Last month, this site reported that a complex, risky investment strategy had blown up since the market plunged in the end of 2018. The UBS Yield Enhancement Strategy or YES was pitched by UBS financial advisors to their customers as a supposedly secure and efficient mechanism to enhance yield from a typically conservative portfolio.
UBS chucked the YES plan as a neutral or very low-risk strategy that simply required customers to allow margin or a”mandate” to be placed against the customer’s portfolio which would be utilized to generate returns through an”iron condor” choices trading approach.
The iron condor Is a purportedly limited risk, a non-directional alternative trading strategy that’s designed to have a large possibility of making a small limited profit when the underlying security is considered to have low volatility.
Selling iron condors (short iron condor) is an options strategy that’s very popular among traders who trade options for monthly income. In this video, you’ll learn how selling iron condors works with examples using real historical option data. The short iron condor is a neutral options trading strategy that consists of selling a call spread and put spread on a stock that a trader believes will remain range-bound. The short iron condor is similar to a short strangle but has much less loss potential and less profit potential.
Sounds pretty great, right? Not so quickly…
Unfortunately, when the market experienced volatility not seen in three decades in December 2018, the strategy failed.
Panicked Clients that, nearly daily, are experiencing massive losses because December 2018 have been besieging their UBS financial advisors for explanations and advice. Alas, the only real advice those consultants are providing to clients right now is to”stay the course.”
Indeed, It’s likely that portfolio managers that operate the YES strategy are trying to find a way to recover losses to client portfolios of more than 20 percent from December.
Many investors did not Understand that they were engaged in a risky options approach which demanded they are qualified for insecure options trading from the firm. Clients of brokerage companies face numerous challenges before they are given the green light to exchange options. Many of these customers paying for the YES strategy were simply not qualified.
Investors are Now fighting back as they’re submitting a ton of investment fraud arbitration cases trying to regain their YES losses.
We’ll repeat it: Investors, beware of speculative trading strategies pitched as low-risk and yield-enhancing. If they buy into such plans, they might wind up looking up in the sky to see if any iron condors are falling in their heads.