Risk disclosure

Options, futures and derivatives

The risks of options, futures, margin, leverage and derivatives strategies, and the additional counterparty and eligibility conditions that apply to OTC digital-asset derivatives.

This page is the published version of this disclosure. It is the copy referenced by your Client Advisory Agreement, and it can be read here at any time without an emailed attachment.

Options, Futures & Derivatives Risk Disclosure

Risks of options, futures, margin, leverage, and derivatives strategies.

Effective July 8, 2026

This disclosure applies where a client authorizes Protocol Wealth to advise on, recommend, or manage options, futures, options on futures, margin, leverage, or other derivatives. It supplements the Client Advisory Agreement, Form ADV Part 2A, the applicable custodian or broker disclosures, and any product-specific disclosure.

Options and derivatives are not suitable for all investors. They can be complex, volatile, illiquid, and speculative. Losses may exceed the amount invested.

Required Options Disclosure

Before buying or selling exchange-traded options, investors must receive and read the Options Clearing Corporation disclosure document, "Characteristics and Risks of Standardized Options" (the ODD), available at:

https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document

The ODD contains the complete standardized-options risk disclosure. This Protocol Wealth disclosure is only a summary.

Key Risks

Leverage. Small market movements may cause large gains or losses.
Loss of premium. Purchased options may expire worthless.
Unlimited or substantial loss. Some strategies, such as uncovered short options or certain futures positions, can produce losses exceeding the initial investment.
Time decay. Options lose time value as expiration approaches.
Margin calls. Futures, margin, short options, and leveraged strategies may require additional collateral on short notice.
Forced liquidation. A broker, custodian, exchange, or counterparty may liquidate positions if collateral is insufficient.
Liquidity. Positions may be hard to close or may trade with wide spreads.
Model and valuation risk. Strategy values may depend on volatility, rates, dividends, borrow costs, liquidity, and pricing models.
Tax complexity. Options and futures may have complex tax consequences.
Operational risk. Trading, exercise, assignment, settlement, expiration, and collateral mechanics can create unexpected outcomes.

Strategy Limits

Unless expressly authorized in writing, permitted by the custodian or broker, and deemed suitable by Protocol Wealth, options activity is expected to be limited to conservative, income-oriented, or hedging strategies, such as covered calls or cash-secured puts. Uncovered, speculative, or highly leveraged strategies require separate written authorization and may be prohibited.

Digital-Asset Derivatives

Derivatives referencing digital assets involve the risks above plus the additional risks of digital assets, including less mature markets, regulatory uncertainty, venue fragmentation, high volatility, custody issues, counterparty risk, and potential fraud or manipulation. OTC digital-asset derivatives are addressed separately in the OTC Digital Asset Derivatives, ECP & Counterparty Risk Disclosure.

Protocol Wealth, LLC is a registered investment adviser (CRD #335298). Registration does not imply a certain level of skill or training. Investing involves risk, including possible loss of principal; past performance does not guarantee future results. This document is provided for informational purposes and is incorporated by reference into your Client Advisory Agreement.

OTC Digital Asset Derivatives, ECP & Counterparty Risk Disclosure

Additional disclosure for elective OTC crypto-linked options, swaps, borrow/lend, and tri-party arrangements.

Effective July 8, 2026

This disclosure applies only if a client separately elects over-the-counter digital-asset derivatives or related strategies and the service is included in a signed agreement or written authorization. It supplements the Client Advisory Agreement, digital-asset schedule, options and derivatives disclosure, Form ADV Part 2A, and any third-party platform, custodian, counterparty, or tri-party agreement.

OTC digital-asset derivatives are highly speculative and may be appropriate only for financially sophisticated clients with substantial risk tolerance, liquidity, and ability to bear losses. Protocol Wealth does not offer this service unless the client, account, counterparty, custodian, and strategy satisfy applicable eligibility, documentation, custody, and account requirements.

Eligibility and ECP Status

Certain OTC derivatives, swaps, leveraged commodity transactions, and crypto-linked transactions may be available only to eligible clients or eligible contract participants (ECPs), or may be restricted for retail market participants. ECP status must be verified before any service that requires ECP eligibility. A client must notify Protocol Wealth immediately if eligibility changes.

Non-U.S. status does not automatically make a client eligible. Non-U.S. persons, foreign entities, and cross-border arrangements are evaluated case by case based on eligibility, tax, sanctions, jurisdictional, counterparty, and account requirements.

Counterparties and Custody

An OTC arrangement may involve a direct client agreement with a counterparty or platform, such as FalconX, A1, or another approved provider, and may involve custody or collateral arrangements with Anchorage Digital Bank or another approved custodian. Protocol Wealth may act as investment adviser or limited agent under the client's written authorization, but Protocol Wealth is not the derivatives counterparty unless a signed agreement expressly states otherwise.

Even where assets or collateral are held in a tri-party custodial account, they may not be protected by SIPC, FDIC insurance, OCC clearing, or the same protections available for exchange-traded securities options. The client is exposed to the credit, solvency, operational, legal, cybersecurity, valuation, and settlement risks of each custodian, platform, counterparty, and service provider.

OTC Derivatives Risks

Counterparty credit risk. The counterparty may fail to perform or become insolvent.
Collateral risk. Collateral may be rehypothecated, restricted, liquidated, impaired, or unavailable.
Liquidity risk. OTC contracts may be difficult or impossible to unwind before maturity.
Valuation risk. Quotes may be proprietary, model-based, stale, or unavailable.
No clearinghouse guarantee. OTC contracts are generally not guaranteed by OCC or a central clearinghouse.
Regulatory risk. Law, jurisdiction, product treatment, or enforcement posture may change.
Basis and settlement risk. Contract exposure may not track the underlying digital asset as expected.
Margin and liquidation risk. Additional collateral may be required quickly, and failure to provide it may result in liquidation.
Documentation risk. Master agreements, tri-party agreements, schedules, confirmations, and platform terms control legal rights and may contain important limitations.

Protocol Wealth Role

Protocol Wealth's fiduciary duty applies to advisory recommendations and strategy execution within the scope of the advisory relationship. Protocol Wealth does not guarantee counterparty performance, platform solvency, custodian operations, market liquidity, tax treatment, legal treatment, or investment results.

Every Protocol Wealth disclosure, with its version history, is listed at protocolwealthllc.com/disclosures.