Market Risk
Loss from the Stock Token's directional move, gap behavior and basis to its reference security.
#Risk mechanism
A covered call retains nearly all downside in the underlying. Net premium absorbs only a fixed initial amount; losses continue as the Stock Token declines.
Stock Token price can also diverge from the reference security because liquidity, transfer conditions, venue hours or issuer-specific terms differ.
#Stress conditions
- Broad market or issuer-specific decline.
- Gap across closed-market hours or an event.
- Stock Token liquidity dislocation.
- Reference-security halt or impaired price discovery.
#Control principles
- Show payoff and downside in absolute units before entry.
- Set asset and notional concentration limits.
- Monitor Stock Token basis and executable depth.
- Define halt, gap and stale-market states explicitly.