Senior Investor Wants to Pursue $5M in Damages

Retiree Accuses Morgan Stanley of Elder Financial Abuse from Covered Call Strategy Involving NVIDIA and Apple Shares

A 77-year-old retiree wants to file a $5,000,000 FINRA arbitration case against Morgan Stanley. He contends that he was the victim of unsuitability, elder financial abuse, and breach of fiduciary duty involving the broker-dealer and its financial advisor  Nicholas Samuel Westendorf. This senior investor claims that his funds were exposed to a covered call strategy that he didn’t fully understand but he believed was supposed to protect his stock. However, he alleges, after he said in writing he wanted out, Morgan Stanley kept rolling his options for four more years. Eventually, his Apple and NVIDIA shares were called away.

This is an investor who says he made it very clear that he wanted to protect his shares. He also was new to covered call trading. He was billed six-figures for taxes on the gains. Morgan Stanley and his broker-dealer earned substantial commissions.

What Is A Covered Call Option Strategy and How Can It Lead to Investor Losses 

Covered call strategies can be high-risk. Often marketed to retirees as a conservative approach that can allow them to earn income, serious losses can occur. Shepherd Smith Edwards and Kantas (investorlawyers.com) represents investors who have suffered losses in a covered call strategy that was unsuitably recommended to them by their financial advisor.

 A covered call strategy involves a type of options contract that an investor can sell to make money from the securities that belong to them.

• The investor has to own at least 100 shares of the underlying stock/options contract. They can sell a call option for a cash premium.
• Typically, there will be a strike price that is higher than the market price. If the stock stays at the same price or goes under the strike price, the investor gets to keep their shares and the premium.
• If the stock price goes up substantially, the buyer gets to exercise the option. The seller has to sell their shares at the agreed strike price, but they can keep their premium and any gains up to the strike price. However, they can also lose out on the huge market gains that resulted from the strike price.
• If the strike price goes down, the investor/seller keeps the premiums but absorbs the full loss on the underlying stock.

 Are Covered Call Options Unsuitable for Retail Investors and Retirees?

While utilizing this investment strategy is not  across the board unsuitable for all retail investors and retirees,  it is not a good approach for every investor, including some accredited investors. Brokers have a responsibility to ensure suitability and make sure their customers understand the risks involved in this type of investment approach.

Representing Covered Call Option Strategy Investors Against Brokers

Shepherd Smith Edwards and Kantas Securities Law Firm represents investors who have suffered losses in covered call options because their financial advisor engaged in some type of broker misconduct or negligence. We are a seasoned securities law firm that represents investors with complex claims against broker-dealers. More than 90% of our clients have secured full or partial financial recovery through our dedicated and skilled efforts.

Talk To Us About Your Covered Call Option Losses Today

Call (800) 259-9010 or contact us online.