What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: June 1, 2022

Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses from trading risky options contracts. All too often brokers recommend trading strategies that are far too risky for their clients, who end up losing a lot of money. One such investment approach is options trading, or the right to buy or sell a security at a certain price in the future. If you guess right on an option, you can make money, provided you buy or sell at the right time at the right price. But in a volatile market, which has pretty much been standard fare the past two years, the chances of guessing right are slim.

Investors lost an estimated $1 billion trading options during the pandemic, according to fa-mag.com. Many traded off broker advice or random tips on “meme stocks” from online platforms such as Reddit. These “mom-and-pop day traders” may have lost up to $5 billion when the costs of middlemen such as market makers is tallied. Worse yet, the day traders may have lost even more on “leveraged” trades involving borrowed money.

“Turns out, taking leveraged flyers on meme stocks mentioned on Reddit’s WallStreetBets trading forum is harder than it looks,” fa-mag reported, citing a new study from the London Business School. “Spurred by Reddit posts and urged on by Twitter and TikTok influencers, daily volume in bullish contracts set record after record as stuck-at-home tinkerers flocked to the contracts in an effort to juice up returns.”

What lured inexperienced investors into the rough-and-tumble world of online trading? “Retail traders were a principal pandemic-era Wall Street story,” fa-mag added. “At home with little to do during the early days of the Covid outbreak, many turned to wagering on the stock market. They placed bets on everything from sturdy tech companies to reopening plays and bankrupt firms. It all reached a peak at the start of 2021, when an army of day-traders bid up the prices of so-called meme stocks like GameStop Corp., whose shares skyrocketed more than 50% in a single session on multiple occasions.”

As with all get-quick-rich schemes, day trading falsely promises easy profits while cloaking the risk. The recent frenzy was fueled by online brokers that didn’t charge commissions. The truth is, most people who engage in short-term trading – particularly with options – consistently lose money.

“Buying options is an easy way to lose money because of the highly-skewed payoff,” the study noted. “The options that they like, they lose money most of the time, and sometimes they get these really big wins — but those are rare.”

Did your financial advisor recommend you invest in options or an options-trading strategy? FINRA has specific rules in place to monitor options accounts, through FINRA Rule 2360. Brokerage firms have a heightened duty to ensure that their clients fully grasp options trading and that they realize the speculative risk involved in these trading schemes. If a firm does not verify that an options trading scheme or plan is not suitable for a client, then the Firm can be liable to the client for investment losses sustained.

FINRA brokerage firms are also legally required by FINRA to supervise and monitor their financial advisors and what they are selling because of FINRA Rule 3110. Further, their investment recommendations must be vetted and authorized by the firms and have an obligation to investors to fully reveal true risk and return information about the investments sold. Investors can file FINRA arbitration complaints if these rules are broken. You can often avoid rogue broker-advisors by checking their backgrounds through BrokerCheck,

If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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