Tom Sosnoff is one of the creators of Tastytrade, a new financial network that incorporates a talk show featuring market analysis and trading strategies, as well as chat about everything from celebrity gossip to the panelists’ workout preferences, and a “superstore” that allows members to purchase discount vouchers that save them money on investor education and brokerage and other services.
Sosnoff is also known as the founder of Thinkorswim, a specialist options brokerage that he sold to TD Ameritrade in 2009 for $600 million. He spoke with Sarah Rudolph about the new venture, which is based in Chicago.
Q: There are a number of components to Tastytrade. You have the show, vouchers for education and brokerage components, as well as trading ideas, with a focus on retail trading. How did you come up with the concept behind Tastytrade and who specifically are your trying to reach?
A: Our audience is the self-directed retail investor. That means upwards of 50 million people, those interested in active participation. I always wanted to build a business focused on content but didn’t like the existing ad revenue models. With most models, the media content is pretty straightforward and you support the model through ad revenue. The Tastytrade show is commercial free, supported through a marketing share plan.
Q: You are the host of the show, and you also have Tony Battista, another long-time trader. You also have some other folks who I believe are comedians? Tell us about the cast for the show and how you develop content.
A: Tony and I spent the bulk of our careers on the floor of the CBOE. We are both ex-market makers. I owned my own prop firm and built my own brokerage. Tony spent 25 years on the floor and then as an instructor at my firm. The others are comedy writers and actors. Sarra is a standup comic. Vonetta is a comedy writer. Martin and Greg are performers who do improv in Chicago. We also have another comedy writer behind the scenes. Those performers have no financial background.
Q: The discount brokerage voucher program is interesting. Tastytrade says traders can cut their brokerage expenses in half using them. Can you explain how that service developed?
A: For every $1 you spend you can get $2 in broker services, but it is not unlimited. It is an annual number. In a year you can buy as many different merchants as you want out of approximately 250 merchants at any of those places. Each individual merchant sets their own limits.
Q: Have you set a date for the Superstore to open?
A: Yes, Monday, Aug. 1, in Chicago. You can click on it now and it’s available for viewing. It’s really pretty cool. The deals we’re having we won’t show until next week, but you can see how everything works right now.
Q: Which brokers to you feature on the site?
A: TD Ameritrade, OptionsXpress, etc. — we are trying to get every major broker as a participant and we are close to having all the major firms on board. Ultimately we plan to have every financial services company. We want to redefine the traditional market model. This is a way to bring real customers to financial service vendors. Right now we think financial services marketing is all about branding. I want to make it all about engagement and account acquisition. We think this is a new innovative form of marketing that could change the industry.
Q: Who do you mean when you say “real customers”?
A: People who currently don’t have a brokerage account, but who don’t know how to start. This is the first consolidated financial superstore ever built. People can go to the superstore and look at all the different offerings and test them out to see which ones they like.
Q: Education has been a key component of your career and you offer vouchers for educational programs as well. How do you chose the programs you’ve listed?
A: I know most of those companies and have worked with them in a past life. We have the Costco mentality; we want fewer items in our store than a Walmart or a Target, but we have higher quality items. I am in a very specific space, so there are not a lot of choices to start with.
Q: Do you still do investor education apart from the show?
A: I’ve been on the road doing investor education. I still love the public speaking and do as much of it as I can. It’s very rewarding. I don’t charge for my own educational sessions, they are all free.
Q: Your background is in options for the most part, is that correct?
A: Yes, but I have also built stock and forex trading platforms.
Q: And do you talk a lot about options on the show?
A: Yes, we talk a lot about strategies. We think it’s all about strategies, our whole business is about
strategies. We think that’s the key to success for independent investors.
Q: Are there any typical mistakes people tend to make when they start out trading options?
A: No, but there is a learning curve. It’s not complicated, but it’s new. You have to learn about certain criteria: certain entry and exit criteria and a lot of other variables. We try to help build those criteria. Trade complexity does necessarily mean trade risk. We’re very risk averse. We try to teach different ways for an individual investor to invest in an assumption.