Articles Tagged with ETP; Exchange-Traded Products; VIX; Volatility Index

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with brokers selling unsuitable Exchange Traded Products (ETPs).  When a broker sells you a product that is “guaranteed” to make money during volatile markets, there’s no downside for the person selling the vehicle. They always make money on investors’ fear and ignorance.

A prime recent example is the widespread sale of volatility-linked Exchange-Traded Products. While these vehicles may make money in the short term when the stock market turns bearish, they can lose money in the long run, which brokers may not disclose. Volatility ETPs are linked to “fear” indexes like the CBOE Volatility Index, or VIX, a short-term gauge of downside activity. When the market dips, they can increase in value.

Average investors, however, get burned when they hold onto fear indexes. Brokers who sold these products know that, but often don’t get clients out before they lose money. The U.S. Securities and Exchange Commission (SEC) recently cracked down on broker-dealers who sold these vehicles to unsuspecting investors.

Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses due to recommendations by financial advisors and brokers to invest in Exchange-Traded Products (ETPs). With market gyrations giving average investors motion sickness this year, it’s understandable for many to find ways of hedging volatility. When the market is up one day and down another, it’s pretty unnerving.

That’s why Wall Street invented Exchange Traded Products linked to volatility indexes, which track the nervy fears of the market at large. When anxiety is high, these indexes are high. One of the most popular such indexes is the so-called VIX, which is managed by the Chicago Board Options Exchange. Brokers and advisors often recommend ETPs based on the VIX for clients who want to hedge against market volatility.

ETPs are securities traded on stock exchanges that can track anything from baskets of bonds to precious metals. For many investors, they can be efficient ways of owning commodities or hedging prices on nearly any kind of security. But each have their own risk profile. Some are clearly unsuitable for unprepared investors.

CNBC
FOX Business
The Wall Street Journal
Bloomberg
CBS
FOX News Channel
USA Today
abc NEWS
DATELINE
npr
Contact Information