Hundreds of investors have been duped by UBS’s Yield Enhancement Strategy (YES). In its marketing materials, UBS told investors that its YES strategy was an Iron Condor, a generally low risk options “overlay” strategy designed to generate incremental income on top of that generated from a customer’s other investment assets. Losses from such a strategy are supposed to be strictly defined and limited. However, UBS’s YES strategy was not the low risk Iron Condor strategy described to its customers by UBS financial advisors and in UBS marketing materials. In fact, the way UBS implemented YES resulted in potential losses that far outweighed any potential gain. Had UBS made full and fair disclosure of the true risks associated with its YES program, most UBS customers, if not all, particularly conservative ones, would likely never have enrolled in the strategy. Unfortunately, many customers, unaware of the true risks, invested in YES and experienced severe losses in late 2018, early 2019 and 2020 when the S&P dropped. RIK’s investment lawyers are pursuing multimillion-dollar FINRA arbitrations on behalf of investors against UBS to recover losses sustained from the YES strategy.
What Is an Iron Condor?
An Iron Condor is an options trading strategy that consists of simultaneously buying and selling a four option set of S&P Index put and call options, consisting of a combination of a bear call spread and a bull put spread, both having the same expiration date. Investors profit from this strategy when the S&P Index performs, whether up or down, within a “band” defined by the strike prices of the short options and certain breakeven points defined by the long option strike prices. Most short options expire worthless because they tend to lose value as they approach expiration, known as “time decay.” When this happens the buyers of the options will let the options expire unexecuted. In that case the investor (seller) gets to keep the premiums received from the sale of the put and call options, net of the premiums paid for the long options. This is the maximum profit. (Read more about what an option is here).