Securities Lawyers Blog
The law offices of Gana Weinstein LLP continue to investigate significant investor losses in a risky options trading strategy employed by several large brokerage houses referred to as a Yield Enhancement Strategy (YES) or Collateral Yield Enhancement Strategy (CYES). These firms include UBS Financial Services, Merrill Lynch, Credit Suisse, and Morgan Stanley. According to marketing materials, the YES strategy seeks to increase returns for investors through the trading of options. These options trading program employ various options trading strategies including the iron condor.
Our firm is investigating whether or not brokers misrepresented the safety of the strategy by pitching a yield enhancement strategy as a safe way to generate additional returns. For instance Rick Selvala (Selvala), CEO and co-founder of Harvest Volatility Management, LLC (Harvest) discussed his firm’s CYES strategy with FINalternatives who claimed the strategy “works particularly well for clients who are running more conservative asset allocations or portfolios.”
The article states that CYES has over 800 separately managed accounts across eight different platforms such as Merrill Lynch, Morgan Stanley, UBS Schwab, Fidelity, and Pershing via independently registered investment advisors.
YES’ “elevator pitch” distilled is less risk more return. The article states that investors in fixed income are being forced to take on more duration or credit risk to increase returns exposing investors to a high degree of risk. The solution pitched is CYES which has the ability to add incremental returns without taking on more equity, duration, or credit risk. Selvala claims that “because we manage risk and keep the maximum loss contained” clients can employ three to four time leverage to generate even larger returns.