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Risk disclosure statement

1. Purpose and scope

This Risk Disclosure Statement accompanies the Rivativ product information for each strategy and forms part of the materials provided to professional clients and to firms that license Rivativ research for onward distribution ("you", "the recipient"). It describes the principal risks associated with the Rivativ options strategies in general (Section 3) and the additional risks specific to each individual strategy (Section 4).

It is not exhaustive. It does not describe every risk that may arise, and the risks described may combine or interact in ways that amplify losses.

2. Nature of the relationship

Rivativ provides research, strategy frameworks, and model portfolios only. Rivativ does not manage client capital, does not execute trades, does not hold client assets, and does not provide personalised investment advice. All trading decisions and all execution are made by the recipient or its clients, on their own account and at their own risk.

Model portfolios are illustrative expressions of Rivativ's views. They are not personalised to any recipient's or end-investor's financial situation, objectives, portfolio size, tax position, or risk tolerance, and they are not instructions or recommendations to trade.

Recipient responsibility. Rivativ is established in Germany; the strategies primarily reference US-listed instruments (S&P 500 index options, VIX options). It is the recipient's sole responsibility to determine, under the laws and regulations applicable to it and to any end-investor it serves, (a) whether these strategies and instruments are appropriate and suitable, (b) whether the recipient is permitted to use or distribute them, and (c) to which categories of client they may lawfully be offered. The recipient is responsible for its own client classification, suitability/appropriateness assessments, and regulatory disclosures.

3. General risks applicable to all strategies

Options are complex, high-risk instruments. They are not suitable for all investors. Trading options can result in the total loss of invested capital. For uncovered or short option positions, losses can substantially exceed the amount initially invested or the premium received.

  • Market and directional risk. Adverse movements in the S&P 500 or related instruments can cause significant losses, including rapidly and within a single session.
  • Volatility risk. Changes in implied volatility can produce losses.
  • Leverage and margin risk. Options provide leverage. Positions may require margin; adverse moves can trigger margin calls and the forced liquidation of positions at unfavourable prices, potentially crystallising losses greater than the capital allocated.
  • Tail and gap risk. Markets can gap sharply between sessions or move violently intraday on news or macro events. Risk-limiting features (hedges, defined-risk structures, trend filters, position limits) may fail to engage in time, may not perform as modelled, and do not eliminate the risk of severe loss in extreme conditions ("black swan" events).
  • Liquidity risk. In stressed markets, bid-ask spreads widen, certain strikes or tenors become illiquid, and it may be impossible to enter, adjust, or exit positions at or near modelled prices.
  • Assignment and early-exercise risk. Short option positions may be assigned, including early, requiring delivery or cash settlement at inopportune times.
  • Execution and slippage risk. Because you execute independently, your fills, timing, and costs will differ from those assumed in the model. Slippage, latency, and partial fills can materially reduce or eliminate the modelled edge.
  • Tracking / divergence risk. Your realised results will differ — potentially significantly — from the published model portfolio, due to differences in execution timing, position sizing, available capital, costs, and market conditions at the moment you act.
  • Model and methodology risk. The strategies rely on quantitative assumptions (for example, the persistence of the volatility risk premium, term-structure behaviour, and correlation relationships) that may weaken, disappear, or reverse. Edges identified historically may not persist; market regimes change.
  • Risk-model limitations. Value-at-Risk and similar measures are statistical estimates based on historical data and assumptions. They can be exceeded, particularly during discontinuous moves; "hard limits" do not guarantee that losses stay within budget.
  • Currency risk. Recipients and end-investors operating in EUR, GBP, or other currencies bear exchange-rate risk on USD-denominated instruments.
  • Concentration and correlation risk. The strategies are concentrated in S&P 500 / US volatility exposures. Assumed diversification or hedging relationships can break down precisely when protection is most needed.
  • Interest-rate risk. Changes in interest rates affect option pricing and financing costs.
  • Counterparty and clearing risk. Exposure exists to brokers, clearing houses, and other counterparties involved in execution and settlement.
  • Hypothetical and past performance. Any backtested, simulated, or historical figures are illustrative only and subject to inherent limitations (including hindsight and the absence of real execution). Past performance is not a reliable indicator of future results.
  • Conflicts of interest. Rivativ, its management, and its shareholders may hold or trade positions in the same or similar strategies and instruments referenced in the research, and their interests may differ from or conflict with yours.
  • No guarantee; no liability. Rivativ gives no guarantee of any outcome or return. To the fullest extent permitted by applicable law, Rivativ accepts no liability for any loss or damage — direct, indirect, or consequential — arising from use of or reliance on its research or model portfolios.

Operational, business-continuity and service-availability risks:

Delivery of Rivativ research and model portfolios depends on Rivativ as a business and on a chain of technology and third-party providers. Any disruption to that chain can mean that signals or updated portfolios are delayed, incomplete, incorrect, or not delivered at all — leaving positions un-rebalanced, un-rolled, or unhedged at times when timely action would have mattered. Specific risks include:

  • Discontinuation of the service. Rivativ may cease to provide research and model portfolios at any time, including permanently — for example if Rivativ ceases trading, becomes insolvent, is wound up, or otherwise no longer exists. In that event no further updates, signals, rolls, or adjustments will be issued, and any open positions held by you or your end-investors will be left without ongoing strategy support. You should not assume the service will remain available, and you should maintain your own plan for managing or unwinding positions if it stops.
  • Service interruption / inability to deliver updates. Technical failures may prevent Rivativ from calculating or transmitting updated portfolios on schedule or at all. Signals may be missed, late, or only partially delivered.
  • Software, code and model-engine defects. Rivativ's strategy engine and supporting code may contain bugs, logic errors, or implementation faults. These may cause incorrect, inconsistent, or missing signals and portfolio outputs, and such defects may not be detected immediately.
  • Data-provider dependency and outages. The strategies rely on third-party market-data providers. Outages, delays, gaps, or errors in that data can prevent Rivativ from calculating the strategies, or can cause calculations to be based on faulty inputs, producing erroneous or absent signals.
  • Cloud infrastructure dependency. Rivativ's systems run on third-party cloud infrastructure (including Amazon Web Services). Any outage, degradation, or failure affecting that infrastructure or its own upstream providers can prevent Rivativ from generating or delivering updated portfolios, regardless of fault on Rivativ's part.
  • Broader third-party dependency. Rivativ relies on additional external services (connectivity, hosting, communications, and other vendors). A failure or discontinuation by any of these providers can interrupt or degrade the service.
  • Cybersecurity risk. Systems and communications may be subject to cyberattack, unauthorised access, data corruption, or interception, which could disrupt delivery or compromise the integrity of signals.
  • Delivery and communication failure. Even when a signal is generated correctly, the channel used to deliver it may fail, and you may not receive it in time to act.
  • No guarantee of availability, timeliness, or continuity. Rivativ does not warrant uninterrupted, error-free, or continuous availability of its research or model portfolios. You are responsible for having your own contingency arrangements for monitoring and managing positions during any interruption or discontinuation, and Rivativ accepts no liability for losses arising from any delay, error, interruption, or cessation of the service, to the fullest extent permitted by applicable law.

4. Strategy-specific risks

These risks are in addition to the general risks in Section 3.

4.1 Defensive Premium Harvest

This strategy writes S&P 500 index puts, holds long VIX calls as a hedge, and applies a trend filter, run as an overlay on a core index holding.

  • Short-put downside exposure. Writing index puts creates substantial exposure to falling markets. In a sharp or sustained sell-off, losses on the short puts can be large and accumulate quickly.
  • Hedge basis risk. The long VIX-call hedge is an imperfect offset to short-put losses. VIX and the S&P 500 are correlated but not perfectly; in a slow grind lower the hedge may contribute little while the short puts lose value, so the realised offset can fall short of the modelled net-risk profile.
  • Hedge carry drag. The long VIX calls bleed value (theta/carry) in calm markets, a persistent cost that reduces returns when no shock occurs.
  • Trend-filter whipsaw. The trend discipline may flatten the book near a low and re-enter higher, locking in losses or missing a rebound, and it cannot protect against gaps that occur before it triggers.
  • Overlay leverage. Because the strategy sits on top of a core index position, total exposure can exceed the nominal capital; a severe decline affects both the core holding and the short puts simultaneously.

4.2 Diagonal Volatility Carry

This strategy expresses short-volatility carry through a VIX call ratio structure (net-short — i.e. more VIX calls sold than bought, with long further-out-of-the-money VIX calls held as partial cover).

  • Short-volatility / vol-spike risk. The position is net-short volatility. A sharp rise in volatility causes losses, and those losses accelerate and continue to grow the further and faster VIX rises — there is no level at which the loss stops increasing.
  • Unbounded loss potential. Because the structure is net-short VIX calls (more calls sold than bought), the position has no upper cap on losses. As volatility rises beyond the short strikes the uncovered short calls lose value without limit, so a sharp or extreme volatility spike can cause losses far exceeding the carry collected and the capital allocated — potentially many multiples of many months' accumulated premium.
  • VIX-specific dynamics. VIX options are priced off VIX futures, not spot VIX. Movements in the futures term structure and in the volatility of volatility (VVIX) can produce losses even when spot VIX appears contained.
  • Roll risk. Systematic rolling near expiry exposes the position to adverse term-structure shifts and additional execution cost.
  • Negatively skewed return profile. The strategy tends to produce frequent small gains punctuated by occasional larger losses, which can be demanding to hold through.

4.3 Systematic Surface Capture

This strategy writes short-dated out-of-the-money S&P 500 calls (monetising upside skew) and runs calendar spreads (short front-month, long back-month), with a trend filter and VaR-based sizing, as an overlay.

  • Upside / "crash-up" risk. Writing OTM calls caps upside participation and exposes the position to losses in a sharp rally or melt-up (for example a squeeze or a gap higher). Losses on short calls in a strong advance can be substantial.
  • Term-structure and vega risk on the calendars. The short-front / long-back structure is sensitive to shifts in the volatility term structure and in implied volatility; an unfavourable change (front-month IV spiking or back-month IV collapsing) can cause losses.
  • Gamma risk. The short front-month leg carries high gamma near expiry, so small moves in the underlying can produce large, rapid P&L swings.
  • Skew-regime change. The structural overpricing of upside skew that the strategy harvests may compress or reverse, eroding or eliminating the edge.
  • Trend-filter whipsaw and overlay leverage / capped participation, as described above.

4.4 Predictive Gamma Strategy

This is a higher-frequency, standalone strategy that uses a proprietary machine-learning classifier to filter 0DTE S&P 500 straddle entries, issuing a daily Long, Short, or Flat signal.

  • Model / machine-learning risk. The strategy depends entirely on a proprietary ML classifier. The model may be affected by overfitting, feature drift, and regime change; its performance can degrade, and "high-conviction" signals can be wrong.
  • 0DTE gamma risk. Zero-days-to-expiry options carry extreme gamma. An adverse intraday move can cause rapid, large losses with little time to react, and short straddle positions have very large loss potential on a significant intraday move.
  • Intraday short-volatility exposure. A single large intraday move (for example on unexpected news or a macro surprise) can produce a loss that exceeds the gains of many prior sessions.
  • High execution sensitivity. Higher trading frequency increases transaction costs and slippage and makes results highly dependent on execution quality. Because you execute independently, your daily timing and fills will diverge meaningfully from the model.
  • Benchmark is itself high-risk. The strategy is measured against selling a 0DTE straddle every session — itself a high-risk approach. Outperforming that benchmark does not imply low absolute risk.

5. Acknowledgement

By using Rivativ research or model portfolios, the recipient confirms that it has read and understood this Risk Disclosure Statement, that it is acting on its own account and responsibility, that it has made its own assessment of suitability, appropriateness, and regulatory permissibility, and that Rivativ provides no investment advice and accepts no liability for trading decisions or their outcomes.