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Option Disputes

The transaction may be a plain-vanilla cap and floor forming a "collar". Or, the option may be substantially more complex, perhaps embedded in a swap.

Issues may involve whether, commensurate with the risk, the option was properly priced and structured by the dealer. At the outset did the customer take on too much market risk or obtain too little compensation? At the conclusion, was the payout properly priced? Did the customer pay too much? Or, was the customer underpaid, for instance, in the early unwind of a European-style option?

Legal issues may include whether the option is a "security" such as to make applicable U.S. federal securities laws, including SEC Rule 10b-5. Among other issues, was there an "excessive mark-up" (or "excessive mark-down")? Is there a valid basis for recovery under applicable state common law? If the client was based outside the United States, is there a valid basis for recovery under other national law?

Typically, each case, when analyzed, will present different challenges and different opportunities.



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