • Regular monitoring and adjustment of risk parameters is essential.

7.3. Education and Preparation

  • Continuously educate yourself about markets, products, and risks.
  • Understand all terms and conditions before entering any transaction.
  • Practice with paper trading before committing real capital.
  • Stay informed about market news and regulatory developments.
  • Consider professional advice for complex trading strategies.

Important Disclaimers

Investment Advice: This risk disclosure does not constitute investment advice. Please consult with qualified financial advisors before making investment decisions.

No Guarantee: Sapphire Broking does not guarantee profits or protection against losses. All trading involves risk, and past performance does not guarantee future results.

Regulatory Compliance: This disclosure is prepared in accordance with SEBI regulations and guidelines. Please ensure you comply with all applicable laws and regulations.

Updates: This risk disclosure may be updated periodically. Please check for the latest version on our website.

Client Acknowledgment

By trading with Sapphire Broking, you acknowledge that:

  • You have read and understood this risk disclosure document
  • You understand the risks involved in trading equity, derivatives, and commodities
  • You have the financial capacity to bear potential losses
  • You will not hold Sapphire Broking liable for any losses incurred
  • You will comply with all applicable laws and regulations

Contact Information

For questions or clarifications regarding this risk disclosure, please contact:

Risk Management Team

Last Updated: July 14, 2025

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