NEW: Real-time data in Trading Tools
Connect now
Risk Disclosure
Risk Disclosure Agreement
I. Introduction
A. Purpose of the agreement
This Risk Disclosure Agreement ("Agreement") is provided by Options Research and Technology Services ("ORATS") to inform users of the potential risks associated with using ORATS products and services, including but not limited to the Data API, Intraday Data API, Trading Tools, and historical data sets. The purpose of this Agreement is to ensure that users are fully aware of the inherent risks in options trading, backtesting, and using financial data and tools.
B. Acknowledgment of risks
By using any ORATS product or service, you acknowledge that you have read, understood, and agree to the risks outlined in this Agreement. You recognize that options trading and the use of financial tools and data involve significant risks, including the potential for substantial financial losses. You agree that you are solely responsible for any investment decisions made using ORATS products and services.
II. General Marketplace Risks of Options Trading & Backtesting
A. Options trading risks
Options trading involves a high degree of risk and is not suitable for all investors. The price of options can be highly volatile, and traders can lose their entire investment in a relatively short period of time. Options may expire worthless, resulting in the complete loss of the premium paid. Additionally, the complexity of options strategies can make it difficult for even experienced traders to fully understand and manage their positions.
B. Backtesting limitations
Backtesting, while a valuable tool for strategy development, has inherent limitations. Past performance does not guarantee future results. The effectiveness of a strategy in historical simulations does not ensure its success in live trading. Market conditions, regulations, and other factors can change, potentially rendering previously successful strategies ineffective or unprofitable.
C. Volatility and market conditions
Options prices are significantly affected by market volatility, which can change rapidly and unpredictably. Extreme market conditions, such as high volatility, low liquidity, or market disruptions, can lead to wide bid-ask spreads, slippage, and difficulty in executing trades at desired prices. These conditions can result in substantial losses for options traders.
D. No guarantee of profit
ORATS does not guarantee any profit or success in options trading or backtesting. All trading involves risk, and users should be prepared to lose their entire investment. No trading system or methodology is guaranteed to be profitable, and past performance is not indicative of future results.
III. Specific Risks Related to ORATS Tools and Services
A. Data API risks
The ORATS Data API provides access to live, delayed, and historical end-of-day options data augmented with proprietary indicators. Users should be aware that:
- Data may be subject to delays, inaccuracies, or errors.
- Proprietary indicators are based on ORATS' methodologies and may not reflect market consensus or other analysis methods.
- The API may experience downtime or performance issues, potentially affecting trading decisions.
- Users are responsible for ensuring they have the necessary permissions and licenses to use the data, especially for professional or enterprise use.
B. Intraday Data API risks
The ORATS Intraday Data API offers one-minute options data, which carries additional risks:
- Intraday data is more susceptible to short-term fluctuations and noise, which may not be representative of longer-term trends.
- The high frequency of data updates increases the potential for temporary inaccuracies or inconsistencies.
- Users must have robust systems capable of handling and processing large volumes of data quickly and accurately.
- Strategies based on intraday data may be more sensitive to execution speed and market microstructure, potentially leading to higher transaction costs and increased risk.
C. Trading Tools risks
ORATS Trading Tools, including the option scanner, backtester, stock scanner, and other features, come with specific risks:
- The tools are designed to assist in analysis and decision-making but should not be relied upon as the sole basis for trading decisions.
- Backtesting results may be subject to overfitting and selection bias, potentially leading to unrealistic expectations of strategy performance.
- Scans and filters may not capture all relevant market factors or may produce false positives or negatives.
- The tools may not account for all transaction costs, slippage, or other real-world trading frictions, potentially overstating strategy performance.
- The stock scan templates, option scan templates, and other pre-canned strategies or scans available in the ORATS dashboard are provided for informational and educational purposes only. They do not constitute financial advice, and ORATS is not acting as a financial advisor by providing these templates.
D. Historical data risks
ORATS provides historical options data sets, including near end-of-day, one-minute intraday, and two-minute snapshot data. Users should be aware that:
- Historical data may contain errors, omissions, or adjustments that could affect analysis results.
- Market conditions, regulations, and trading practices change over time, potentially limiting the relevance of historical data to current market conditions.
- The data may not include all factors that influenced historical prices or market behavior.
- Users are responsible for validating and verifying the accuracy and completeness of the historical data for their specific use cases.
E. Broker connection risks
While connecting to brokers through ORATS offers convenience and streamlined trading, it's important to be aware of the potential risks involved:
- Security: Ensure you're using secure, private networks when accessing your brokerage account through any third-party application.
- Technical issues: There may be occasional technical glitches or latency issues that could affect order execution or account information.
- Limited functionality: Some features available directly through your broker might not be accessible via the ORATS platform.
- Data discrepancies: There could be slight differences in data between what's shown on ORATS and what's on your broker's platform.
- Regulatory compliance: Ensure that using a third-party connection complies with your broker's terms of service and relevant regulations.
- Responsibility for trades: You are ultimately responsible for all trades placed through the ORATS-broker connection, including any errors or unintended orders.
Always review and understand your broker's policies regarding third-party connections, and consider consulting with a financial advisor to discuss the risks and benefits of using such tools.
IV. Options Trading Risks
A. Complex nature of options
Options are complex financial instruments that derive their value from underlying assets. The relationship between option prices and underlying asset prices is non-linear and can be influenced by multiple factors, including time to expiration, volatility, interest rates, and dividends. This complexity can make it challenging for traders to accurately assess the risk and potential reward of options positions.
B. Potential for total loss
Options buyers risk losing their entire investment if the option expires out-of-the-money. For options sellers, the risk can be even greater, as losses can potentially exceed the premium received. Certain strategies, such as naked short selling of options, can expose traders to theoretically unlimited losses.
C. Time decay
Options are wasting assets, meaning they lose value as time passes, all else being equal. This time decay, or theta, accelerates as the option approaches expiration. Time decay can work against long option positions and may require precise timing or significant price movements in the underlying asset for positions to be profitable.
D. Liquidity risks
Not all options contracts are equally liquid. Less popular or further out-of-the-money options may have wide bid-ask spreads or low trading volume, making it difficult to enter or exit positions at favorable prices. This lack of liquidity can lead to slippage and increased transaction costs, potentially eroding profits or exacerbating losses.
V. Backtesting and Forecasting Risks
A. Limitations of historical data
Backtesting relies on historical data, which may not fully represent current or future market conditions. Historical data can be subject to survivorship bias, where delisted or bankrupt companies are excluded, potentially overstating historical performance. Additionally, historical data may not capture all relevant factors that influenced past market behavior.
B. Overfitting and selection bias
Backtesting carries the risk of overfitting, where a strategy is optimized to perform well on historical data but fails to generalize to new, unseen data. Selection bias can occur when strategies are chosen based on their past performance, potentially leading to unrealistic expectations of future performance. Users should be cautious of strategies that perform exceptionally well in backtests, as they may be the result of overfitting rather than robust, generalizable strategies.
C. Changes in market conditions
Markets evolve over time, with changes in regulations, trading technologies, market participants, and economic conditions. Strategies that performed well in the past may become less effective or even unprofitable as market conditions change. Users should be aware that backtesting results may not accurately predict future performance in different market environments.
VI. Data and Technology Risks
A. Data accuracy and reliability
While ORATS strives to provide accurate and reliable data, users should be aware that:
- Financial data can contain errors, omissions, or inconsistencies.
- Data may be subject to revisions or corrections after initial publication.
- Different data sources may provide conflicting information.
- The methods used to calculate derived or proprietary indicators may change over time.
Users are responsible for verifying the accuracy and reliability of data for their specific use cases.
B. System outages and technical issues
ORATS services rely on complex technology infrastructure. Despite best efforts to maintain system stability and reliability, users may experience:
- Service interruptions or downtime due to maintenance, upgrades, or unforeseen technical issues.
- Delays in data updates or API responses during periods of high market volatility or system load.
- Temporary unavailability of specific features or tools.
Users should have contingency plans in place to manage their trading activities during potential system outages or technical issues.
C. Third-party data sources
ORATS may rely on third-party data sources for certain information, such as fundamental data or news feeds. The accuracy and timeliness of this data are subject to the reliability of these third-party providers. ORATS cannot guarantee the accuracy or completeness of data from external sources.
VII. Regulatory and Legal Risks
A. Changes in regulations
The options and financial markets are subject to ongoing regulatory oversight and changes. New regulations or changes to existing regulations may impact trading strategies, data availability, or the use of certain financial products. Users are responsible for ensuring their trading activities comply with all applicable laws and regulations.
B. Tax implications
Options trading can have complex tax implications. The tax treatment of options transactions may vary depending on the specific strategy employed, holding period, and individual circumstances. Users are responsible for understanding and managing the tax consequences of their trading activities and should consult with a qualified tax professional.
C. Jurisdiction-specific risks
Users from different jurisdictions may be subject to different laws, regulations, and restrictions regarding options trading and the use of financial data and tools. It is the user's responsibility to ensure compliance with all applicable local laws and regulations.
VIII. Disclaimer of Liability
A. No investment advice
ORATS products and services, including data, tools, and analysis, are provided for informational purposes only and do not constitute investment advice. ORATS does not recommend any specific securities, strategies, or courses of action. Users are solely responsible for their investment decisions and should conduct their own research and due diligence.
B. User responsibility
Users of ORATS products and services assume full responsibility for their trading and investment decisions. By using ORATS offerings, users acknowledge that they have sufficient knowledge and experience to evaluate the risks associated with options trading and the use of financial data and tools.
C. Limitation of liability
To the fullest extent permitted by law, ORATS and its affiliates, officers, employees, and agents shall not be liable for any direct, indirect, incidental, special, consequential, or exemplary damages, including but not limited to, damages for loss of profits, goodwill, use, data, or other intangible losses resulting from the use of or inability to use ORATS products and services.
IX. Acknowledgment and Agreement
A. User's confirmation of understanding
By using ORATS products and services, you confirm that you have read, understood, and agree to the terms of this Risk Disclosure Agreement. You acknowledge that you understand the risks associated with options trading, backtesting, and the use of financial data and tools.
B. Agreement to terms
You agree to use ORATS products and services at your own risk and accept full responsibility for any financial losses or damages that may result from your use of these offerings. You understand that past performance is not indicative of future results and that no guarantees of profit or success are made by ORATS.
By proceeding to use ORATS products and services, you indicate your acceptance of this Risk Disclosure Agreement and your willingness to assume the risks associated with options trading and the use of financial data and tools.
Contact Us
Questions about the API requirements? Want to become an affiliate? Curious about the backtester? Leave us a message and we'll get back to you shortly.
Your email
Your message
Submit
ORATS
Institutional Quality Tools for All Options Traders
(312) 986 - 1060
support@orats.com
36 Maplewood Ave, Portsmouth, NH 03801
Trading Tools
Historical Data
The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors. For more information please see our disclaimer.
Interactive Brokers is not affiliated with Option Research & Technology Services, LLC and does not endorse or recommend any information or advice provided by Option Research & Technology Services, LLC.