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Risk Disclosure Document — Algorithmic Trading in Equity Derivatives (F&O)

Effective Date: [TO BE INSERTED ON PUBLICATION]

This Risk Disclosure Document ("RDD") is provided by SMF Technologies LLP ("Company") to users of the Nexora platform ("Service") in connection with trading in equity derivatives (futures and options, "F&O") on the National Stock Exchange of India ("NSE") and/or BSE Limited ("BSE"), executed via algorithmic/automated strategies through your own brokerage account.

You must read this document carefully and in its entirety before using the Service. By using the Service, you confirm that you understand and accept each of the risks described below.

1. General Risk of Trading in Securities

1.1 Trading in securities, and particularly in equity derivatives, is inherently risky and may not be suitable for all investors. The value of derivative contracts can fluctuate widely and you may lose part or all of your invested capital.

1.2 You should not trade in F&O unless you understand the nature of the contracts you are entering into and the extent of your exposure to risk.

2. Leverage Risk

2.1 F&O contracts are leveraged instruments — a relatively small amount of margin controls a much larger notional exposure. This means that small adverse price movements can result in losses that are large in proportion to the margin deposited, including losses that may exceed the funds you have allocated to a strategy.

2.2 Strategies involving short options positions (e.g., the short strikes in an Iron Butterfly or Iron Condor) carry theoretically unlimited loss potential on the short leg(s) if not adequately hedged, and substantial loss potential even when hedged, if the market moves sharply against the position before an adjustment or exit can be executed.

3. Market and Volatility Risk

3.1 Prices of the underlying stocks/indices, and consequently of the derivative contracts, can move rapidly due to factors including macroeconomic events, corporate announcements, regulatory changes, and general market sentiment, which may be unrelated to the specific stock and outside anyone's control.

3.2 Strategies that profit from low volatility (e.g., premium-selling strategies such as Iron Butterflies/Condors) can incur significant losses during sudden volatility spikes ("gap risk", "tail risk").

4. Algorithmic and Automated Execution Risk

4.1 No guarantee of profit. The strategies offered through the Service are rules-based and may be informed by historical backtesting, but past performance — whether live or backtested — is not indicative of future results. Backtests have inherent limitations, including assumptions about fill prices, slippage, liquidity, and market impact that may not hold in live markets.

4.2 Technology and connectivity risk. Automated order placement depends on the continuous, correct operation of: (a) the Service's software and infrastructure; (b) your internet connectivity; (c) your broker's (Upstox) API and trading systems; and (d) the exchange's systems. A failure, interruption, latency, or error in any of these — including but not limited to server downtime, API rate-limiting, token expiry, or network outages — may result in orders not being placed, modified, or cancelled as intended, potentially resulting in unintended open positions, unhedged exposure, or missed exits.

4.3 Configuration risk. The behaviour of any strategy is determined by the parameters you configure (capital allocation, strike selection logic, adjustment and exit rules, position sizing). Incorrect or unsuitable configuration is your responsibility and may result in losses greater than intended.

4.4 Model and data risk. Computed analytics (e.g., max pain, implied volatility percentile, realized volatility, stock scores) are derived from market data obtained via the broker's API and may be delayed, incomplete, or inaccurate due to data provider issues. Where live data is genuinely unavailable, the Service may use documented statistical fallback values (e.g., a default realized volatility assumption) for that specific computation only — these fallbacks are disclosed in the product documentation and are not a substitute for live market data where available.

4.5 Adjustment and exit risk. Strategy adjustments and exits are triggered based on configured conditions (e.g., max pain shift, profit thresholds). There is no guarantee that an adjustment or exit will be triggered in time to limit losses, particularly during fast-moving or illiquid markets, or during periods of high order latency.

5. Dependence on Third Parties

5.1 The Service relies on your broker (Upstox) for order execution, margin computation, and account data. The Company has no control over, and is not responsible for, your broker's systems, policies, margin requirements, brokerage charges, or any actions your broker takes with respect to your account (including margin calls, forced liquidation (RMS square-off), or account restrictions).

5.2 If your broker liquidates positions due to insufficient margin (RMS action), this may occur independently of, and potentially in conflict with, the strategy logic configured on the Service.

6. Liquidity Risk

Certain option strikes, particularly those far from the money or in stocks with lower trading volumes, may have low liquidity. This can result in wide bid-ask spreads, slippage between the expected and actual execution price, and difficulty exiting positions at the desired price or time.

7. No Assurance of Returns; No Capital Protection

7.1 The Company does not guarantee any minimum return, profit, or protection of capital. All trading decisions implemented through the Service are executed in your brokerage account, for your account and risk.

7.2 Any performance figures, backtest results, or illustrative examples shown on the Platform are for informational purposes only, are hypothetical or historical in nature, do not represent actual trading by any user, and should not be relied upon as an indication of future performance.

8. Capital Suitability

8.1 You should only allocate capital to F&O strategies that you can afford to lose without materially affecting your financial position. You are solely responsible for assessing whether the strategies offered are suitable for your financial situation, investment objectives, and risk tolerance, and you are encouraged to consult an independent SEBI-registered Investment Adviser before trading.

9. Acknowledgment

By proceeding to use the Service, you acknowledge that:

  • you have read and understood this Risk Disclosure Document in its entirety;
  • you understand that trading in F&O involves substantial risk of loss, including total loss of capital allocated;
  • you understand the additional risks specific to algorithmic/automated execution described in Section 4;
  • you are entering into trades through your own brokerage account, at your own discretion (by enabling/configuring the relevant strategy), and at your own risk; and
  • the Company's role is limited to providing the software tool described in the Terms of Service, and the Company does not guarantee any outcome.

This Risk Disclosure Document is provided in addition to, and does not replace, any risk disclosure document provided by your broker or by the stock exchanges, which you should also read carefully.