Coronavirus (COVID-19) Update: YES Strategy Is Vulnerable To Losses Now Markets Are Rough
The World Health Organization (WHO) has just declared the coronavirus a pandemic, with the United States President Donald Trump announcing a travel ban involving more than two dozen nations. As if these health concerns weren’t bad enough, the latest Coronavirus update has also placed the markets in a panic. Dow Jones dropped by thousands of points and the S&P 500 index has also taken a dive.
While the stock markets do typically rebound after a sharp plunge, we are currently living in uncertain times due to COVID-19. As one Bank of America Merrill Lynch report cited in a Reuters article, the coronavirus is the type of “slow-moving train wreck” in which the market “slowly and progressively” realizes its “magnitude.”
While market rebounds are usually good news for many investors, in particular, those whose money is in exchange-traded funds and mutual funds, investors in the UBS Yield Enchantment Strategy – also known as UBS YES – and the Collateral YES (CYES) by Harvest Volatility Management would be unlikely to benefit and if anything may be left from the plunge with even more losses than they’ve suffered already.
YES Strategy investors have already been grappling with collectively losing tens of millions of dollars since the big market shakeup from a little over a year ago and now there is the current market turbulence. At Shepherd Smith Edwards and Kantas (SSEK Law Firm), our UBS YES fraud attorneys and our CYES lawyers are here to help you explore your legal options.
Misrepresentations and Omissions
Yield Enhancement Strategy investments were touted as generally safe and profitable by brokers. While this is true when the markets are stable, YES and CYES investments can incur significant losses when there is volatility.
YES Strategy investments use an iron condor strategy, also called an options overlay strategy. This uses an investor’s margin account, in which assets become collateral. Traders work with four options that have identical expiration dates but differing strike prices. They establish two spreads, selling calls and puts to make money while simultaneously buying puts and calls to hedge risks so as to keep losses minimal.
Investors usually make money when the prices stay between the breakeven points of the spreads. However, when sudden price changes go outside of these breakeven points, losses can happen.
Brokerage Firm Negligence
While UBS YES is sold by UBS brokers, other YES Strategy investments have been sold by registered financial representatives at other firms such as Merrill Lynch, Morgan Stanley and Credit Suisse. CYES investments come mainly from Harvest Volatility Management and were sold to customers by broker-dealers.
YES Strategies are not for every investor and they can be complex and risky. Over the years, SSEK Law Firm has represented clients in different Yield Enhancement Strategy cases including UBS YES, CYES and even the Schwab Yield Plus Fund.
Misrepresentations, omissions, unsuitability, failure to disclose the risks, excessive trading and inadequate supervision are just some of the allegations that have been brought against the brokers and brokerage firms that sold YES Strategy investments to customers.
Please contact our UBS YES Strategy attorneys and CYES Strategy lawyers to request your free, no-obligation case consultation so that we can help you explore your legal options and help you determine whether you have an investor fraud claim on your hands.