Conservative and moderate investors who were sold on UBS Financial Services' iron condor options trading strategy called Yield Enhancement Strategy (aka YES) may be experiencing losses as this investment, which ordinarily relies on returns in a flat or stable market. YES hit volatile waters causing a ripple effect of damage to investors with low risk tolerances who were nonetheless unsuitably sold complex YES products.
The idea behind UBS' Yield Enhancement Strategy is that stability in the market will produce consistent returns, and this picture of reliability is what brokers may have unsuitably painted for investors without portraying the extent of the risks and pitfalls of the YES options investments. For instance, YES investors hold uncovered options that are risky because they are vulnerable to price fluctuations. Because YES bets on flat markets, volatility and price movements in either direction (both gains AND losses are harmful to YES) become an enemy and when markets fluctuate substantially, YES customers are susceptible to significant losses.
Rick Selvala, a former volatility manager at Credit Suisse's Volaris volatility management unit, explained that YES tends to transact in the experienced-trader community. This begs the question of why UBS would ever suggest an unsophisticated investor, or those clients with risk tolerances preferences in the low-to-moderate range, invest in YES or its riskier cousin, the "iron condor" collateral yield enhancement strategy (CYES) by Harvest Volatility Mangement LLC. CYES is another complex options-based investment strategy generally unsuitable for inexperienced, conservative, or risk-averse investors.
As was the case in late 2018 when volatility invaded the stock market and YES products faltered, harming many risk-averse clients who didn't seek YES in the first place, volatility is back with a roller-coaster financial picture. It is only a matter of time before a new generation of YES investors, many of whom were unsuitably sold on YES in the first place, experience losses (or more losses) as a result of the stock market's unpredictable performance.
To reiterate, UBS Group's Yield Enhancement Strategy or YES is regarded as a complex product that may not be suitable for risk-averse and/or inexperienced investors, as well as investors seeking safety through more traditional securities. Such fiscally conservative investors unsuitably sold YES products who experienced losses in the wake of events such as market volatility may be entitled to damages.
If you have invested in the UBS Yield Enhancement Strategy (YES) product, CYES, or with any firm, broker, or financial adviser who has recommended an unsuitable yield enhancement strategy and represented this risky and complex options product as safe or low-risk, resulting in losses or harm to your fiscal interests, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.