Mauriello Law Firm Achieves $1.5 Million Settlement in Stock Option FINRA Arbitration

January 2022

The Mauriello Law Firm obtained a $1.5 Million settlement against a major Wall Street brokerage firm in a FINRA arbitration claim. The case involved the firm's recommendations of a covered call-writing options strategy, namely, selling "call" options on 100% of a single company stock that the client owned. The strategy was pitched to the client as a way to generate additional income with virtually no additional risk. Unfortunately, this was a misrepresentation. As the price of the stock consistently rose and exceeded the "strike price" of the options, the risk increased that the shares would be "called away," i.e., sold, to the holders of the options.

To avoid having the stock called away, the firm recommended "rolling the calls" - buying back the calls, and selling calls with later maturity dates but with strike prices that were still "in-the-money" (i.e., lower than the current share prices). This evolving strategy of "kicking the can down the road" could not be maintained and eventually caused huge losses for the client.

Investing in or trading in stock options can be complex and entail significant risks. If you have encountered losses due to a recommended stock options strategy or trading scheme, contact us to discuss whether you may have a legal claim for stock option losses.