Risk Disclosure

This document is mandatory disclosure required of any platform operating in this space, and supplements the risk disclosures you receive from your broker, your exchange, and the regulator. It is not intended to be exhaustive — markets innovate faster than disclosures can be updated — but it is intended to be honest and complete.

This Risk Disclosure is published by Sleeping Trade LLC, a Delaware-registered company doing business in India, in compliance with general principles of disclosure expected of technology service providers operating in connection with the Indian securities market, with particular reference to SEBI's circulars on algorithmic trading for retail and to the Master Circular for Stock Brokers issued by SEBI from time to time. While Sleeping Trade LLC is not itself a SEBI-registered intermediary, we have voluntarily aligned our disclosure standards with the regulator's expectations to give users the clearest possible picture of what they are signing up for.

It is intended for: (i) any individual considering subscribing to a Sleeping Trade plan, whether Signal Only or Auto-Trade; (ii) any existing subscriber whose risk profile or capital position has changed; and (iii) any individual using a friend's or family member's Sleeping Trade subscription, where such usage is permitted at all. Continued use of the Service constitutes acknowledgement of every risk described below. If at any point you find that any risk listed here is unacceptable to you, you should immediately cancel your subscription, revoke API access, and close out positions.

This document should be read together with the Terms of Service, the Disclaimer, and the risk disclosures issued by your broker. In case of any inconsistency between this document and the broker's risk disclosure relating to the same risk, the broker's disclosure governs your account-level relationship with the broker; this document governs the relationship between you and Sleeping Trade LLC.

Trading any instrument on any exchange exposes you to the following categories of risk, regardless of whether trading is manual or automated:

• Market risk: the risk that prices move against your position. F&O markets are particularly susceptible to sharp, often non-linear moves driven by macro data, corporate news, geopolitical events, and global cross-asset shocks.
• Liquidity risk: the risk that you cannot exit a position at the price you want, or at all, because there are no buyers or sellers. Far-month and far-strike options are particularly affected. Even index options can become illiquid in the final minutes of an expiry session.
• Volatility risk: the risk that India VIX or instrument-level implied volatility expands sharply, widening spreads, increasing margin requirements, and triggering risk-management actions.
• Gap risk: the risk that the market opens far from the previous close, leaving stop losses ineffective. Indian markets can gap on global cues overnight, on weekends, on RBI policy days, on Budget day, and on election results.
• Black-swan and systemic risk: the risk of low-probability, high-impact events — flash crashes, credit-event contagion, currency-peg breaks, surprise sanctions, pandemics — that no backtest can anticipate.
• Force-majeure risk: the risk that natural disasters, civil disturbance, war, or government action interrupts the Service, the broker, the exchange, or the clearing corporation, leaving you exposed to open positions you cannot manage.
• Circuit breakers and exchange halts: the risk that trading is paused at the index or instrument level, locking your position at an unfavourable price for the duration of the halt or until expiry.
• Regulatory risk: the risk that SEBI, RBI, the exchanges, or the Government of India introduces new rules — STT changes, lot-size changes, margin changes, restrictions on weekly expiries, restrictions on algorithmic access — that materially alter the strategy's economics.

The futures and options segment carries risks beyond those of cash-segment equity trading. The Service's strategies operate primarily in F&O. Key F&O risks include:

• Leverage in futures: futures are margin instruments; a small adverse move can wipe out the margin and trigger broker intervention. Leverage cuts both ways — the same leverage that magnifies gains magnifies losses.
• Time decay (theta) in options: long-option positions lose value over time, even when the underlying is unchanged. On expiry day, intra-day theta can decimate the value of out-of-the-money options.
• Implied-volatility crush: a sharp drop in IV after a known event (Budget day, RBI policy, US Fed meeting) can move long-option positions sharply against you even if the underlying moves in your direction.
• Assignment risk: short option positions held into expiry may be assigned, requiring delivery of the underlying. For stock options, this means physical delivery; you must have the cash or stock to settle, or face an exchange-determined cash-settlement penalty.
• Expiry-day volatility: Indian weekly index expiries concentrate enormous order flow into the final hours, producing extreme intraday moves. Stop losses and limit orders may be skipped over.
• Weekly vs monthly expiry: weekly expiries decay faster, with less time to recover; monthly expiries concentrate larger open interest and produce different risk profiles. SEBI has from time to time restricted the number of weekly expiry products; future restrictions may affect strategy availability.
• Lot-size and margin changes: the exchanges revise lot sizes and the SPAN-plus-exposure margin model from time to time, which directly changes the capital required to trade a given position size.
• Physical-settlement risk for stock options: all stock-option contracts in India are physically settled. If you are short a near-the-money option going into expiry, you may end up taking or making delivery of shares, with the associated capital and exposure consequences.

Algorithmic trading is not a magic eraser of trading risk. It is a disciplined execution layer; the strategy still has to make money. Key algorithm-specific risks include:

• Backtest vs live divergence: backtested results assume zero slippage, perfect fills, and stationary market regimes. Live trading inevitably introduces slippage, partial fills, rejected orders, and market-regime change. The gap between backtest and live can be material — sometimes the entire edge.
• Overfitting: a strategy can be tuned so closely to historical data that it captures noise rather than signal. We mitigate this through walk-forward testing, but no mitigation is perfect, and out-of-sample performance can be much worse than in-sample performance.
• Regime change: markets do not stay in a single regime. A strategy that performed well in the low-volatility, low-rate environment of one period may underperform when rates rise, volatility expands, or correlation structures shift. We monitor for regime change but cannot react to it instantaneously.
• Latency and slippage: internet latency, broker rate limits, and exchange queue dynamics introduce slippage between the signal price and the executed price. For some strategies, slippage of even a few rupees per leg is the difference between profit and loss.
• Order rejections and partial fills: brokers and exchanges reject orders for many reasons — circuit limits, freeze quantities, margin shortfalls, daily order-rate limits. We retry where appropriate, but rejected orders can leave you with mis-hedged positions.
• Algorithm errors: all software has bugs. While we run extensive automated tests and monitor production for anomalies, there is residual risk that an unexpected interaction between code, data, and market conditions produces incorrect orders.
• Connectivity failures: a network outage between us and the broker, between the broker and the exchange, or within the exchange itself can prevent us from entering, exiting, or adjusting positions, leaving you exposed.

The Service connects to your broker through that broker's official API. Risks specific to this layer include:

• Broker API downtime: all major Indian brokers experience occasional API outages, especially around expiry, results, and high-volatility events. During outages we cannot place, modify, or cancel orders. We will notify you, but you are responsible for any consequences.
• Internet and ISP failures: failures at our infrastructure, your home internet, or any intermediate ISP can interrupt the data flow.
• Server outages: our infrastructure runs primarily on AWS Mumbai. AWS has multi-zone redundancy but is not infallible; regional outages are rare but possible.
• Data-feed interruptions: our strategies depend on live or near-live market data from broker APIs. If the data feed is interrupted or returns stale data, our signals may be based on incorrect prices.
• Cybersecurity risk: any internet-connected system is exposed to attack. We invest heavily in security (encryption, access controls, monitoring) but cannot guarantee that every attack will be repelled.
• Unauthorised API access: if your broker credentials, your Sleeping Trade credentials, or your two-factor device are compromised, an attacker may misuse the API. Practise password hygiene, use unique passwords, enable broker-side 2FA, and revoke API access immediately if you suspect compromise.
• Daily token expiry (Zerodha): Zerodha's API access tokens expire daily at 06:00 IST. You must perform a one-click re-authorisation each trading day. If you miss it, no trades will be placed that day.
• Broker maintenance windows: brokers periodically schedule maintenance (often weekend mornings); during maintenance the API may be unavailable.

The single most important rule in trading is: only trade with money you can afford to lose. F&O is a leveraged, derivative product; positions can move against you faster than the margin in your account is replenished, and your broker is empowered to liquidate your positions if margin shortfalls are not cured. The minimum capital range for each plan is published on the pricing page. These minimums are the lower bound for the strategy to function with appropriate position sizing; they are not a floor on the size of losses you can incur.

• Margin calls: if your account margin drops below the broker's threshold, the broker will issue a margin call and may liquidate positions to bring the account back to compliance, irrespective of whether the liquidation is favourable to you.
• Forced liquidation: liquidations are typically executed at the prevailing market price, not at a price favourable to you. In gap or fast-market conditions, this can compound losses.
• Overnight risk: positions held overnight are exposed to news, global cues, and gap-open moves, none of which can be hedged after market hours.
• Weekend and holiday risk: Indian markets are closed on weekends and listed holidays; positions left open across these periods cannot be adjusted until the next session.
• Event-day gaps: election results, Union Budget day, RBI MPC outcomes, US Fed announcements, and major geopolitical events can produce overnight moves of 2-5% in indices and much more in single names. Stop losses do not protect against gap opens.
• Margin requirement changes: SEBI and the exchanges revise margin rules from time to time, particularly during periods of elevated volatility. A position that was within margin at entry may become undermargined after a rule change.

SEBI's circular on algorithmic trading for retail (issued in successive iterations during 2022 and updated in 2025) provides a framework for retail traders to access algorithmic execution through registered platforms with appropriate risk gates, audit trails, and order-rate limits. Our compliance approach is to operate consistently with the spirit of that framework even where, as a technology service provider, we are not the registered intermediary in the chain.

What is permitted under the framework, in summary: retail traders may use algorithmic execution provided through their registered broker or through a platform working with the broker; the broker remains responsible for risk gates and audit trails; orders must be placed through APIs that the broker has approved and rate-limited; and certain prohibited activities (front-running, spoofing, layering, insider-trading-driven execution) remain prohibited regardless of mechanism.

What is not permitted under the framework, in summary: unregulated "managed account" arrangements where a third party places trades in your account in return for a profit share without SEBI registration; sale of strategies framed as investment advice without an Investment Adviser registration; sale of "guaranteed return" products in any form; and any execution that contravenes existing prohibitions on market abuse.

We are a technology platform that gives you an algorithmic execution layer running inside your own broker account. Funds remain in your account, the broker remains responsible for the regulated relationship, and we provide the strategy stack and execution code. We are not a SEBI-registered investment adviser, research analyst, or portfolio manager, and nothing in the Service is investment advice as defined under the SEBI (Investment Advisers) Regulations, 2013. If you require regulated investment advice, consult a SEBI-registered Investment Adviser.

All performance figures shown on our website, in marketing materials, in pitch decks, and in support correspondence — including any "track record", "monthly return", "win rate", or "drawdown" figures — are illustrative. They are based on either backtested results applied to historical data, or to live results from our internal accounts and a small number of pilot users. They are not a promise, prediction, or guarantee of the returns you will experience.

Backtesting limitations include but are not limited to: (i) survivorship bias — using current index constituents to backtest history overstates returns by excluding stocks that were delisted; (ii) look-ahead bias — using data that would not have been available at the historical decision point; (iii) data-snooping bias — running enough variations of a strategy to find one that fits past data well, without a true edge; (iv) execution-cost optimism — assuming zero slippage, zero broker rejection, and full fills at the signal price; (v) regime stationarity — assuming the future market regime resembles the historical period.

Paper-trading is more realistic than backtesting because it operates on real-time data, but it still differs from live trading in three critical ways: (a) paper trades do not consume real capital, so the discipline cost is not paid; (b) paper trades do not interact with the order book — the act of placing a real order moves the market a little, while a paper order does not; (c) paper-traders frequently override paper signals with manual judgement in ways they would not override live signals.

Each supported broker introduces its own operational nuances. We summarise the principal points here; for the most current rules consult the broker's documentation.

• Zerodha: daily login is required to refresh the API access token at 06:00 IST. Kite Connect imposes order-rate limits during high-volatility periods. Zerodha levies an API subscription fee of ₹2,000 per month, billed by Zerodha to your trading account; this is in addition to our subscription.
• Upstox: token validity is longer than Zerodha's, but Upstox imposes its own rate limits. Upstox has historically had lower API stability during expiry sessions; we monitor for this and reroute where possible.
• Angel One: SmartAPI is full-featured; Angel One has a more centralised order management system than Zerodha or Upstox, which produces different rejection behaviour.
• HDFC Securities and ICICI Direct: these legacy brokers have stable APIs but more conservative rate limits. Some advanced order types may not be available.
• Broker insolvency: in the unlikely event that a broker becomes insolvent, customer securities and unutilised funds are protected by the SEBI investor-protection framework and the relevant exchange's investor-protection fund up to applicable limits. We have no role in insolvency resolution.
• Broker margin policy changes: brokers are entitled to revise their margin policies — for example, increasing the margin required for a particular strategy or reducing the margin available against pledged securities. Such changes may affect strategy economics in your account.
• Broker terms changes: brokers may amend their API terms of use. We monitor changes and reroute as needed; in extreme cases (where a broker withdraws API access for retail entirely), we would migrate users to a supported alternative.

F&O income in India is taxed as non-speculative business income under the Income Tax Act, 1961. It is not capital gains; it is taxed at slab rates and is eligible for ordinary business-expense deductions (subject to the relevant rules). This treatment has consequences:

• If you have F&O income, you may be required to maintain books of accounts and have them audited under Section 44AB if turnover exceeds the prescribed threshold (currently ₹10 crore for primarily-digital businesses).
• F&O losses may be set off against other non-speculative business income in the same year and carried forward for up to eight assessment years against future business income; failure to file your return on time forfeits carry-forward.
• Securities Transaction Tax (STT), exchange transaction charges, GST on brokerage, SEBI turnover charges, and stamp duty all impact your net returns. Our backtests include best estimates of these costs but the actual incidence depends on your broker, plan, and trade pattern.
• You are responsible for advance-tax obligations under the Income Tax Act. F&O income often produces large advance-tax liabilities; under-payment attracts interest under Sections 234A/B/C.
• Non-resident Indians have separate considerations including TDS on F&O income, FEMA reporting, and the application of any DTAA between India and the country of residence (notably, the India-US DTAA for US-residents trading Indian markets).

We do not provide tax advice. Consult a qualified Chartered Accountant (or, for US persons, a US tax advisor with India experience) to determine the precise tax treatment of your trading and to plan your filings.

Even with a fully automated execution layer, the operator — you — remains in the loop in three important ways:

• Discretionary overrides: the dashboard exposes a "stop trading" or "close all positions" button. In drawdown, the temptation to use it grows. Backtested edges typically include drawdowns of meaningful magnitude; cutting the strategy off in the middle of a drawdown converts a temporary mark-to-market move into a realised loss.
• Recency bias: after a string of wins, traders often increase position size beyond what the strategy was designed for; after a string of losses, they cut size below what is needed to recover. Both reactions are costly.
• Expectation management: a "5–7% target monthly return" is a target, not a steady output. Some months will show much higher returns; some months will show losses. Your decision to continue or stop should be based on the strategy's behaviour over many months, not on any individual outcome.

The Service includes optional features that mitigate these risks — for example, a "do not allow override during market hours" mode, scheduled review windows that lock the dashboard between meetings, and weekly journals that summarise the trades. We strongly recommend enabling these.

We make no guarantee of profit, no guarantee of capital preservation, no guarantee of out-performance, and no guarantee that any specific strategy will continue to be offered. Targets shown on our website (such as "5–7% monthly target return") are illustrative; they are based on backtests under historical conditions and are not contractual commitments. Actual returns may be much higher, much lower, or negative.

If anyone — a Sleeping Trade employee, a contractor, a marketing partner, or a third-party "expert" you encounter — represents to you that returns are guaranteed, that representation is unauthorised. You should report it immediately to legal@sleepingtrade.in and you should not rely on it. There is no such thing as a guaranteed safe return in active trading; even fixed-income instruments carry credit and rate risk. Anyone offering "guaranteed returns" in F&O is, at best, unauthorised, and may be operating illegally.

By using the Service you acknowledge each of the following statements specifically and individually. Each is a condition of your use of the Service.

1. I understand that trading F&O involves substantial risk of loss and is not suitable for all investors.
2. I understand that 91% of individual F&O traders made net losses according to SEBI's 2025 study.
3. I understand that Sleeping Trade is not a SEBI-registered investment adviser, research analyst, or portfolio manager.
4. I understand that funds remain in my broker account at all times and Sleeping Trade does not custody my funds.
5. I understand that API access granted to Sleeping Trade is trade-only and cannot withdraw or transfer funds.
6. I understand that past performance, including backtested or live track records, is not a guarantee of future returns.
7. I understand that the platform may experience downtime and that no specific level of uptime is contractually guaranteed.
8. I understand that broker outages and exchange halts are outside Sleeping Trade's control.
9. I understand that I am responsible for maintaining sufficient margin in my trading account.
10. I understand that I am responsible for performing daily token refresh at Zerodha if I am a Zerodha user.
11. I understand that physical settlement of stock options means I may receive or deliver shares.
12. I understand that algorithmic trading does not eliminate market, execution, or systemic risk.
13. I understand that I should consult a CA for tax matters and a SEBI-registered IA for investment advice.
14. I understand that I can revoke API access at any time from my broker dashboard.
15. I understand that I should only deploy capital I can afford to lose.
16. I understand that I should not increase position size after wins or decrease size after losses without analysis.
17. I understand that overnight, weekend, and event-day gap risk is not eliminated by stop losses.
18. I understand that returns shown on the website are illustrative, not promises.
19. I understand that I should not enter F&O if I cannot emotionally tolerate drawdowns.
20. I understand that this Risk Disclosure does not list every possible risk and that markets evolve.

The Service is not for everybody. You should not use it if any of the following applies to you:

• You cannot afford to lose your trading capital. F&O is a leveraged segment; losses can exceed initial margin in fast-market conditions.
• Your trading capital is below the minimum recommended for your plan. Under-capitalised accounts are forced to take outsized risk to operate the strategy and are prone to margin calls.
• You require predictable, regular income from the capital you propose to deploy. Active trading is volatile by nature; even profitable strategies have months of negative returns. Capital you need for living expenses, EMIs, school fees, or medical contingency does not belong in F&O.
• You are emotionally unable to tolerate drawdowns. Even our best-performing strategies have had drawdowns of meaningful magnitude. If you are likely to disable the strategy mid-drawdown, you will lock in losses and miss the recovery.
• You do not understand F&O. If you cannot explain the difference between a long call and a short put, you do not yet have the literacy to trade these instruments. Learn first; deploy capital later.
• You are subject to a SEBI, exchange, or court order restricting your trading activity.
• You are dependent on a third party for trading capital. Trading with borrowed capital, capital from family without disclosure, or capital from "investor friends" is a recipe for disputes that will not be resolved by us.

If any of these applies to you, do not subscribe; if you have already subscribed, cancel and seek any available refund within the cooling-off period.

If you suspect an emergency — unauthorised orders in your account, runaway losses, a compromised credential, or a regulatory direction — follow the steps below in order.

1. Revoke API access at the broker. Log in to your broker dashboard and revoke our API token. This is the fastest, most authoritative way to stop further activity. The revocation takes effect immediately at the broker.
2. Square off open positions. Once revocation has taken effect, close any open positions through the broker terminal. We cannot do this for you after revocation.
3. Disable broker auto-actions. If your broker has any auto-square-off or auto-execution settings linked to our integration, disable them.
4. Change your Sleeping Trade password and revoke active sessions. Use the dashboard to log out all sessions and reset the password.
5. Contact us. Email support@sleepingtrade.in with subject line "EMERGENCY" and a brief description of what happened. We respond to emergency mail with priority during Indian business hours.
6. Preserve evidence. Take screenshots of unauthorised orders, anomalous behaviour, and dashboard state. These may be needed for any subsequent investigation by us, the broker, or a regulator.

You retain at all times your right to escalate to regulators and exchanges. The principal channels are:

• SEBI SCORES portal: scores.sebi.gov.in — for complaints against SEBI-registered intermediaries (your broker, depositories, etc.). We are not a SEBI-registered intermediary; complaints about us cannot be lodged here, but complaints about your broker can.
• NSE Investor Service Cell: for complaints relating to trades on NSE.
• BSE Investor Service Cell: for complaints relating to trades on BSE.
• Broker grievance officer: every SEBI-registered broker is required to display the name and contact of its grievance officer; that office is the first point for any broker-related complaint.
• Consumer forum: for service-deficiency complaints against Sleeping Trade as a service provider, you may approach the consumer forum of the relevant pecuniary jurisdiction. The e-DAAKHIL portal allows online filing.
• Sleeping Trade legal team: legal@sleepingtrade.in for any complaint about the Service.

This Risk Disclosure should be read together with the Indian and US laws and regulations applicable to algorithmic trading, F&O, and technology service providers in the securities market, including but not limited to:

• SEBI Act, 1992 and rules and regulations issued thereunder.
• Securities Contracts (Regulation) Act, 1956.
• SEBI (Stock Brokers) Regulations, 1992.
• SEBI (Investment Advisers) Regulations, 2013.
• SEBI circular on algorithmic trading for retail (2022 and 2025 updates).
• SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
• SEBI (Prohibition of Insider Trading) Regulations, 2015.
• Information Technology Act, 2000 and rules thereunder.
• Digital Personal Data Protection Act, 2023.
• Income Tax Act, 1961 and the GST Acts to the extent applicable to subscription billing.
• Prevention of Money Laundering Act, 2002 to the extent applicable.
• For matters relating to Sleeping Trade LLC's corporate existence: the General Corporation Law of the State of Delaware, USA, and applicable US federal law including OFAC sanctions, the Bank Secrecy Act to the extent applicable, and US securities law to the extent it bears on US persons trading Indian markets.

This list is non-exhaustive. Compliance is your responsibility in your account; the regulatory framework continues to evolve, and you are encouraged to consult professional advisers on any specific matter.