The Option Paper Trading Simulator Disclaimer
The Option Paper Trading Simulator is an educational tool meant to familiarize investors with Options Trading without having to risk their own capital. The tool is limited in its features and does not replicate every real-life scenario. Investors who use the Option Paper Trading Simulator should be aware of these nuances before employing similar option strategies in real life.
1) No Order Restriction on Liquidity. The simulator does not restrict orders that exceed the available size of inventory in the market. Therefore, the simulator will allow users to be able to acquire and dispose of positions of greater quantity without any price impact than you could in real life. For example, if a user wishes to purchase 5,000 contracts of ABC $100 JAN 23, 2025 while the market is only offering 100 contracts for sale, all 5,000 can be filled with no impact on price. In real life, the market would only be able to fill 100 contracts at the going price, and once filled subsequently would result in a higher offering price for a given order size.
2) Order Handling. The simulator will execute Market Orders at the bid-ask price for sell and buy orders, respectively. Real life orders may not be filled as quickly at favorable prices due to large volume of orders and fast-moving markets. The order types available are Limit and Market Orders. In the simulator option positions can be opened until the close on expiration date, whereas in real life Ram Financial, LLC restricts opening orders on expiration date up until a certain time before market close.
3) Corporate Actions. Options that undergo corporate actions will be automatically closed in the simulator after the market closes. In real life, there are a myriad of adjustments an option contract can experience because of a corporate action.
4) Market Data Delay. Unless you are subscribed to OPRA real-time market data, the market data displayed is based on a 15-minute delay.
5) Legging Out Limitations. Certain limitations apply to legging out of strategies. The short call position in a buy-write option strategy cannot be closed independently of the underlying long stock position. Both positions of the buy-write must be closed at the same time.
6) Option Assignments. Option assignments will not occur in the Option Paper Trading Simulator. Therefore, the entire life-cycle of an option’s mechanics and various associated risks cannot be fully realized in the simulator. These include dividend risk, pin risk, and early assignment risks.
This disclaimer attempts to address the major differences between the simulator and real- life option trading. It is, however, not all encompassing of all the possible differences between the two. Ram Financial, LLC is not liable for any adverse outcomes in real life option trading that are not able to be replicated in, or derived from, the simulator. The results of the Options Paper Trading Simulator are not intended to be relied upon as a track record or validation of any trading strategies.