Many times in past, seller have tried to make product out of risky assets to deliver constant returns or safe investment for investors. People bought those products unaware of underlying risk and payed huge price. I don't know how many times these things have happened in past or will continue in future. Let's look at notable instances where such blunders eroded investor's capital. If you are aware of such incidents which I have missed, you can comment here or reply at @stocks_in
1. 96.1% decline in NAV of Inverse VIX ETF after increase in underlying Cboe Volatility Index. ETF was tracking short positions in VIX futures. As long as market was going up without any major down move, this ETF gave great returns. Once underlying instrument's price started upmove, this ETF turns worthless resulting in winding up of ETF. For further reading at The Motley Fool
2. This incident of capital erosion due to Writing naked options in Natural gas where fund manager made apology video after losing client's money.
3. Failure of Options Maxima strategy by Aditya Birla Money, which was another product made out of option selling. For further reading at Forbes India
4. Recent failure of FMPs which were sold to give better returns than FD even though it involved credit risk. Check Capital Mind's article for in depth analysis
1. 96.1% decline in NAV of Inverse VIX ETF after increase in underlying Cboe Volatility Index. ETF was tracking short positions in VIX futures. As long as market was going up without any major down move, this ETF gave great returns. Once underlying instrument's price started upmove, this ETF turns worthless resulting in winding up of ETF. For further reading at The Motley Fool
2. This incident of capital erosion due to Writing naked options in Natural gas where fund manager made apology video after losing client's money.
3. Failure of Options Maxima strategy by Aditya Birla Money, which was another product made out of option selling. For further reading at Forbes India
4. Recent failure of FMPs which were sold to give better returns than FD even though it involved credit risk. Check Capital Mind's article for in depth analysis
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