Effective Date: April 16, 2026
Read this entire document before using Trade Catalyst or making any trading decisions.
HIGH RISK WARNING
Options trading carries a high level of risk. OTM options frequently expire worthless. You can lose your entire investment in a single trade. Do not trade with money you cannot afford to lose.
Trade Catalyst provides educational content and trade ideas only. It is NOT a registered investment advisor. Nothing on this platform constitutes financial advice. You are solely responsible for your own trading decisions and outcomes.
Trading options and other financial instruments involves significant risk and is not suitable for all investors. You could lose some or all of your invested capital. Before deciding to trade, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment. Therefore, you should not invest money that you cannot afford to lose.
An out-of-the-money (OTM) option is an option contract whose strike price is unfavorable relative to the current market price of the underlying asset. For call options, this means the strike price is above the current market price. For put options, the strike price is below the current market price. OTM options have no intrinsic value — their entire value is extrinsic (time value and implied volatility). This means OTM options frequently expire worthless, resulting in a total loss of the premium paid. Trade Catalyst's setups often involve OTM catalyst plays. While these can produce significant returns when a catalyst event moves the underlying asset favorably, the base rate of OTM options expiring worthless is high. You must understand this risk before trading OTM options.
When you purchase an option, the maximum amount you can lose is the entire premium you paid for that option. This can happen quickly — sometimes within hours or days. Do not trade with money you need for rent, bills, debt payments, or essential living expenses. Only trade with capital you can afford to lose entirely without affecting your financial stability or quality of life.
Options provide leveraged exposure to the underlying asset. A small percentage move in the underlying asset can result in a large percentage move in the option price — in either direction. While leverage can amplify gains, it equally amplifies losses. A position that appears small in dollar terms may represent significant risk relative to your account size. Always size positions based on the maximum possible loss, not the expected outcome.
All options lose value over time due to theta decay. This time decay accelerates as expiration approaches, particularly in the final week before expiration. Even if the underlying asset moves in your favor, time decay can erode your option's value and result in a loss. Short-dated options (weekly expirations) are especially vulnerable to rapid time decay. If the expected catalyst event does not occur before expiration, time decay alone can destroy the entire value of your position.
Option prices are heavily influenced by implied volatility (IV). When IV is high (often before earnings, FDA decisions, or economic data releases), options are more expensive. After the event occurs, IV typically drops sharply — a phenomenon known as "IV crush." Even if the underlying asset moves in the expected direction after a catalyst event, the collapse in implied volatility can cause the option to lose value. Trade Catalyst setups may be issued before high-IV events. You must understand that IV crush is a real risk that can result in losses even on directionally correct trades.
Options markets have defined trading hours. Outside of regular market hours (9:30 AM to 4:00 PM ET), options cannot typically be traded. This means you may be unable to exit a position when you want to. Additionally, not all options contracts have sufficient trading volume or tight bid-ask spreads. Illiquid options can be difficult to sell at a fair price, and wide bid-ask spreads can significantly reduce your realized returns. Always check the liquidity of an options contract before entering a position. Low-volume strikes and distant expirations are particularly prone to poor liquidity.
Any setup track record, win rate, performance statistic, or historical result displayed on Trade Catalyst is provided for educational and informational purposes only. Past performance does not guarantee, predict, or indicate future results. Market conditions are dynamic and change constantly. A strategy or setup that performed well in one market environment may perform poorly in another. Do not assume that future setups will perform similarly to past setups. Every trade carries independent risk regardless of historical outcomes.
This is not a formality. This is a direct statement of risk. If losing the amount you are about to trade would cause you financial hardship, stress, or inability to meet your obligations, do not make the trade. Establish a maximum loss threshold before you begin trading and do not exceed it. Consider allocating only a small percentage of your total investment capital to options trading. Many experienced traders recommend risking no more than 1-5% of your total account on any single trade.
Trade Catalyst strongly recommends that you consult with a licensed financial advisor, registered investment advisor, or qualified financial professional before making trading or investment decisions. A licensed professional can evaluate your individual financial situation, risk tolerance, investment goals, and tax implications in a way that an educational platform cannot. Trade Catalyst is not a substitute for personalized professional financial advice. If you are unsure whether options trading is appropriate for your financial situation, seek professional guidance before proceeding.
Trade Catalyst is not registered as an investment advisor, broker-dealer, or financial planner with the SEC, FINRA, CFTC, NFA, or any state securities regulatory authority. Trade Catalyst does not execute trades, manage funds, or hold client assets. All trading is conducted through your own brokerage account, and you are solely responsible for all orders, executions, and account management.
By using Trade Catalyst, you acknowledge that you have read and understood this Risk Disclosure in its entirety. If you have questions or need clarification, contact us at legal@tradecatalyst.us.
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