SOVEREIGN TRADING CAPITAL, INC.
Effective Date: May 10, 2026 Last Updated: May 10, 2026
CUSTOMER MUST READ THIS DOCUMENT BEFORE ACTIVATING AN ACCOUNT.
Sovereign Trading Capital, Inc. ("Sovereign") provides algorithmic options trading services that execute trades on Customer's brokerage account through API authorization. Options trading is highly speculative and involves substantial risk of loss. This document describes specific risks Customer should understand before authorizing Sovereign to trade on Customer's behalf.
DRAFT — rate tables migrated 2026-05-18 to self-generating placeholders. The numeric monthly-fee values shown below are inserted at request time from
models.fee_tiers.FEE_RATES_BY_SENTINEL(the canonical source of truth used by the customer-facing pricing surfaces), so this disclosure always reflects current advertised rates with no possibility of drift. The list of active Sentinels is also drawn from the platform's roster registry — retired Sentinels are automatically excluded. PENDING OREN REVIEW before customer launch — both the dynamic-table approach and the current numeric values want Counsel's sign-off.
Sovereign currently operates a roster of Sentinels organized into two tiers:
SPX tier — for accounts at or above $25,000, trading SPX 0-day-to-expiration ("0DTE") iron condors:
| Sentinel | Founders' Monthly Rate |
|---|---|
| Oracle V1 | 0.49% |
| Genesis V2 | 0.58% |
| Polaris | 0.64% |
| Kairos | 0.65% |
| Chochma | 0.67% |
| Precision | 0.70% |
| Eli | 0.72% |
SPY tier — for accounts in the $2,500–$25,000 range, trading SPY 0DTE iron condors. Each SPY Sentinel is a variant of an SPX parent Sentinel and inherits its parent's monthly rate per dollar of capital deployed. SPY Sentinels are currently in Phase A Lite validation; subscriptions open once validation completes:
| Sentinel | SPX parent | Founders' Monthly Rate |
|---|---|---|
| SPY Genesis | Genesis V2 | 0.58% |
| SPY Polaris | Polaris | 0.64% |
| SPY Kairos | Kairos | 0.65% |
| SPY Precision | Precision | 0.70% |
| SPY Eli | Eli | 0.72% |
All Sentinels trade 0DTE iron condors and substantially similar structured options positions on either the S&P 500 Index (SPX tier) or the SPDR S&P 500 ETF (SPY tier). The underlying differs; the strategy mechanics are the same.
0DTE options carry expiration risk. Iron condors expire worthless if SPX closes between the short strikes (typical profit case). Iron condors expire at maximum loss if SPX moves beyond the long strike on either side at expiration. Loss on a single 0DTE trade can be substantial relative to the credit received.
Sentinels are correlated within tier. All SPX tier Sentinels trade SPX 0DTE iron condors; all SPY tier Sentinels trade SPY 0DTE iron condors. SPX and SPY are themselves highly correlated (SPY tracks the same S&P 500 index). A single adverse day in the underlying market may therefore produce losses across multiple Sentinels — whether they are SPX, SPY, or a mix — if Customer subscribes to more than one.
Drawdowns are inevitable. No strategy wins every trade. Customer should expect periodic drawdowns and should not assess strategy performance over short periods.
Past performance does not guarantee future results. All performance figures shown on Sovereign's website reflect either paper trading (simulated execution at $100 million simulated capital) or backtests over historical time periods. Live results may materially differ due to factors including but not limited to: real execution slippage, real liquidity constraints, real-time data delays, broker order handling, and market regime changes.
Position sizes are calculated as a percentage of account balance. Increases in account balance increase position sizes proportionally; decreases reduce them. Customer should ensure their brokerage account always maintains sufficient capital and margin for the selected strategy.
Margin calls are possible. Iron condors require margin held against potential maximum loss. Brokerage firm may issue margin calls if account equity falls below maintenance margin requirements. Customer is responsible for meeting margin calls.
Insufficient buying power may prevent position entry. If Customer's available margin is insufficient at the moment of trade entry, Sovereign will skip that trade for Customer's account. This may cause Customer to miss profitable trades that other customers receive.
System failures may affect trading. Sovereign's systems, the brokerage's systems, internet connectivity, market data feeds, or other infrastructure may experience outages affecting order execution, position management, or account state visibility.
Authentication failures may interrupt trading. OAuth tokens expire and require automatic refresh. If refresh fails — for instance because Customer revoked access, brokerage changed policies, or there is a temporary brokerage API issue — Sovereign may be unable to manage open positions for a period.
Data discrepancies are possible. Sovereign's dashboard relies on broker API data. Brief discrepancies may occur due to API delays, outages, or sync issues. Customer should periodically verify positions directly through the brokerage. The brokerage's record is authoritative.
Software bugs may produce unexpected behavior. Sovereign rigorously tests all changes, but as with any software system, bugs are possible. Customer agrees that occasional software issues are an inherent risk of using algorithmic trading services.
Sovereign does not custody Customer funds. All custody, clearance, settlement, and dispute resolution responsibilities rest with the brokerage firm.
Brokerage failure or insolvency. Securities Investor Protection Corporation ("SIPC") insurance may apply but does not protect against trading losses. Customer should review brokerage SIPC coverage and account protection terms directly with the brokerage.
Brokerage policy changes. Tastytrade or any future supported brokerage may change its API terms, options trading rules, margin requirements, or authorization policies, potentially affecting service availability or performance.
Brokerage API rate limits. During market events with unusual order flow, the brokerage may impose rate limits that delay Sovereign's ability to enter or exit positions.
Trading generates tax events. Each trade close is a taxable event. Customer is responsible for reporting capital gains and losses on Customer's tax returns.
Wash sale rules. Frequent options trading may trigger wash sale considerations. Customer should consult a tax professional.
Tax treatment differs by underlying. SPX index options are typically classified as Section 1256 contracts under the Internal Revenue Code, with mark-to-market treatment and a 60/40 long-term/short-term capital gains split. SPY options are typically classified as equity options and taxed at short-term capital gains rates regardless of holding period (since 0DTE positions close same-day). The same trade strategy will therefore produce materially different after-tax outcomes depending on whether Customer is subscribed to an SPX or SPY Sentinel. Customer should consult a tax advisor regarding their specific situation.
1099 reporting. The brokerage will issue 1099 forms reflecting all trades. Sovereign does not provide tax advice or tax documents and is not responsible for the accuracy of brokerage-issued 1099 forms.
Regulatory changes. Securities regulations, options trading rules, and tax laws may change in ways that affect strategy availability, fee structure, or service operation.
Sovereign's regulatory status. Sovereign currently operates as an algorithmic trading service operator. Sovereign is evaluating Investment Adviser registration with the U.S. Securities and Exchange Commission or applicable state regulators. As Sovereign's regulatory status evolves, the legal nature of Customer's relationship with Sovereign may change, which could result in additional disclosures, agreement updates, or operational changes.
Minimum capital and brokerage requirements. Sovereign requires a minimum of twenty-five thousand dollars ($25,000) of equity in the connected brokerage account for each selected SPX Sentinel, or two thousand five hundred dollars ($2,500) for each selected SPY Sentinel. These are Sovereign's eligibility thresholds — strategy-economics decisions (iron condor positions require sufficient capital to be sized appropriately; the SPX threshold is higher because SPX options have larger notional value per contract; below either threshold transaction costs and slippage materially compress returns), not regulatory requirements. Customer is responsible for maintaining sufficient equity for the selected Sentinels and for satisfying any margin, day-trading, or options-approval requirements imposed by Customer's own brokerage firm, which may change over time.
Foreign account regulations. If Customer's brokerage account is held outside the United States, additional regulatory considerations may apply. Sovereign currently serves only U.S. residents.
Service may change or be discontinued. Sovereign may add, modify, or remove strategies. Sovereign may change fee structure with thirty (30) days' notice. Sovereign may discontinue the service entirely with thirty (30) days' notice.
Personnel risk. Sovereign relies on a small team. Disruption to key personnel may affect service continuity. Sovereign has implemented backup procedures, but no system is fully immune to operational issues.
Cybersecurity risk. Despite Sovereign's security measures, malicious actors may attempt to compromise customer accounts or Sovereign's systems. Customer should protect Customer's credentials and report any suspicious activity immediately.
Although SPX and SPY options are both highly liquid, extreme market conditions may impair the system's ability to enter or exit positions at theoretical prices. During flash crashes, circuit breakers, or unusual volatility events, options pricing on either underlying can become discontinuous, and slippage may be substantial. SPY options spreads may widen more than SPX options spreads under stress because SPY's smaller per-contract notional attracts a wider participant base, but in either case Customer should expect that execution prices in extreme conditions may materially differ from theoretical mid-market.
Customer's entire authorized capital may be concentrated in single 0DTE trades. While individual trades have defined maximum losses (the spread width minus credit received), the concentration of capital in a single position type and underlying (SPX for SPX tier Sentinels, SPY for SPY tier Sentinels) means Sentinel losses can compound across consecutive trades. Subscribing to multiple Sentinels does not diversify this concentration risk meaningfully — SPX and SPY both track the same S&P 500 index and move together under stress.
Sovereign requires:
We do not recommend Sovereign as appropriate for:
Sovereign does not provide individualized investment advice. Decisions about whether to use Sovereign, which strategy to select, and how much capital to allocate are Customer's decisions. Customer should consult independent financial, tax, and legal advisors.
Customer acknowledges receiving and reviewing the Options Clearing Corporation publication "Characteristics and Risks of Standardized Options" (also known as the Options Disclosure Document or "ODD") prior to opening an options account at the brokerage. The ODD is available at theocc.com.
By activating an account with Sovereign, Customer acknowledges having read this Risk Disclosure Statement and understanding that:
a. Customer may lose substantial capital, up to and including total loss of deployed capital b. Past performance does not guarantee future results c. Sovereign is not Customer's individual investment adviser d. Customer is responsible for monitoring Customer's own brokerage account e. Customer's risk capital is appropriate for the strategy selected f. Customer has reviewed the Options Clearing Corporation Options Disclosure Document g. Customer has consulted independent financial, tax, and legal advisors as appropriate
Sovereign Trading Capital, Inc. 9350 Wilshire Boulevard, Suite 203 Beverly Hills, California 90212 +1 (424) 777-4553 sovereigntrading.ai
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