There is no question that yield enhancement strategies (YES) present substantial risks for individual investors. There is also no question that most individual investors lack the in-depth knowledge of options, margin, puts, calls and other relevant investment concepts needed to make informed decisions about investing with yield enhancement strategies. But, this has not stopped Wall Street firms like UBS from pushing these strategies on individual investors. As long as yield enhancement strategy investments continue to generate fees and commissions, and as long as individual investors continue to bite, these firms are going to continue to sell these risky investments without regard for the potential consequences for their clients.
What are the Risks Associated With YES Investing?
One of the primary risks associated with YES investing is the misleading name of the investment product itself. Despite being termed a “yield enhancement strategy,” the real goal of YES investing is to establish a potential income source while potentially mitigating the associated risk of loss. Theoretically, investors who constantly make yiel investments over an extended period of time could see enhanced yields if their bets paid off consistently. However, by the nature of the YES structure, these potential yields are minimal, and they rely on a lack of market volatility – something which is inherently unreliable.
With most types of investments, the goal is to earn a reasonable return as the value of the investment increases over time. However, with a yield enhancement strategy, the goal is to collect an “option premium” when an index, typically the S&P 500, remains fairly constant. Essentially, a yield enhancement strategy involves buying options to purchase shares of the S&P at certain prices at the top and bottom of a range, and then hoping that none of these “strike prices” actually come to fruition. But, if the index moves outside of the range of the options purchased, then the entire investment structure becomes worthless.
Of course, by this time, the firm that sold the yield enhancement strategy structure has already earned commissions on each of the options purchased; and, if the firm convinced the investor to buy the options on margin (which essentially involves borrowing money from the firm in order to invest), then the investor now owes a debt to the firm as a result of buying the failed YES investment as well.
What Recovery Options are Available to Investors of Yield Enhancement Strategies?
For individuals who suffered a YES strategy loss (including “iron condors” sold by UBS and other brokerage firms), the primary option for recovering their losses is to file an arbitration claim with the Financial Industry Regulatory Authority (FINRA). Our investigations have revealed that UBS and other firms have withheld material information about their YES investment offerings while providing unsuitable advice to individual investors. For more information, you can read: Recovering Yield Enhancement Strategy Losses.
Speak With an Investment Fraud Lawyer at Zamansky, LLC
Zamansky, LLC is a national investment fraud law firm that is actively representing clients who have lost money in yield enhancement strategy (YES) investments. To find out if you are eligible for FINRA arbitration, call 212-742-1414 or contact us online for a free and confidential consultation.