Law \ Legal

UBS Took Over A Credit Suisse Strategy So It Gets To Pay The Fine For It

Back in 2015, UBS had an opportunity to pick up a neat little business with a neat little name. The Yield Enhancement Strategy—just say YES!—had been devised by rival Credit Suisse, buying out-of-the-money index options alongside short-term below-market puts and above-market calls on the same benchmark. It was all supposed to add up to a fairly low-risk option for wealthy clients. Of course, as has since become obvious, Credit Suisse wasn’t great at assessing risk and…

YES involved multiple options trades on stock indexes that produced positive returns when indexes such as the S&P 500 moved steadily, but spiraled into large losses when markets became more volatile. UBS customers lost at least $60 million as of mid-2019…. In one month in 2018, YES lost more than 13%. It ended down 18% that year, the SEC said.

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