The UBS Yield Enhancement Strategy (YES) is becoming increasingly popular among major investment firms. This strategy involves an advisor who engages in the selling of put or call options to boost returns in markets that are generally steady or not showing much movement. It’s often touted as a “safe” or “secure” option for investors in pursuit of stable outcomes. However, the reality is that the financial instruments traded under the YES strategy carry significant risks and complexities. The unpredictable nature of markets can lead to substantial financial losses. The failure to fully disclose these risks might be considered fraudulent and could be grounds for legal action.

Numerous investment firms have suggested YES to financiers in recent years, and several, if not all, are continuing to recommend you these perilous investments. Currently, we are conscious of these companies providing Yield Enhancement Strategy via structured funds, notes, managed accounts, and other comprehensive investment products and plans:

• UBS Financial Services
• Morgan Stanley
• Merrill Lynch
• Credit Suisse

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Recovery Options for Investors Who Lost Money in a Yield Enhancement Strategy

For financiers who have lost money in YES investments, monetary reimbursement may be available with the help of FINRA arbitration.  To pull through financial losses in FINRA arbitration, individuals need to have the capability to validate, through attorneys that their losses were due to investment con. All investments bear risk, and losing money in YES or other venture does not really mean that the money was lost due to con. However, considering the distinctive risks associated with YES or iron condor policies, we believe that financiers who have lost funds in such investments will be permitted to recuperate their losses in several instances.

If you lost money with the UBS Yield enhancement strategy, call the Investment Fraud Lawyers at 1-888-628-5590 for a free consultation.  They help investors recover funds with a “No Recovery, No Fee.”

What is Investment Fraud?

The term “investment fraud” is so much more than what many people think it to be. While quite a few of you imagine boiler room frauds as you have seen in many movies too, numerous cases include ways that are much more mundane.

Investment fraud includes a broad collection of unacceptable advisory and broker practices that result in individuals naively making bad investment decisions. While this entails advisers and brokers’ deliberate scheme to earn at financiers’ expense, it also involves situations where financiers are given inappropriate suggestions or are not given enough data they require to have to safeguard themselves. This insufficiency of risk disclosure is regarded as investment fraud and could result in class action lawsuits.

YES or Yield Enhancement Strategy Risks

YES strategy is dicey since it relies on market stability which is nearly non-existent in the long run. The aim of these policies is to generate income when a stock index, usually S&P 500, stays within a particular array that is marked by the “strike prices” of alternatives bought at either end of this array. When the alternatives end without attaining their strike costs (one alternative is bought with a strike price on the peak of the array, and the other is bought with a strike price at the base), then the buyer — hypothetically — earns a lucrative return from the alternative premiums.

Considering the “covered” choice, the financier possesses an offsetting place in the asset underlying the alternative. This is called a “long” position, which helps to offset the dangers of the “short” position. With an “uncovered” choice, the financier does not possess this long place; so, if the cost of the key asset goes down substantially, the “short” or the “uncovered” place is a sheer risk.

With YES, the financier possesses an uncovered short position if the key asset rate falls and an uncovered long position if the key asset rate rises. While the financier can apply one of the alternatives to buy the fundamental stock for value if the strike price is fulfilled, this means buying at a time of instability because of an unforeseen market swing. This is dicey, and it indicates that financiers who are in undesirable places with YES plans have two choices: (i) to allow the alternatives to terminate and accumulate nothing or (ii) to acquire a stock when many people would deem it ill-advised.

Many financiers have experienced redundant investment losses connected with an financing plan at UBS (along with its rival companies) known as a “Yield Enhancement Strategy.”

This policy includes an options plan that was promoted as a secure approach to increase the profit (or money flow) from a financing profile. Regrettably, investors are now finding unnecessary and unexpected losses in this so-called secure approach.

UBS Financial Services (along with other competing companies) misguided investors and informed them that a Yield Enhancement Strategy will offer a low-risk method to make more money. However, the investment plan was filled with danger, which, in many cases, eventually resulted in unexpected and unnecessary losses. In case you have encountered investment loss due to this policy, get in touch with our insurance broker negligence law company today.

The Yield Enhancement Strategy involves an intricate “iron condor” kind of alternative investment plan which included purchasing and trading put as well as call alternatives on the S&P 500 index. An iron condor alternatives investment tactic consists in writing a collection of alternative contracts, usually at the same time or around the same period. It involves writing two close money alternatives, which are short and buying two more in-depth out-of-the-money alternative contracts, which are long.

Volatile Markets Produce Extra Risks

YES was promoted in a way indicating that as long as there is any volatility in the market, this strategy could help in generating lots of money. But when the stock market turns out to be more unpredictable, as it did in the last quarter of 2018 (particularly in December 2018) with rapid and substantial changes, this plan could generate considerable unnecessary and unexpected losses for several financiers.

This plan might have been (or might have become) inaptly insecure for some financiers, especially if it was advocated as a conservative or secure money-generating investment plan. It is likely that the investment broker or company that advocated this investment strategy had failed to create sufficient risk revelations to individuals concerning this strategy, or might have been unsuccessful in taking logical steps to avoid unexpected losses with the market becoming highly unstable.

In what seemed to be a low volatility market, reduced rate of interest and investment setting, several brokerage advisors and companies like UBS, Wells Fargo, Morgan Stanley, and Merrill Lynch, have allegedly suggested different alternative investment plans to their clients as apparently proficient and secure investment policies for increasing income via their investment profiles. Nevertheless, when stock markets become unstable, these plans can swiftly turn into sudden investment reductions for the financiers. Instances of an unstable market in the second month and last quarter of 2018 might have ensued in unnecessary and unexpected losses for some people.

Prestigious investment plans, especially those plans including naked alternatives, seem to have been advocated to financiers by well-established investment companies such as UBS, Wells Fargo, Morgan Stanley, and Merrill Lynch. While these alternative investment plans have allegedly given investors a chance to make some extra money by participating in a relatively complex alternatives investment plan, some of these investment plans were often filled with undisclosed or sudden risks. One such alternative plan, promoted in certain cases as YES or Yield Enhancement Strategy, entails writing supposed iron condors via S&P 500 derived alternative contracts. On occasion, investors are maneuvered into these plans searching for the alternative income, without completely learning the policy or receiving a disclosure concerning the risks coupled with such strategies.

The most frequently used financial tool for yield enhancement options strategies is S&P 500 Index (SPX), a stock market index established on the biggest 500 companies with stocks filed for dealing with the NASDAQ or NYSE. The CBOE, also known as Chicago Board Options Exchange is its exclusive provides. CBOE offers a plethora of SPX choices with different settlement dates and ranges, including end-of-month and weekly options. Significantly, as SPX is a speculative index, a financier who gets involved in options dealing via SPX will be getting involved in naked or uncovered, alternative investing.

How Does The UBS “Iron Condors” Program Cause Investment Loss?

The iron condor structure entails writing two short close money alternative bonds along with buying two long and deep out-of-the cash alternative bonds. When applying its initial part, the financier is gambling that amid now and end, SPX’s trading will stay range-bound within both alternative strike costs thus guaranteeing that the uncovered alternative bonds will end worthlessly and the financier will gain from alternative premium earned.

In recognition of the considerable risks coupled with short uncovered alternative bonds, the iron condor policy entails another element for reducing the risks. Notably, the next element of an iron condor plan involves purchasing an extra out-of-the-money put bond, as well as buying an additional out-of-the-money call bond. Thus, in iron condor, the initial two legs include two exceptionally risky short uncovered options and the last two legs want to alleviate that threat with less perilous long SPX alternatives. Together, these legs or alternative trades constitute an iron condor strategy.

Eventually, options tactics such as iron condor lead to bets in support of time decay vs. volatility. On one hand, an individual can have options premium income where the option has a fixed lifetime and finite ending and seen as a crumbling asset goes to zilch and ends worthless. On the other hand, periods of distinct market volatility can rapidly lead to situations where the option premium is overshadowed by losses caused by market volatility.  An unstable change in the stock markets in February 2018 and December 2018 caused considerable losses for a number of investors placed in the supposed “yield enhancement” and alike investment plans conjectured on low market volatility.

Without having received full divulgence from their investment adviser concerning these substantial dangers embedded in options hedging or investing strategies, investors that have endured unnecessary or unexpected due to these or similar alternatives investing could have the ability, through an attorney, to recoup their losses. In some instances, the suggestion by a financial advisor or broker might not have a logical basis in the first place, or if the type of the investment together with its risk factors were not revealed or were otherwise misrepresented.

Are you looking for help to evaluate your losses? Contact the Investment Loss Recovery Group, which is the top-rated investment fraud attorney with extensive experience in tackling complicated alternative trading lawsuits all over the country. If you have lost funds because your advisor or broker advised an alternative trading investment like Yield Enhancement or Iron Condor strategy, at UBS, Wells Fargo, Merrill Lynch, Morgan Stanley regarding some investment strategy that caused you unnecessary or unexpected losses, then get in touch with our attorney by calling them today at 1 (888) 628-5590.