Investment Strategy: Tom Saznoff emphasizes a contrarian trading approach, focusing on taking the opposite side of market orders, which he developed from his experience in trading pits.
Market Dynamics: The discussion highlights the importance of volatility in trading, with Saznoff noting that Tasty's business thrives on options and futures trading, which are more strategic and profitable compared to stocks.
Options Trading: Saznoff explains that Tasty Trade's platform is designed to educate retail investors on options trading, focusing on quantitative analysis and probabilities rather than market predictions.
Retail Trading Growth: The podcast discusses the significant increase in retail trading, particularly since 2020, and how platforms like Tasty Trade have contributed to educating a new generation of traders.
Financial Education: Saznoff underscores the importance of financial education, stating that Tasty Trade aims to empower traders by providing them with the knowledge to make informed decisions based on mathematical models.
Company Evolution: The conversation touches on the evolution of Think or Swim and Tasty Trade, highlighting their impact on the brokerage industry and their focus on building innovative trading platforms.
Market Participation: Saznoff notes that while many retail traders participate in the market, only a small percentage achieve significant success, emphasizing the role of education and strategy in trading.
Future Outlook: Saznoff expresses enthusiasm for building new financial technologies and platforms, indicating a continuous drive for innovation in the trading industry.
Transcript
Tom, this is so exciting. I I I uh I've been looking forward to this since we scheduled it. And so happy to see you here. >> Nothing's off limits. Okay. Nothing. And you could go as long as you want. I have no agenda. My I have a show tomorrow in town, but that's it. Where you headed? >> Awesome. >> Exchange. >> No, no, no, no. We have our We do our own shows. So, I have a show at um Webster Hall. You know where that is? >> It's on It's on 11th. >> It's on 11th Street. It's a It used to be the Ritz like when I was a kid. And um yeah, we've got like >> who's come so who comes to that? Who comes >> retail retail? We have like a thousand a little over a thousand people signed up. >> That's unbelievable. >> But we do them all over the country. Like two weeks ago I was in San Francisco and next weekend we're not this coming week and the weekend after that we're in LA, >> you know. >> Can I ask you a question? >> Yeah. >> It's weird. So we started doing live events and we've done some really successful ones. You can put that on. Okay. >> And we um we did one in Chicago at the Chop Shop >> and we sold it out and it was great. >> Yeah. One of the problems we're having. >> Do I need to wear this? >> Yeah, it helps. It because it it helps for the recording. One of the Because when I because when you say something really funny and I and I want people to acknowledge it. >> All right. We have problem finding the venue that matches the size of the audience. So like which >> How many people do you have? >> That's the thing. It depends on where we are. >> Okay. So I got a girl I got a woman that works for me. She's been with me for 10 years. All she does is book venues around the US. >> How many events do you do a year? >> We do one every other weekend. So 25. >> So she knows every venue in America basically. And we use all kind of really we use all Live Nation or you know we use we use theaters. We don't use like in Chicago we just did one at um Valia Hall. I don't know if you know it's a concert venue. It's really nice. Yeah. >> But >> but we know every venue. Like she knows she knows every venue. Just I I'll give you her context. When you go to LA, you do the Lray theater. >> We've done the LA theater. We're doing the Fonda Theater this time. >> Okay. >> But we've done LA like two or three times. Great place. >> So, my team does a pretty good job, but it's always hard. >> Shouldn't be as hard. It shouldn't stop that. It shouldn't always be as hard as it is, but it's like in this city we have 300 people. In this city, we have 100 people. >> We don't know how many tickets we could sell. >> So, are they is it free or do you pay? >> Oh, so when you pay you have a pretty good show rate. >> Yeah. >> Yeah. Uh that's not the right. The issue for us is we don't know these places. >> Yeah. >> So we do our best from long distance. Yeah. >> And then we'll fly out and see something, but it's not easy to do. It's one of the uh more underappreciated aspects of doing a live event is the venue itself. Yeah. >> I have somebody that that's her full-time job and she's amazing. >> But wait, you said this is important. If people pay, they show up. So you're saying it's risky to have people not pay because then who gives a They Right. It might. Yeah, >> but we do we don't charge because we don't have that's not in our model. So, we only charged once, but we did it as a because we had a slightly smaller venue. So, we charged and then if you showed up, you got your money back. >> And we had like we had >> like a reservation. >> Yeah, exactly. We had it was like a 95% show rate there. Normally when you just do a free so our show rate like we have maybe 11 or 1200 people signed up for tomorrow morning and we'll probably end up with a show at about 65%. So we might get 650 to 700 in that range >> and you just do your version of the show but do it for a live audience or this is a specific No. >> All right. This is a very specific thing that you're doing. >> This is a live trading event. So we trade live for you know 90 minutes to almost two hours. >> That's awesome. Are people People are trading with you? >> They can but we don't care. I mean, we're just we're just trade non-stop for basically 90 minutes and uh we trade everything. >> Wait, what time is it? Where is it? I want to come. >> You can come. Um >> you would love that. >> It's uh doors open at 8, show starts at 9:00 tomorrow morning at Webster Hall. I think it's on 11th. I think it's on 11. >> So, I want to tell you about the time I figured out you were a genius. Uh the year is 2014 or 2015. I never met you before. >> Okay. >> Um but from afar, I just said, "This guy is smart." So, I land at the Las Vegas airport for the Salt Conference >> and um >> and you see my ugly face up on the up on the keeping out internet. >> As soon as I get off the plane, >> Yeah. >> I go to the baggage claim and all of the baggage claims in McCarron airport, which if people are listening, if you've been in the Vegas baggage claim, >> it might be the the largest freestanding structure in the United States. It's so big. >> All of the baggage claims are sponsored by Tasty Trade. >> Yeah. >> Then I go outside. I don't need a cab because Joe Fami is picking me up, but the taxis are lined up and they all have Tasty Trade on the top. >> And I said to myself, look, this is like the one week of the year where every hedge fund manager in America is all in one place. >> Yeah. >> Of course, Tom has the sponsorship uh thing. >> Well, that was actually a great sponsorship and they did us right. >> So, you remember this 10 years ago. You remember? >> Oh, yeah. No, I I negotiated that deal with whoever whoever had the space and it was actually very reasonable. Um, and we we gave free internet, you know, basically that's all it was, free internet with then you got some you got some of their uh digital screens and all the other stuff. And it was great. We kept it for almost three years. And then and then somebody came over the top, I think it was Google, and offered them like five times what we were paying. >> You don't want to get into a bidding war with Google. >> Well, we can't win that. We can't win that. >> No one's winning that. >> Does it feel good to be back in the studio? >> I love it. I love it. We did a show uh at Future Proof last week and we love doing live shows in front of the audience, but it's nice to be back home. >> Yeah, we don't ever do our show live. >> Why? >> Um because it's not that interesting. Like I mean we find that the audience gets a little you know it gets a little bored. So we do all our live events are completely different. So we do like live trading and then we do some you know sometimes it's like we have all these so we've been doing I've been on the road for 25 years and we have different events every year. we change it like we'll do some fun events with the audience where we give away some money and they're all like some of them are teaching some of them are fun you know we we we create all these like um challenging questions they're all like it's every show is a paradox of something of some math model of which we kind of don't tell them that in advance but then at the end we let them figure it out >> and so we play all these games over the course and we have like probably 10 speakers on the road >> you know but but >> but Tony and I draw the, you know, the best by a lot. >> How did you, how did you find these people um and then elevate them and like turn them into stars within your community? Is that just an organic thing or >> Yeah, it's organic. >> They found you. >> They find you. >> No, most of us have been friends for decades. Like Tony and I who I did show, we've been friends for 45 years. Scott and I have been partners for 35 years. Okay. >> Um Liz and Jenny, we were friends for 20 years. I mean, these are long relationships. We don't. The new kids are great, but they don't draw. >> That's the hard thing. >> Okay. Not yet. >> Not yet. >> Yeah. >> Yeah. Okay. Well, I You got a You got a really cool community and we want to talk all about it today. So, thank you so much for being here. >> Um, when we're done judging the pumpkin bowl, are we ready to we ready to get the show on the road? >> Yeah. You, like I said, you go anywhere. I don't really care. >> All right. It's an important man, guys. Time is money. >> I like your energy, Tom. >> Thanks. Let's go. >> All right. Hey John, what episode is this? >> Episode 20. 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[Music] Please read the perspectus and if available, the summary perspectus carefully before making an investment. Newberger Burman BD LLC is a distributor of the fund and a FINRA member. >> Episode 209. Nicole's here. when Nicole's dancing. I know it's going to be a great show. Duncan's doing a little Bob. What do you got going on? You excited to be here, too? >> Of course. >> All right. You have a microphone in front of you. You know that, right? >> I do. >> All right. John is in the house. Ladies and gentlemen, we have a first time guest today. Somebody that I'm so excited to be speaking with. And uh I've been aware of his work for a long time. I've met many of his acolytes over the course of my career in finance and financial media and uh today's episode is going to be just an absolute blockbuster. So, thank you so much for joining us. Tom Saznoff is a trailblazer in the online brokerage industry, driving innovation and financial education for investors of all levels. He offers up expertise in the options market as co-host of Tasty Live L live airing daily on the Tasty Live Network. A former floor trader, Tom became one of Chicago's most well-known serial entrepreneurs in fintech when he built a breakthrough options trading platform, Think or Swim, which was eventually sold to TDM Trade for $750 million. Leveraging over 20 years of experience as a market maker for the CBOE, one of the original OEEX traders in the S&P 100 index pit, Tom pursued his vision to educate retail investors in options trading and build a superior trading platform. Tom Sasnoff, welcome to the show. >> Thanks for having me. >> All right. And I know there were other things that I was supposed to read. It's just so much. You're you're extremely accomplished, man. Um, can I can we start with the markets question? Yeah, sure. >> I was going to do this whole thing like state of the markets and like do this whole wind up about this is doing this and this is up that, but it's it's almost like a stupid question I feel like because I think your ethos is let's find a way to make money no matter what the state of the market is. Do I have that right? >> I'm a strategist if you I'm a trader. I I really don't care what the market says. >> Okay, so that's what I wanted to get to. how how did you come about that um mindset as a market participant because most people don't start off as what they end up as and so I'd love to just hear that journey for you and then we can get into the state of the markets >> so I started this business different than most people because I started in the trading pits where you don't decide so I I spent 20 years in the S&P 100 so you don't decide what you want to do you just take the other side of whatever order comes in the crowd so I grew up never having an opinion about the markets. I grew up just taking the other side of what anybody else wanted to do. So, I'm a pure contrarian. >> Okay. Because that's where the money that's where the money is to be made. >> That's the only way you can that's the only way you can trade. So, when you're a floor trader, the other traders, it's like going to do you play poker? >> Yeah. >> Okay. So, if you go sit down a poker table and it's just a bunch of professionals, you guys don't even want to play with each other, >> right? >> But you have to wait for people like me to come by, you know, to blow some money. Um, it's the same thing in the trading world. The professional market makers don't trade with each other. They just wait for customer orders to come in. If there's no customer orders, they just stand there with their hands in their pockets. >> Okay. So, what what year did you start out uh trading and how did you get the job? >> I was I got uh I grew up in the So, I'm 68. >> Okay. >> I grew up um >> You look, by the way, you look great. Nobody would guess that you're 68. >> So, I grew up in New York and I went to Sunni Albany. >> Okay. >> And it was 1979 when I graduated college and there was no freaking jobs. I mean, it was the middle of recession. Interest rates were 20%, 19, 20%. >> And it was hard to get an interview. I got an interview on Wall Street. I was a political science major. I thought I was going to be like a lobbyist. And I got an interview on Wall Street with Drexel. If you remember Drexel Burnham, they were a good firm, like a boutique firm. And they offered me a job on the spot. So now I'm in finance. >> And I got a job with Drexel. I was there for probably about >> nine months in their training program. And one of the met a couple of guys there on their trade desk and they were like they didn't really like the retail business. They wanted to trade. So they go they were all married though. They go you move to Chicago and we'll put up the money. >> Okay. >> And it was $50,000. I thought it was 50 million at the time. And so they put up 50 grand and I packed up my car and just left and went to Chicago. Never. >> You needed somebody physically on the floor in those days. >> Yeah. You needed somebody. Yeah. But but so so it's the it's like 1981 just before the market explodes. These guys get a little bit short. I forgot what stockck it was. I'm on the floor three days. They lost all 50 grand. I had I made $18. I I remember like it was yesterday. I made $18.75. Three teenies. 316. That's $1875. That's $18.75. Nothing else. >> That was your commission for what? >> No. No. That was my commission. That's how much I actually scalped. >> Oh my god. >> 18. And and of the 1875, 1250 of it was given to me by other traders that just were like, "Hey, welcome to the business." Okay. >> So, that was the end of a 16-year bare market. >> Yeah. Basically. And that and they blew out in it was it was like less than two weeks in there. So, now I'm in Chicago. I got $1,200 maybe to my name, you know, but I paid the rent for I'm on a seat that I can't afford to pay for and because seats are expensive and I had to figure out, you know, and I figured it out. >> That's Dude, that's that's an amazing origin story. And so your formative experience is not sitting as like a strategist trying to figure out what's the year end price target for the S&P. You have to figure out how to make money on Monday and then Tuesday you have to figure out how do I make money on Tuesday. >> I eat what I kill. >> But that was such an interesting time because >> it was the greatest thing ever. I I had never been to Chicago. I grew up here and they they said why don't you fly to Chicago and check out the city. So I landed Chicago and I I took a cab. I went up and down Lake Lakeshore Drive just to check it out. And then I met this guy who I didn't know who was a lawyer from New York who hated law and he was now a trader. He takes me on a trading floor. It's the old trading floor and it's all options and everybody's screaming and yelling. It's the most wild place I've ever seen. And I walked down there within 3 seconds. I'm like this is where I got to spend the rest of my life. >> It was the most amazing place. It it will it will you know it was the last frontier of like true capitalism in my mind back then. And I didn't even know what I was doing. So in 1981, like how long did the psychology take to change when people were like, "Wait, maybe this bull market is real. >> How long did people fight it for?" >> I have no idea because when you're in the pit, you don't all you care about is making 108s or 100s, >> you know? Like, >> so you really don't give a >> You You only care about what orders come. Can you scalp that order? That's it. >> It's not It doesn't matter if it's a bull market or a bare market because you're affecting trades right now that are going to close very quickly. >> Yeah. I always tell the story of the the kid sitting next there was a kid sitting next to me or standing next to me and we became friends over the years and we're still friends today and he when the Dow crossed through a thousand for the first time he goes take a picture because you're never going to see this again. Like the numbers we were talking about are insane. >> Are you still a contrarian by nature? >> Oh my god. Yeah. >> So trading back then was a physical job. >> Very physical. All just big freaking guys. >> A lot of ex- football players and Right. Like a lot of like big guys because they could get close enough to the action. But a lot of everything like so, so I started a couple years later I started to make some money and I started a prop firm and so we hired lots of traders. I probably hired 50 traders over the years and I hired a first round draft pick from the Kansas City Chiefs that blew out his knee and and so he was the largest he was he was a offensive tackle, the largest human being ever. You couldn't move him no matter what you do, >> but he didn't make it. >> Okay, >> I hired a professional wrestler because he was just he looked he looked like Goldberg. Remember what Goldberg looked like? Of course. He looked like exactly like him who once broke three people's ribs in the bond. >> He had the traps like he >> he was steroided out. He was just insane. He was the largest widest. He wasn't that tall. He's the widest human and people were petrified of him. But he never made it. And then we I also hired like some crazy rocket scientists, some kids out of like Carnegie Melon with um master's degrees, PhDs, the whole deal. And they didn't make it. So you never knew. But then you get some kid from some southside parochial school in Chicago that didn't even go to college and they kill it. So, who makes it and why? >> It's a really good question and I we could never figure it out because back then the learning curve was kind of long and the people that made it, you know, at some point it just clicked and I I can't explain like we we couldn't tell in ad like we had no idea if we hired somebody if they were going to >> What about now? Can you tell now? Like is it a personality type or what? >> So, now it's now it's now there's no more computers now. Now it's all computers. >> But what I love about what you're saying is it e we had Mark Fischer on the show. Um I know Mark Fisher. >> You know Mark, I'm sure. I don't I mean I only had did one interview with Mark Fischer. I did not know him as a trader, >> right? So, but Mark told us the same thing. >> Yeah. >> He's like a lot of people try to do this and you'll be amazed at who actually can do it. >> Yeah. He's a new he was a New York >> junkie. He's a futures trader, you know, like futures traders are very different. Like in Chicago you had the CME which was one guy kind of trader and then you had the SIBO, you know, like I did a really fun interview. I did a documentary on Louis Borcelino. >> Okay. >> Do you remember? No. >> Okay. >> Should I know who that is? Uh he was for years in the 80s he and 90s he was like the biggest futures trader. >> Oh wow. Okay. >> Yeah. And then he he's got a great story. I'll send you a link to documentation. It's unbelievable. >> Yeah. I would watch the out of that. I love I love that stuff. All right. So let's do state of the markets though. So >> I would assume a year like this one got to be a lot of fun for traders. There's a lot of ups and downs but predominantly like the bias is high. Maybe the volatility is not as much as you would want it to be if you're intraday. So, so our business is volatility based. >> Okay. >> So, so we do better and Tasty is a um uh is a firm where 90 plus percent almost 95% of our business is listed options, futures and futures options. >> That's what the users on the platform are trading. >> That's right. >> Okay. >> So, we're like the largest derivatives boutique in the world. But we don't trade a lot of stocks. So, customers don't come to us for stocks. They'll go to Schwab or E Trade or Fidelity or whatever, but they come to us to trade options and futures. >> Okay. Well, they'll do that separately from where they're doing their stocks. >> I mean, some people do. >> Okay. Why? What is it about Tasty Trade that makes them want to trade? >> It's just it's just a way better platform. I mean, it's just the technology is faster. Everything work everything is from a single interface. You can do all the different stuff. Like the other interfaces are all legacy interfaces. They're old and clunky. >> Okay. >> So, did April make your year? >> No. >> Why not? because we don't like when people get hurt. >> Okay. >> And and you know, April, the trading volumes were great, but you get situations where like some of your best customers >> and they don't come back. >> Well, they come back. Everybody always comes back. There's nobody ever goes away. But some of our good customers got hurt. Yeah. >> You know, because we're a premium selling firm and you know, you got slapped in April. April's kind of, you know, it was good for business, but not good for the overall business. Could you explain what you mean by that when you say we're a premium selling firm? >> Well, our the way we teach and the way that we so we we we're a think tank. We have two businesses. Our our primary business is our brokerage firm. >> Okay. >> Okay. And that's pays everything. That's, you know, that's our business. That's our revenue. We're a 300 and something million dollar revenue brokerage business. >> Okay. >> Um way more than that actually. But then we have a network that that which is actually for content marketing and we don't charge anything. That's all free and it that's how we kind of get that's how we compete marketing wise with all the big firms. >> Yeah. >> And the network when we built it the reason I built this I didn't like financial media traditional. I didn't like CNBC. I mean listen I like those guys. I just didn't like the content. I don't like interviews with people. I don't like I don't care what somebody else has to say because that's goes back to my mentality. Yeah. So I didn't like Bloomberg, you know, I didn't like CNBC. It doesn't make any sense to me. Why would somebody listen to what somebody else thinks? Who cares? They don't know anything. So So we built Tasty. >> Duncan, we could edit all that out, right? All right. >> So So we built Tasty to to build a firm strictly around around quantitative, you know, probabilities, statistics, um quantitative just math. We're just we're a math freak firm. And you can do that in the options world because the options everything is just a uh is a derivative of flexuals. So everything you can figure out expected move, you know, everything's based on vol. >> You're trying to figure out like what's in the premium, how much of this is time value, how much of this is intrinsic? >> No, we're really trying to figure out is is is the premium pumped relative to it. >> Is it priced correctly or not? >> No, it's always priced correctly. It's always I'm trying to understand what is the math what is the math trying to figure out? Okay, so everything's always priced perfectly. That's why firms like Citadel and all the other, they're amazing and they price everything perfectly. So nothing's mispriced. Okay, but sometimes volatility is high relative to itself and sometimes it's very low. >> And so what we do is we try to help customers when it's high, tell them what they can do, which like optimize strategies. And people really love math. You know, here here's our basic premise and everybody told me this would never work. People are super smart and I believe people are smart. People are good and they're smart. When I say good, they're just most people are decent. So, the premise behind Tasty was >> we're going to give you we're going to tell you everything we know about trading and hopefully you use our platform because it's a it's a goodwill, good faith marketing plan and it worked. >> And the reason people liked it is because we challenge them with math rather than tell them you know tomorrow you know Nvidia's going down or tomorrow Nvidia's going up. What we do tell them is based on the way options are priced, Nvidia for the next 30 days has a $17 move higher or $17 move lower. So set your strikes wherever you want because that's going to be right 70% of the time. >> Okay? >> Cuz that's just a math model. >> Who are these people? Who who are your customers? >> Like who are your like hardcore users? >> Oh my god. Well, we have, you know, I don't know, half a million customers. >> Okay. All all walks of life. Is there anything that they have in common? They're probably very intelligent. >> But everybody's intelligent. Like I I know you don't think so, but in the world of self-directed trading, >> yeah, >> everybody's our customer. Here, I'll tell you a quick story. So, once we built a a institutional platform years ago, I built a platform that's still used today by Schwab. It's their institutional platform now, but I built it 25 years ago. And when I built it, I built it with partners. We had partners at um ABN Ambro and um UBS, you know, a couple of big institutional firms. And I built it because I thought it would help us, you know, grow our business and our name and stuff like that. And every firm that signed up for it, I would say, they go, "We want it exclusive with our customers." And I go, "I can't do that." Because, you know, Meil Lynch says, "Every customer is their customer." And UBS says, "Every customer is our customer." And then says, "Every customer is our customer." So I look at business the exact same way. every customer at Robin Hood, every customer at at Think or Swim, every customer at Erade, every customer at Fidelity, they should be our customers, but obviously they're not. But that's the way I look at the business. We don't have, you know, we could have a 18-year-old kid. We could have a 90 I think our oldest customer is like 99. You know, I don't know. Very short day. >> They never leave at that age. >> Well, you don't buy right, you know, you don't buy. >> So, so you mentioned zero day. >> You don't buy the green bananas. You mentioned your customers got hurt in April. So, >> most most options expire worthless. We know that. So, is your thing like, "All right, instead of being the sucker who buys the options, sell them." Is that the deal? >> Yeah. >> But don't a lot of institutions do that trade also? Like, how do you how do how do uh >> institutions are pretty on on on unbalanced? They're pretty dumb. First of all, they don't have the expertise. They don't have the technology. They don't have the expertise. And they're very limited by liquidity. So institutions have to trade in a very narrow set of you know that's why you have such a concentration of just all you know equity wealth but it's the same thing for options. If you're an institution you can't move $25 million in option which is nothing if you know in very many stocks. You have like five or 10 five or 10 different underlyings max. So the the futures world with respect to options is I mean the institutional world with respect to options is pretty limited and we don't do any institutional business. >> Okay. We're 100% retail. >> So options trading is at record highs. >> Yes. >> But I thought there was an interesting uh juxosition that I wanted to show you. Can we put up this uh cash and money markets chart? >> It's weird to be in an environment where people have never traded more in options. Whether it's volume of contracts or dollars, any way you want to look at it, it's an absolute explosion. >> Yeah. But then at the same time, total cash and money market funds is at an all-time record high and like a very pronounced one, almost vertical. >> Yeah. >> People will look at that options chart and they'll say it's a speculative mania cuz they're stupid and they just infer. >> And then people will look at this cash and money markets and they'll say, um, everyone's bearish. >> Neither of these two things are true. >> There just is a lot of cash and a lot of activity. And neither one of those things have to signal anything about the environment. They could just be things that are happening in and of themselves. I I think you'd agree with that. >> Yeah. The markets at the S&Ps are at 6,700. I mean, there's, you know, you're talking about an enormous amount of wealth is created. That's why there's, you know, you could take a little bit of money off the table and you still have the same position you had on, you know, a year ago. So, that's why cash is so high. >> So, you you said people are smart and investors today are more informed than they've ever been. First, Fidelity made this video in 1994. We've got a 4 secondond clip. John, show us the time. >> When I say the word stock market to you, what comes to mind? >> Confused. >> I don't even know how to read the >> Too much of a gamble for me. >> Unbelievable. That's 30 years ago. Where how did >> how much more informed is the public today than they were 30 years ago or even 20 years ago? I I mean the dissemination of everything because we all you know we all have everything in whatever in Tik Tok bites now um it's it's got to be significantly you know it's significantly higher here I'll give you a number that's really interesting when we built thinkers um was 1999 2000 and the amount of option business that TDM trade did was between seven and 8% of all their volume. Now they had a web-based platform but remember they had bought like you know bunch of different firms so pretty big and 78% of their volume was options and they did zero futures business when they recently sold to Schwab the TD trade their business was over 70% options and futures when you add them together they're mid70s >> wow that was only that wasn't that much you know that wasn't that many years later >> right so the the investing public has grown more sophisticated over time. Well, also they've grown more capital efficient. So, the problem right now is you got stocks like you take a hundred shares of spiders, just as an example, $67,000 for 100 shares. >> The average retail customer has a 504 or $50,000 portfolio. >> And so, you know, I mean, that's the average online customer. You know, there's obviously places like Schwab where the customer size is bigger, but you can't even buy a hundred shares of stock. >> Yeah. So, why would you why wouldn't just either sell a put where you put up, you know, $8 or $9,000 or sell a put spread where you put up $250 or buy a call spread or buy a call, whatever you want to do. >> What is the limiting factor? It's the lack of understanding of how these instruments work. >> Not really anymore. Now there's so much content out there. There's the technology is so freaking good. You can't believe how good the technology is today. >> Yeah. Well, one of the reasons why I think people feel more comfortable with stocks than options is not having to constrain their opinion of what's going to happen into a set predetermined window of time. >> So people will say >> because that's old school way of thinking. >> I understand. But but I wanted to ask you about that. So people will say like, "All right, I'm going to buy Alphabet. >> Yeah. >> If I'm wrong, it'll go down $20, but I'll just hold it until it goes up." Cuz that's how people operate with an option. You're dead. >> Nobody in our world thinks like that. Like I couldn't I haven't found a person, you know, I mean, I respect, you know, the the people that can do that, that can get away with that like, you know, the Warren Buffets of the world where you can hold something for 20 years until it's right because nobody's ever leaving you. But in today's world, you're only if you're a money manager, you're only good as good as your last quarter or your last month. And if you are a trader, you know, none of that plays well. >> Well, you won't survive as a trader. You couldn't do that. >> You're dead. You're dead. So, the only way to keep yourself in check is kind of is trade size. there's nothing else. But again, the technology today and the information that's available to you like I mean our platform we'll we'll show you your like you get your worst case like we'll give you a sear number. We'll we'll basically give you everything to 99% of the occurrences. >> Okay, >> you know there's only 1% outliers and that's kind of you know so the only way genius fails >> is when you trade too big. Okay. So, you're showing people here here's the here's the mathematical probabilities of what could happen here. You don't know what will happen, but you're stacking the odds in someone's favor by at least presenting them with upside downside. >> No, we're not giving we're not we're we're stacking the probabilities in their favor, but it's not a theoretical edge. >> Do you understand? >> It's quantifiable. >> It sort of is quantifi quantifiable, but it's not a theoretical edge. What it is is it's just we are just explaining to somebody. So in other words, if you want a 70% probability of success on every trade you make, you can do that no problem. And law of large numbers will deliver that return will deliver that win percentage to you, but they won't necessarily deliver return to you. >> I was about to say what's the gain if you're if it's that high. It's got to be relatively low. >> So So you so so the gain is less. You take more risk. You risk more to make less, but you have a higher win percentage. So you mentioned edge and how the market makers are so good, the prices are always right, the technology is so good, the information is so good and quantifiable. Yeah. Does that make alpha or edge much harder paradoxically because everybody knows everything? >> Of course. Yeah. I mean, yeah, there is no such thing as edge anymore. >> Are there a lot of are there a lot of retail options traders who make a living and that's their sole source of income is the money that they're pulling out of the stock market? >> Yes. >> That's pretty impressive for somebody to be able to do that. >> It's really impressive. Is that one in Is that one in 10,000 or is that one in a million? Like how like what are the odds of of somebody getting good enough and being consistent enough and emotionless enough to be able to really do that? It's extremely rare. >> We we've done we do >> I'm sure you've seen it. >> We do a shitload of research on this. Okay, this is this is my word. >> Well, this is what I want to learn. >> But let me just say finish up what with what you said because I think it's important. So the reason that we take that high probability approach to trading is not because it means you're going to make a certain return. We do it because we teach people to win. Like all we care about because we can't make you money or whatever. All we care about is you learn how to be how to have a winning how to win more than you lose and then hopefully you figure out how to turn that into a positive return >> and position size. So I I'm with you. So I'm a gambler. >> Yeah. And I would much rather do a three-leg parlay where I buy points and it's plus 120 as opposed to an eight leg parlay that's plus 1300. That's never going to happen. >> But the problem with that trade the problem with that bank >> Oh, I know. I lose money. Believe me. >> Yeah. Is you have you have an embedded negative return. You cannot over time make money. >> Correct. >> In the trading world. So, so I'll give you a couple stats. Interesting. So, in the gambling world, you bet $100,000, you're basically paying $10,000 in fees. Okay. You bet $100,000 in the trading world. Okay. You're paying $1. Because if you're trading something that's liquid like $100,000 of Apple, $100,000 in video, whatever it is, it the difference between the bid ass differential is one penny. So it's $1 to10,000. That's why, you know, if you want to gamble, have some fun. But it's not it's impossible to make money. >> So I used to lose three to five cents for every dollar that I was betting and FanDuel. Yeah. >> And the bottom fell out for me thanks to the Chiefs and the Texans and Chargers game. But anyway, so now I'm down to like six to seven cents loss for every dollar. But that's right. Yeah. I lose six to seven% of my bets or the dollar of every. So in the trading world, it's it's it's it's a level playing field and that's it. You know, it just depends on how you do it. There's >> But is it as much fun? >> Maybe more fun. >> I don't know. It really depends. I have fun gambling, too, but it's different. >> Okay. So, the question, the question about how many people could realistically be professional traders. >> So, think of it like a because it's such a level playing field if you, you know, make enough trades. It's all about making enough trades because then you average out what you're supposed to, which is just classic, you know, law of large numbers. >> That's like p That's like poker. If you have an edge, the longer you play, the longer that edge, like the more money that edge should deliver to you, >> of course. But even poker, the rake is is pretty big compared to trading. But so, so I'm going to break it down like just a nor like this is how our customers go. 16% of the people blow out. The attrition rate is about 16%. >> Within how much time does it take for that to happen? >> I have no idea. It could be it could be it could be a it could be 3 months, 6 months, a year. >> Michael's case, first trade. When you say blood, you mean account goes to zero or they stop trading? >> They account goes to zero or they or they stop trading >> and that's why they stop trading. >> Yeah. Yeah. The reason people stop trading is because the account goes to zero. >> Um and and >> so 16 All right. 16% >> 16% blowout. 16% >> outperform some crazy multiple of risk-free rates. So let's say risk-free rates are 4%. Right? So 16% deliver returns over 20 or 25%. >> Wow. Okay. So both that's both sides of your distribution curve. Everybody else falls in the middle. >> Everybody. >> And what's the middle? Just whatever. >> The middle is whatever. So So you have 34% above the midline, which now for me the midline is some multiple of risk-free rates. And then 34% fall below the midline, which is you don't you don't beat risk-free rates. >> So if there's no edge, why do people trade with you? >> Well, there's there is we try to optimize the mechanics because it's fun. >> Hell yeah it is. Because here there is such a demand for speculative uh um there's such a speculative demand because of either asymmetric upside or just hey I I want to do something you know I want to I want to take some risk. So the I will argue the reason people trade is so that they make quicker decisions. So their brain processes decision-m faster. So they're probabilistic in the way they think about everything and they become a much they build wealth at a at a rate that is that is higher that if you run into anybody you've ever met that's that's very wealthy, they make the quickest decisions you've ever seen. And the reason for that is their brain just works faster. It works for athletes. >> Is that real? >> 100%. >> Really? That's why that's why you have athletes like that can play play Brady. >> Can I Can I pause you though? >> Yeah. >> So then why are all the famous investors obsessed with telling you how slowly they operate? >> Howard Marx, Warren Buffett, Charlie Mer. >> It's they're they're 100 that's from a year's past. >> You find that interesting? >> No, I don't. I used to hate I hate like Charlie Munger used to drive me crazy. I couldn't listen that guy. You know, when you start when you start when you start like I mean I used to until he died I used to rant against him all the time. I'm like shut the up. You know you're this is not good for a business. >> Okay. >> I there's so much. >> So quick decision- making is alpha. >> Even if they're not good decisions, just the fact that you were able to be decisive, you're saying is how you get rich. >> So I've been doing this on the retail side now for 25 years. 20 years I spent as a market maker and then 25 years building Thinker Swim and Tasty. >> And if I told you the number of people that said, "You know what? I couldn't trade for shit." >> But my business exploded from what I learned from trading. >> Oh, I love that. >> It's incredible. >> Okay, >> it's incred the numbers just off the charts. >> Well, you know what? Money won is better than money earned. And the reward, the dopamine hit from seeing that exponential growth in a short period of time. I mean, what's nothing better? >> I'm a grinder, so I'm a little different. Like I'm I'm somebody that like, you know, I don't really get that kind of asymmetric upside because I >> You're not looking for lotteryies feeling. You like to win consistently over time. >> Yeah. >> Okay. I think I'm that way too. >> But you can't have longevity in the trading business if if you're just shooting for long shots. It just you you'll you'll >> No, you die. >> You'll bust. >> Can we talk about that 16% that are at the top of the distribution? >> Okay. So these are the 16% of people who are earning far in excess of the risk-free rate, multiples of the risk-free rate. >> That's the only way you can measure it, right? That's the only fair way. >> Okay, fine. So what is it about those people and how do you replicate them? How do you find them? And how do you bring more of them on platform? >> I mean, first of all, we try to bring everybody on platform. So it's not like, you know, we we don't the the >> But those are great customers because they'll be with you forever. >> Forever. Yeah. >> Yeah. I mean, in this business, remember in in the brokerage business, you know, at TD Merch, I think it was 6% of the customers did 80% of their business. At Tasty, it's like 20% of our customers do 80% of our business. >> So, >> you're right. That's what we want. I mean, those we want to teach people to hang around for 40 years. Um, and you know, >> Tom, are you born that way or can can anyone become that top 16%? >> Oh, anybody. >> Anybody can. >> Yeah, anybody. So you sound so you agree with um the turtle traders like the idea what they said like basically if if anyone walks in off the street and does this method they can become a trader. So you sort of believe >> it's not exactly the trading places thing but but um uh it's a little different. I think anybody can become a successful self-directed investor. I think the key for me is teaching people to improve their basis. Like when you first start, you know, what's the greatest thing to do? Just improve your basis. Just just give yourself a better statistical chance than somebody that buys something. It's a 50/50 shot. Give yourself a better statistical advantage. And then also teaching people about financial strategies and also how to use like this technology and how, you know, how the markets work. It's so valuable. You understand everything. You know, I mean, we've probably taught five million people over the last 25 years. >> Okay. If someone's going to if someone's going to go on that journey with you, how much of their day does it monopolize? Cuz if you have options trades on, it's not set and forget it. Buying hedging trades right now. >> Yeah. You haven't traded in 10 minutes since we've been talking. No, but like somebody has to >> I am a junkie, just so you know. >> Somebody has to be committed to like I'm going to have alerts set. I don't give a >> No, but I know. I don't care. >> Is that relevant to the to the people? >> I mean, you don't have to. You know, you do whatever you want. Like, it's it's like, you know, all right. You like to gamble on sports. Okay. How many times on a Sunday do you look at your phone to see what the score is? >> Looks away from his phone. >> Okay, there you go. Same thing. I mean, you know, you and you still work, you know, you figure it out. It's just like anything else. >> The 16% of the elite traders, I would imagine that there's a lot of turnover in that group. Or are you saying that it's okay? >> There's some Yeah, there's always there's turnover in everything. But you know what? Like you can't you can't overthink this stuff. Like the the world's moving. There is no question that on the retail side, I'm not talking about the institutional side because that never changes. It's old. It's legacy. It just stays the way it is until somebody completely disrupts it. But on the retail side, everything's moved shortterm. You know, whether it's zero DT options, whether it's, you know, trading, you know, the biggest growth we have is in futures options. The biggest growth. It's like we're like 25% year-over-year in futures options. >> There's not enough leverage in futures. options on futures. >> Options on futures >> as opposed to just straight trading futures. >> Yeah, we're the largest we do the largest percentage of options on futures of any firm in the world. >> Okay. >> And it's crazy, but that's what customers are attracted to. >> What's the purpose of options on futures more leverage dollar? >> No. Strategic. >> Tell tell me more. >> Strategic. You can you can you can you can make money if you're wrong potentially and you can lose money if you're right. You can you can bet on something staying inside a range. >> Okay. You can risk a little to make a lot or you can risk a lot to make a little depending on what probability set you want. The the model for futures options is the exact same as it is for listed options. Doesn't make a difference. >> Do you uh do you think that overall the explosion in retail trading um that I I would put like the beginning of that let's say March April of 2020. I know retail trading has been growing in popularity forever since Charles Schwab, you know, in San Francisco, but just in the last four years, five years, it really feels like a renaissance. >> Do you think that um on balance that's been a great thing for most people or a really great thing for a small group of people or like do you have like a philosophical take? >> Yeah, I think it's been a I think I think you're you're talking >> I'm positive on it. I think you're talking about like kind of really that meme stock movement in 2021 and what exploded from that, you know. >> Well, I I don't know like uh 30 million new retail traders or whatever the number is. >> That was the inflection point. >> Most of them young. I >> I agree. I think it was transformational moment. And of course, I'm going to say it was amazing for the business and and I don't care if some people lost money because we introduced >> life. >> Yeah. And we introduced markets and trading to, you know, maybe 50 million new people in the end, you know, because there was obviously carry on after that. So, I mean, no, it's huge. It's great. Introducing teaching people about managing your own money is so freaking important. And nobody wants to touch this because they're all scared, but nobody realizes, hey, you know what? You're just as smart as the next guy. You're maybe probably even smarter. >> Yeah. Do you What do you say to somebody who says, all right, I tried this. I tried to be very active. Yeah. Yeah. >> Made a lot of decisions quickly. >> They weren't great decisions. It turns out in hindsight >> and it made me very anxious. Would you ever say to somebody, "Hey, you know what? I actually think you would be better off with ETFs and don't do this." >> Well, we would never say that, but I'd be totally fine. Like, I wouldn't like like I we don't tell people. I I build technology and I write content, right? >> I don't talk to people about their, you know, their stuff. I mean, >> you're not anyone's financial adviser, >> right? I I'll answer I'm an email junkie, too, so I answer like a gazillion emails a year, but I will help people with they have a question, but I don't tell people what to do. >> Okay. What's the coolest story you ever heard from somebody who learned to manage their own money and trade on your platform and what happened for them as a result? >> The coolest story? >> Yeah. Like what's like a what's like an awesome outcome? >> I'm not sure how the outcome ultimately resolved itself because there were some negative things. Can't wait to hear this. See you later. But the coolest story I ever heard, which was back when we owned Thinker Swim, was there was this woman who came to an event that we did. She was she was nice. She was an accountant. She was a CPA. And she was she had gone to Wake Forest. She's really smart, master's degree. And we started talking because she was a huge North Carolina basketball fan because she grew up there. She loved Michael Jordan, the whole deal. and we started talking and she moved $100,000 from wherever she had her money because she was really intrigued. We did an options seminar was like 2005 and she emailed me a couple times and and I had no idea and she moved $100,000. So my partner Scott comes up to me one day, this is probably 2007, 2008 and he goes, "Do you know this woman?" Cuz she says she knows you. And I go, "Yeah, yeah, I met her in like, you know, North Carolina. I was doing a show, whatever." is super nice. She writes me emails all the time. He goes, "She's up $10 million this year and she's firing and she's firing like thousand lots, you know, in the S&P." Yeah. >> It's like 2008, 2009. And I'm like, "What?" Like I I go, she moved to $100,000. I go, "No, she's up 10 million right now." Okay. And and she's like, >> you know, probably early 60s, like the quietest, nicest southern woman, you know, like like and I'm like, "What the hell?" So, so they're watching her because when you get when you start trading a certain size, you know, you pop up on our wrist monitors. Yeah. So, you know, and and she's a premium seller and all this other stuff, but she mostly sells puts and she caught the absolute bottom in 2000 end of 2008 to beginning of 2009, she sold a ton of puts and over that period, she made $100 million. >> No way. >> Started with $100,000. She made 100 million. Now, >> she the story has a bad ending and I don't really want to get into it because >> you married her. No. >> All right. >> I got I got my own problems there. >> But but um uh but but she legit made and people would be like and we did a series on her for a while. Like we we we told the story because it was great and so many people write to us like it's all You guys are so full of you know? Like and I'm like, "Dude, we watched this. We watched everything cuz we were worried about firm risk." >> Yeah. >> We couldn't shut her down. >> Did you copy her trades? >> No. No. And she traded. She was by the time she >> What was she doing though? so special. >> She was just selling size. >> She was just selling 5,000 lots of of different uh strangles and condors in in the SPX >> and that's a lot >> back then. It's she was the biggest trader in the world for a short period. >> So when she was right, she made a lot of money. >> Yeah. But she didn't have a lot of draw downs because what she did is she always stayed long delta which means long she always stayed on balance long the theoretically long the market. And so she caught from 2009 to like 2013 >> and she just >> she developed this on her own just using your platform >> using our using the analytics on our platform and I interviewed her I I was just like Tony and I interviewed one and I really just shaking our head but like it's noting possible like it doesn't because and the guys in the SPX pit who were all friends with still cuz that's where we grew up you know with on the trading part so she would route the orders and they'd be like they'd be calling us and be like what what the's going on how does this woman write you know >> can you share what you what you nicknamed her cuz You definitely had a nickname for this whale. >> Oh, yeah. Yeah. >> Oh, our nickname was Karen the Super Trader. Karen the Super Trader. >> Karen the Super Trader. Okay. >> Um, what did that tell you about the power of your platform? It it didn't it didn't that that was that wasn't it because because I mean that was the thinkersome days and then when we built tasty you know it we we changed the game again like thinkers changed the whole industry you know and it also I was going to ask you about this later tell us for the audience that is not aware of what Thinker Swim is let's let's do this now >> my first trade was on Thinker Swim 2008 >> there you go >> why was it called that why do people still talk about it in glowing people love Think or Swim. >> Beautiful platform. >> Um, what was it about it? And then why'd you sell it? >> It was a cultlike firm. So, yeah. >> So, I was I was in trading in the OEX pit one day in in the S&P, you know, 100. And my partner was Scott Sheridan. We've been partners for 37 years or something. And we still are. And I turn to him, I go, you know, everything was going electronic in the end of 1999. And we were also short the market and those stupid internet stocks were exploding. We're like, we're I was just in a bad mood. And I go, I'm ready to try something different. I've been doing this for 20 years, standing in one spot, literally like in in two feet of space. And I'm like, I you know, I'm sick of all these guys spitting on me and, you know, sweating on me and all that stuff. Like, let's try something different. And we had already built a money management firm. So, we were managing a half a billion dollars of like some institutional money on top of trading, all this stuff. But I'm like, I want to try something different. I want to build something. And I got a great name, Think or Swim. Nobody will ever I made it up. I just walked through my I tell my wife, I go, "Think of something. What do you think?" She goes, "I idiotic. >> It's a great name." >> So, so I go, "Nobody >> would have been a great name." >> Nobody. And they when we when we launched the platform, Crane Chicago, which is like a business paper, they go, "Worst name for a brokerage firm ever." Someone wrote a whole story. And I'm like, I told Scott, I go, "We nailed it cuz if this person hates it, we got it." And and so we built Thingerwim and we had a you know we had built it with seven guys originally and a bunch of Russian developers because there was nobody around in the US and it turned into be an amazing cult firm with a really beautiful piece of technology. Um and it still exists today. It's one of the best platforms. Um, and the reason we sold it was because, first of all, we're traders, right? And at the time was the meltdown in 2009 because we didn't know. >> Oh, that was the era that >> Yeah. So, we were trading over a billion dollars and then we dropped down to like, you know, let's say 600 million because of they killed all the financial stocks in 200 end of 2008, early 2009. And then all of a sudden, you know, TD had tried to buy us twice before and we turned them down both times. And then Options Express started talking to us and another couple firms. We had three firms bidding for us at >> Was their offer lower than the previous ones? >> They were all about the same. But here's why we did TD merch. >> Who were you negotiate? Are you Is this Mowglia or is this Ricketts? >> Mowglia? No, it's not Ricketts. It's Mowglia was the CEO at the time. >> Okay. >> And so I was negotiating with Joe who I'm friends with to this day. >> Yeah, we're friends with Joe. >> Yeah. So, my favorite Joe Muggley story is we're sitting, we're negotiating this deal and Joe and I'm in New York doing a show cuz I'm just always promoting and I'm in New York doing a show and Joe calls me up and I go, "Why does your phone sound so bad?" He goes, "Cuz I'm taking a shit." He goes, "Are we done? Are we done with this deal yet?" And I go I go, "I guess." Okay. >> How could you say no? >> Exactly. >> Yeah. Yeah. Yeah. >> Anyway, so and but but here was the problem. This is even a better part of the story. So, we agree to the deal and and and we're, you know, we think this company's worth we think they're paying a little bit more than we're worth, but but that's because all the financial stocks are killed. And TDM trades trading for $11 at the time. >> Yep. I remember >> they killed their their stock. So, we're like, >> we don't want cash. >> Smart. >> We want stock. >> Like selling a putt, basically. >> Contrarian. >> Cuz I cuz I thought their stock was too cheap and I thought it in the hole. >> So, I thought our stock was too cheap, but I thought their stock was even cheaper. So I'm like, I want your stock and they're like, we want to give you cash because it's a credib. >> It was it was not a good deal. It was I shouldn't say it wasn't a great deal. It was a great deal for them, but they wanted to do all stock. But then the beautiful thing is at the exact same time, the same exact day, month, whatever, the Ricketts, Tom Rickettts wants to buy the Cubs. >> Okay. >> And the C so to buy the Cubs, he needs cash. >> Oh, it's perfect. So he needs about 350 million cash over what? So they could buy the Cubs from I think it was Sam Zel or whoever that time. So So Ricketts, the Ricketts need 350 million. We want stock and TD wants to do the deal for stock rather than I mean for cash rather than stock. So we did a three-way deal and we never announced this like to the public, but the Ricks got their $350 million cash. We got our stock and TD was able to, you know, was able to keep their stock. What a story. >> Perfect timing. >> Three a three-way deal at the exact same time. >> There would have been a cool way if you would have gotten the Cubs, but I but I I guess >> well the biggest mistake I made from that is that so when we did that then Tom Ricketts goes cuz we're all kind of friends, you know. Um and we even sponsor the Cubs today. We're one of their lead sponsor. >> He's alone. >> Oh yeah. Yeah. They're great. He's the best owner in sport in Chicago for sure. >> Well, he deliver he delivered finally. >> But we're on the mound. >> That's cool. Tasty trade. >> Tastes on the mound on Wrigley. every every every you know every tele every telecast. But so Tom goes, "Listen," he goes, "Tom, you should we still need a little more cash. You should throw some money in for the Cubs because it's a good deal." And I'm like, "I think it kind of is a good deal." But I just was like, you know, going through this intense deal to do the whole deal. So I didn't buy to the Cubs. I missed that. But anyway, that's why we sold it. >> How long did you sit around until you said, "I got to do this again." >> So it was two years. And I and and and then Mowglia left and this guy named Fred Tomzac took over TD. >> And Fred was Fred was great. He was a great CEO. And we're very good friends even to today. And Fred comes in and um he's he says, you know, he wants us to work there, me and Scott, for a couple years. You know, we signed like a three-year deal. After two years, I went to him. I said, Fred, you know, this is not for me. Like I I you know, this is too corporate for me. you know, I'm a, you know, I'm t-shirt wear. I mean, I'm not, this is not me. So, he goes, "What do you want to do?" I go, "I have an idea. I go, I want to build this financial network called," and I didn't tell him what, right? Because I know he hates all my names. He hated the name, Thicker Swim. And now I know he's going to hate Tasty Trade. And, uh, I go, "All right, I'm going to build this financial network called Taste Trade." He goes, "That's the dumbest idea I've ever heard." He goes, "But I'm in for 20 million." >> Because he goes, "He's betting on you." >> He goes, "Whatever you do, I'm betting on." And so, they were our first investor. We never even took the 20 million. took a piece from them. Um, and uh, and and so he supported it, which is great. And then and then Taste Tra was born in 2011. We sold it in 2021 for 1.1 billion. >> Wow. Unbelievable. Unbelievable. Michael wants a fist bump. >> So, you sold it, but you're still there. You're still part of it. >> Yeah. Well, no. I don't need like the specifics in your contract, but like you s you you sold it. >> Who bought it? >> IG group out of London. >> Okay. All right. Are you having fun now that you took all that risk off and you can just do what you do, do the shows, and >> you know what? I don't give a crap about the money. I know it sounds weird, but like >> Well, you were doing okay before this. >> Yeah, you were okay before this. You didn't need the money from this. >> Well, I mean, it's always like you always like you want to be like it's your legacy kind of thing. Yeah. >> Like it doesn't it didn't change my life at all, but you know, I still work my ass off. I mean, this the company we we sold it four years ago. It's worth double that today. >> So, what still drives you? You're just competitive. You're a maniac. >> Yeah. And plus, I don't have any hobbies. >> Well, this is your hobby. You love Stay with us. >> Plus, you know what? So, this is going to sound weird, but I work with all my friends. Like, most of us have been together 25 to 45 years. Like, these are my only friends. Like, this is what we do. And so, you know, so I work with my friends. But I still have fun. >> Dude, I get a text from Michael like every 3 months and he's always like, it's always some version of like, I feel really bad for you that you can't enjoy the ride that we're on. Like, we're working our asses off. >> He's a miserable prick. >> I'm such I guess I'm I guess I don't appreciate what you just said enough. >> See, say it again. >> You're working with your friends. It's not about the money. So, I I check every one of those boxes that you just said. I'm working with my friends. >> Yeah. >> I like I do need the money. I'm not in your situation, but like I'm okay. It's not not every day is uh do or die the way it used to be when I was a retail broker. So, I'm fine on money, but I just can't like on a daily basis. I have ups and downs. Sure. >> But I don't appreciate it enough. And can I read this? Yes. >> This is what Michael texted me. >> Make me cry, but yes. >> No, because Michael's my friend like first and foremost, right? >> Um so, so and I feel bad about it because I know he's right. So, he goes, "Uh, I wish you could, this is yesterday, uh, two days ago, 7:30 at night. I wish you could enjoy the ride. It's going to end one day. These are the best days we're ever going to have. Literally doing everything we ever dreamed of and more. It breaks my heart that you can't find the joy in this." Or, if you are having fun, you have a weird way of showing it. You don't have to respond, but I had to get this off my chest. And that's maybe the fourth time he said some version of that. >> I'm a good friend, right? You are a good friend. I wouldn't say that I'm not having fun. >> Yeah. >> But I'm definitely underappreciating the aspect of it that you just described. >> Well, fix me. >> So, the only thing that money is good for. The only thing that I mean, of course, there's I shouldn't say only thing, but the really nice thing about making some money is that you can afford to do things that you have fun with. Like, I don't give a crap about buying I don't even own I'm a I'm a minimalist. I don't own anything, but I I I'd love to be able to do things where I'm having fun. And so like what I do, I'm having fun. Like the investments I make, I'm having fun. The businesses I build, I'm having fun. I'm not going to do anything at my age. I'm not doing anything anymore, which is not fun. >> Okay. I don't And you don't have to. So, all right. So, I'm not >> How does How does Josh have fun? >> Well, no, no, but I'm not in I'm not in your I still have to do >> I got enough problems. I can't help out. >> No, no. I still have to do things that I don't want to do, but it's okay. Like, this is what I'm I'm This is part of my journey, part of my adventure. >> You have a lot of years on me. You probably did a lot of things that you didn't want to do, but you knew you had to. And then your success, the point that you're at now is like you don't have to do those things anymore. So, I'm not there yet, but I'm closer to being there than I ever in my life thought I would be where I am able to say no to a lot of >> Yeah. And I think I under I think I underappreciate it, but that might just be this is the way I am. I can't do anything about it. >> You know, one of the things also that that's a really fun takeaway is that I like the fact that I have made people that have hung around with me like very wealthy, too. >> I love that. >> You know, we Scott and I and and Christie, we gave we gave away $50 million. We gave $20 million to our employees when we sold Think or some and 30 million when we sold Tasty. This is in addition to everything else. We just gave them like just handed out checks for $30 million on top of everything else we've done. So we >> that's got to be the best the best feeling in the world. >> The best. >> Okay. And you see these people still every day or often. >> So one of the things with wealth is that you do lose a few friends because some people can't handle it. It's it's a weird thing. Somebody that I know when we were a lot younger sold their business to Goldman Sachs and I said, "It's amazing, right?" And he's like, "Yeah, but I lost a couple of friends." I go, "Why?" And he's like, "Because some people couldn't handle it." And >> people that don't have the money that you do can't be your friends anymore. >> Yeah. >> Maybe from jealousy or whatever. It's something. But and I see it sometimes in business, but my friends, we've been like the hardest thing was >> like there's a bunch of people that you know that I've hired over the years that I think have done your show. I think Did JJ do your show? >> Not yet. >> Oh, not yet. But like Q did your show, right? >> Uh Steve. >> Steve Cor. >> So like these are guys that we all traded together in the pits, you know, and it's hard, you know, like and Tony, same thing. The first time I offered Tony a job, he's like, I'm not working for you. And the second time I offered a job, not working for you. JJ was the same way. I offered him a job, he goes, I'm not working for you. And then and then Q is, you know, Q is the first time he's I I tried to bring him in, he's like, I'm not working for you. like we stood next to each other in the pit, you know, and then and then and then a year later. >> You get that though because if the situation were reversed, >> I totally get it. >> You would probably like if you were JJ Kenahan and you were like, >> "Yeah, >> working for Tom." >> No, I totally get it. And then and then but you know, then years later, you know, they're they've amassed a ton of wealth because they they just bought in and they learned so much and you know, it just it's it's cool. Like that kind of stuff is cool. Like we have a tree that goes to every firm like Robin Hood and Erade and every single firm out there has Thinker Swimmers and everything. >> You're like the Bill Parcels. >> I think I actually Tom I think that's actually the coolest thing in the world. Um what do you think about Robin Hood? What's your I mean this is the mo I would say >> I don't give a crap. >> No, no, no. I mean the success that they've had and what they built. I think it's amazing. >> Yeah, it's amazing. >> Okay. So I think >> I mean if you >> in the last 10 years it's definitely the most exciting uh new brokerage business to come along. >> Sure. I mean they they you know they clicked the viral button and it worked and the virality that they did I mean I I was trying to do that for you know I mean I mean I'm not I had an amazing career but like what they did incredible. >> Um I don't I don't give a crap like I mean I like those guys you know on balance I like those guys but I'm also a competitor. I want every one of their customers. >> They kind of bent the industry to their will with uh 0% uh commission. Dude, that's why TD had to get bought by Schwab is because of Robin Hood. >> Why? >> Because the commission free trading destroyed the business. No. Of TD Marit trade. It didn't. >> No chance. >> Come on. >> No. >> What do you think it was >> that TD sold? >> Yeah. >> Because they had a bunch of idiots on their board who just wanted to take the money. They were so they they >> You don't think Commission for Trade? >> No. Here TD Merit Trade was owned 40 some odd percent by TD Bank, right? >> TD Bank was in trouble for like, you know, bunches of crap, but they also they hated each other. >> They wanted to hit the bid. >> They just wanted out of that thing. Everyone's like, you know, I mean, no, the Ricketts, Joe Ricketts and Schwab, they hate each other. They don't want to do the deal. >> I'm sure I'm sure that's true. The way that I see it is that when Schwab had nothing to do, >> but when Schwab said, "We're going commission free, too." >> Yeah. >> Schwab stock got hurt. Let's just say 10% of making went commission free. >> But TD got destroyed and then Schwab said, "We're buying you with our stock. We're just going to swallow you." >> No, that's not And and TD Ti at that point was doing 70% of their business in options. They didn't go commission free. >> Okay. >> They only went commission free in stocks. They didn't even care. It's nothing to them. >> They had a they had a uh they had a no commission platform of ETFs for the RAA custody side of the biz >> here. When we when we went to when we did the thinker some TD deal at first they were doing about 300,000 to 400,000 darts a day. That's trades >> daily average. Yeah. It's it's number of trades. That's back in 2009. They were doing about three or 400,000. At the first board meeting, I walked in, I said, "We're going to do a million trades a day because of our platform. Because you bought toss, you're going to do a million trades a day." They're like, "No way." Within six years, they were doing four million trades a day. When they sold to Schwab, they were doing over four million trad. They were killing it. They sold because they were dysfunctional. They didn't sell because they had to sell. >> Do you think they could have stayed by themselves? >> You know, a lot better than we take your word for it. >> They could have survived with zero dollar commissions. They don't make nobody. We all have zero dollar commissions. Everybody has zero dollar commission. >> So payment for order flow, margin lending, that like would have been enough reason to stay independent. >> Of course. Okay. The Robin Hood going to zero. None of us have have gone to zero on options or anything else. And so we've all just went to zero on stock because nobody makes any money on stock anyway. >> Oh, let me ask you a question. >> Options is the better business. Options and futures. >> Is it because the spreads are so wide? Like why are options such a great business? because you can actually make money with them and and because the customers the customers like them because they're strategic and the firms like them because because they can actually make a little bit of money. You can't make any money in stocks. >> Yeah. >> So, >> the technology is really expensive to deliver and the marketing is really expensive. Everything's expensive and nobody helps you. So, you know, you've got to get market share. >> I want to ask you about option strategies in ETF rappers. How do you feel about that? >> I don't care. So, we do. So, do you think that those products are worthwhile? Do you think they're like executing that those strategies well or what are they missing? Like why why aren't they working as well as they should? >> Because they stink. You just have >> You ever get called for help with any of that stuff? >> Well, I have one friend that's really good trader that manages one of those funds, but I'm not going to bring him into this. But the other >> is it YieldMax or No, >> I I don't know the name. >> Okay, so let me let me read this real quick. >> Okay, >> this from our friend Jeffrey Pek at Morning Star. Yield Max Coin Option Income Strategy ETF gained 42% per year. From its 2023 inception through 2025. Okay. >> Over that period, the ETF received nearly $2 billion in cumulative net inflows. Um, and his daily assets average around $560 million. So Jeffree says, how much money did investors in this ETF make in dollar terms over that period? Because it's up 42% a year. It's still only two years, but still they didn't make any money. They lost $35 million in total. How do investors lose $35 million in an ETF that's gained nearly 42% per year? >> I don't know. >> Amazing. >> Miss So they're they're buying and selling at the wrong time. >> No. >> Horrifically. >> What else? >> Here's here's the problem with these and I don't want to get into like a lot of the problem is that they can't use the they can't use the listed markets >> because the listed markets are not big enough for what they want to do. So what happens is they are forced to go into the OTC markets and they just get they don't understand how bad they're getting ripped off by JP Morgan, Goldman Sachs and everybody else. And so so they're at like, you know, like where customers are trading one tick off mid price, these guys are trading 10 or 20 ticks off mid price and they don't give a because it's not their money. >> So the ETF sponsor, the asset manager can't go into the same options market that you and I can go into because these are $500 million funds, >> right? >> Okay. So there's not enough size in the contracts they want to buy. So they go into an OTC market where it's a little bit more of a wild west like the pricing. >> The counterparty is just some bank >> and the bank and the bank has to lay it off in the public marketplace in some way. So the bank has to has to have enough edge to find >> they have to capture something in between. >> Sure. Sure. So the difference is I I'll explain the difference. So the difference is when our customers trade and Citadel is the counterparty, >> Citadel makes money on scale not on edge is tiny. It's like a fraction of a penny, but it's all about scale. It's all about doing, you know, billion trades. >> A billion trades. So, it's all scale. It's just the high frequency game is a scale game. The game that these guys are playing is the old school way where they're giving up the edge to the counterparty and then the counterpart is Goldman, Morgan, whatever. And um and that's a just an absolute like conceptually I'm okay with it. It's just not my thing. You know, I don't like the product. >> I mean, they've gotten popular. >> Yeah. >> Amongst investors. This is why we're asking about it. But remember what happened in 2007208 remember what most popular fund was then closed end closed end covered call funds 150 of them were created every single one of them had business >> yeah they they did not survive the financial crisis right exactly >> counterparty risk >> or was it something else >> it was it was structural risk >> structural risk >> yeah structural risk and it was counterparty structural the whole deal but they didn't survive none of them did >> because you mentioned ABN AMRO there was a moment in ' 07 where the entirety of the retail brokerage business was selling structured notes. ABN was one of the biggest counterparties. Lehman, >> well, those were those were different, but the the >> Lasal Street, >> when you think about the the whole credit default like era then and you know, so we were just having this conversation the other day cuz cuz we so firms like us, we sit on a lot of cash like let's say we have $8 billion in customer capital. I think it's some but it's all cash because nobody nobody buys stocks. I mean, nobody brings their portfolio over to us. It's all just trading. So we probably have, you know, four or $5 million, billion dollars in cash all the time. So in 2008, it was a little less than that, but in 2008 or seven, every firm on the street was like, why are you guys leaving your money in overnight repos and treasuries, you know, cuz you could get four 6% more cuz that's your revenue. That's your only revenue. And I'm like, yeah, but >> who's the counterparty? Like like this is customer funds. And if you remember what happened in when the meltdown in 2008, E Trade almost went out of business. >> Commercial paper started blowing up. Money markets were blowing up. >> Not only Leman but but you know um Meil Lynch basically had everybody who lattered out just like a couple years ago when the you know with the silicon. >> Yeah. But but this was even way worse in 2008 because everybody jumped into those credit just to get just to ladder out and get a little bit more money on their money. Even TDM trade if you remember then they their money funds went under a dollar. >> Yes. Famously. famously. So the firm that had zero risk was was Thinker Swim back there because we didn't do any we only left all the money because we're like that's not our business. So in the middle of the crash I called Ken Griffin and I said cuz he had bought all the E Trade. >> Which crash? Oh 08. >> 08. >> Okay. >> I forgot that Ken Griffin bought E Trade. >> He basically bailed out E Trade. >> Yeah. >> Okay. So I called him and I said, "Ken, we're you know we're doing great. We had no problems. We had no issues at all. you know, maybe we lost five or 10 million dollars and just, you know, customers blowing out, but other than that, we had no other issues. So, I go, I want to buy part of E Trade from you, okay? And he he was like, "Listen, Tom, it's a it's a trade because I don't know if this company's going to make it." He goes, "I wouldn't feel good about selling you." He goes, "If you really want one, I'll sell you a piece, but I wouldn't feel good about it." And I was like, "Okay." And and we didn't I didn't do anything cuz I >> It's for that reason you're saying like, "Why was it a business at that time?" cuz he wasn't sure that they were going to make it. He He was like He was like, "They got so many mortgage issues and so many credit default swap issues that I don't know if they're going to be able to pull out of this." And he goes, "I don't know if you know what you guys can afford to lose." And I'm like, "That's fair. Thank you." And I didn't do it. And and it and to be fair, it took a couple years for him to make any money on it. >> Okay. I want to I want to uh >> But that would have been fun if we bought E Trade. >> I want to finish by asking you a culture question. Uh New York versus Chicago. Where where'd you grow up? You grew up in New York? >> Queens. No, I grew up in I was born um in Manhattan. My mom was a grad student at at Barnard Columbia and um then we moved to just outside of White Plains. >> Okay. Westchester. >> Yeah. Okay. >> About 20 miles from here. >> All right. Um you obviously are the center of the universe in terms of the Chicago trading scene. At least that's the way I've heard it. Yeah. >> Okay. Um but you've worked in New York, too. >> Yeah. What do you think is the big what are the big cultural differences between traders in New York, traders in Chicago, Wall Street versus Chicago? Like what what >> Well, we the first thing we would say in Chicago, there are no traders in New York. >> There's there's there's there's a financial community in New York that is huge. >> Yes. >> Um there are a lot of lawyers and bankers in New York. >> There's a lot of money managers and um there there's there's a massive business here of, you know, assets under management, things like that. But we would argue there's no traders. you would say like the activity at the New York Stock Exchange, the NASDAQ is more uh public relations at this point, less trading, but I could say the same thing about the CBOE is is gone. The the physical floor at the CME is gone. >> Yeah. But those those exchanges are still they're the monsters and and and mostly all the high frequency firms. I mean, Citadel moved to Florida, but most of the high frequency firms are still in Chicago. >> Yeah. >> And um and there's still a pretty, you know, dominant trading community there. >> Okay. Um, but you know of like Protale and and that kind of stuff, you know, professional prop firms. >> Tom, you're never going to stop, right? You have you have another trick up your sleeve. What's next? >> I do. >> Of course you do. >> Do you know Do you know Do you know what it is yet or this airs tomorrow? >> This this this airing tomorrow. Why? Do you have a big announcement coming? >> Maybe. >> Maybe. All right. >> Good for you. >> Yeah. >> Tom, this has been such a pleasure. uh we uh we've we've followed you from afar and uh I I've always looked forward to asking you these questions and having this conversation. So, thank you so much for being here. We um we always end this podcast by asking people what they're most looking forward to. Sounds like the thing that you're most looking forward to, you can't say, but maybe what's the second most uh exciting thing. >> I should I don't want to make it seem like it's some mystery thing, but but there's um I'm just, you know, I look for me what's really fun is building stuff. Okay. >> You know, so I'm I probably most look forward to seeing, you know, like like what kind of cool stuff can we build in the future? >> Okay. >> Like that's it. I mean, I'm not, you know, I'm not going to ever retire. You're right. >> Oh, it's tasty AI. >> I mean I mean when I'm doing something on stage, I always say you when I'm when I drop dead here, just roll me in the dumpster in the back. I'm cool with it. That's okay. Like I I want to die doing this stuff. >> Love it. >> So you're the man. Thank you so much, Tom. Thanks. All right, guys. We want to say thank you so much for listening. Please like and subscribe. Do all the things. We appreciate you. Great job on the show all week. John Duncan, etc. Whole team. Shout out to the whole team and we'll talk to you guys soon. Thank you. Thanks so much. [Applause] [Music]
How to Become a Super Trader | TCAF 209
Summary
Transcript
Tom, this is so exciting. I I I uh I've been looking forward to this since we scheduled it. And so happy to see you here. >> Nothing's off limits. Okay. Nothing. And you could go as long as you want. I have no agenda. My I have a show tomorrow in town, but that's it. Where you headed? >> Awesome. >> Exchange. >> No, no, no, no. We have our We do our own shows. So, I have a show at um Webster Hall. You know where that is? >> It's on It's on 11th. >> It's on 11th Street. It's a It used to be the Ritz like when I was a kid. And um yeah, we've got like >> who's come so who comes to that? Who comes >> retail retail? We have like a thousand a little over a thousand people signed up. >> That's unbelievable. >> But we do them all over the country. Like two weeks ago I was in San Francisco and next weekend we're not this coming week and the weekend after that we're in LA, >> you know. >> Can I ask you a question? >> Yeah. >> It's weird. So we started doing live events and we've done some really successful ones. You can put that on. Okay. >> And we um we did one in Chicago at the Chop Shop >> and we sold it out and it was great. >> Yeah. One of the problems we're having. >> Do I need to wear this? >> Yeah, it helps. It because it it helps for the recording. One of the Because when I because when you say something really funny and I and I want people to acknowledge it. >> All right. We have problem finding the venue that matches the size of the audience. So like which >> How many people do you have? >> That's the thing. It depends on where we are. >> Okay. So I got a girl I got a woman that works for me. She's been with me for 10 years. All she does is book venues around the US. >> How many events do you do a year? >> We do one every other weekend. So 25. >> So she knows every venue in America basically. And we use all kind of really we use all Live Nation or you know we use we use theaters. We don't use like in Chicago we just did one at um Valia Hall. I don't know if you know it's a concert venue. It's really nice. Yeah. >> But >> but we know every venue. Like she knows she knows every venue. Just I I'll give you her context. When you go to LA, you do the Lray theater. >> We've done the LA theater. We're doing the Fonda Theater this time. >> Okay. >> But we've done LA like two or three times. Great place. >> So, my team does a pretty good job, but it's always hard. >> Shouldn't be as hard. It shouldn't stop that. It shouldn't always be as hard as it is, but it's like in this city we have 300 people. In this city, we have 100 people. >> We don't know how many tickets we could sell. >> So, are they is it free or do you pay? >> Oh, so when you pay you have a pretty good show rate. >> Yeah. >> Yeah. Uh that's not the right. The issue for us is we don't know these places. >> Yeah. >> So we do our best from long distance. Yeah. >> And then we'll fly out and see something, but it's not easy to do. It's one of the uh more underappreciated aspects of doing a live event is the venue itself. Yeah. >> I have somebody that that's her full-time job and she's amazing. >> But wait, you said this is important. If people pay, they show up. So you're saying it's risky to have people not pay because then who gives a They Right. It might. Yeah, >> but we do we don't charge because we don't have that's not in our model. So, we only charged once, but we did it as a because we had a slightly smaller venue. So, we charged and then if you showed up, you got your money back. >> And we had like we had >> like a reservation. >> Yeah, exactly. We had it was like a 95% show rate there. Normally when you just do a free so our show rate like we have maybe 11 or 1200 people signed up for tomorrow morning and we'll probably end up with a show at about 65%. So we might get 650 to 700 in that range >> and you just do your version of the show but do it for a live audience or this is a specific No. >> All right. This is a very specific thing that you're doing. >> This is a live trading event. So we trade live for you know 90 minutes to almost two hours. >> That's awesome. Are people People are trading with you? >> They can but we don't care. I mean, we're just we're just trade non-stop for basically 90 minutes and uh we trade everything. >> Wait, what time is it? Where is it? I want to come. >> You can come. Um >> you would love that. >> It's uh doors open at 8, show starts at 9:00 tomorrow morning at Webster Hall. I think it's on 11th. I think it's on 11. >> So, I want to tell you about the time I figured out you were a genius. Uh the year is 2014 or 2015. I never met you before. >> Okay. >> Um but from afar, I just said, "This guy is smart." So, I land at the Las Vegas airport for the Salt Conference >> and um >> and you see my ugly face up on the up on the keeping out internet. >> As soon as I get off the plane, >> Yeah. >> I go to the baggage claim and all of the baggage claims in McCarron airport, which if people are listening, if you've been in the Vegas baggage claim, >> it might be the the largest freestanding structure in the United States. It's so big. >> All of the baggage claims are sponsored by Tasty Trade. >> Yeah. >> Then I go outside. I don't need a cab because Joe Fami is picking me up, but the taxis are lined up and they all have Tasty Trade on the top. >> And I said to myself, look, this is like the one week of the year where every hedge fund manager in America is all in one place. >> Yeah. >> Of course, Tom has the sponsorship uh thing. >> Well, that was actually a great sponsorship and they did us right. >> So, you remember this 10 years ago. You remember? >> Oh, yeah. No, I I negotiated that deal with whoever whoever had the space and it was actually very reasonable. Um, and we we gave free internet, you know, basically that's all it was, free internet with then you got some you got some of their uh digital screens and all the other stuff. And it was great. We kept it for almost three years. And then and then somebody came over the top, I think it was Google, and offered them like five times what we were paying. >> You don't want to get into a bidding war with Google. >> Well, we can't win that. We can't win that. >> No one's winning that. >> Does it feel good to be back in the studio? >> I love it. I love it. We did a show uh at Future Proof last week and we love doing live shows in front of the audience, but it's nice to be back home. >> Yeah, we don't ever do our show live. >> Why? >> Um because it's not that interesting. Like I mean we find that the audience gets a little you know it gets a little bored. So we do all our live events are completely different. So we do like live trading and then we do some you know sometimes it's like we have all these so we've been doing I've been on the road for 25 years and we have different events every year. we change it like we'll do some fun events with the audience where we give away some money and they're all like some of them are teaching some of them are fun you know we we we create all these like um challenging questions they're all like it's every show is a paradox of something of some math model of which we kind of don't tell them that in advance but then at the end we let them figure it out >> and so we play all these games over the course and we have like probably 10 speakers on the road >> you know but but >> but Tony and I draw the, you know, the best by a lot. >> How did you, how did you find these people um and then elevate them and like turn them into stars within your community? Is that just an organic thing or >> Yeah, it's organic. >> They found you. >> They find you. >> No, most of us have been friends for decades. Like Tony and I who I did show, we've been friends for 45 years. Scott and I have been partners for 35 years. Okay. >> Um Liz and Jenny, we were friends for 20 years. I mean, these are long relationships. We don't. The new kids are great, but they don't draw. >> That's the hard thing. >> Okay. Not yet. >> Not yet. >> Yeah. >> Yeah. Okay. Well, I You got a You got a really cool community and we want to talk all about it today. So, thank you so much for being here. >> Um, when we're done judging the pumpkin bowl, are we ready to we ready to get the show on the road? >> Yeah. You, like I said, you go anywhere. I don't really care. >> All right. It's an important man, guys. Time is money. >> I like your energy, Tom. >> Thanks. Let's go. >> All right. Hey John, what episode is this? >> Episode 20. 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[Music] Please read the perspectus and if available, the summary perspectus carefully before making an investment. Newberger Burman BD LLC is a distributor of the fund and a FINRA member. >> Episode 209. Nicole's here. when Nicole's dancing. I know it's going to be a great show. Duncan's doing a little Bob. What do you got going on? You excited to be here, too? >> Of course. >> All right. You have a microphone in front of you. You know that, right? >> I do. >> All right. John is in the house. Ladies and gentlemen, we have a first time guest today. Somebody that I'm so excited to be speaking with. And uh I've been aware of his work for a long time. I've met many of his acolytes over the course of my career in finance and financial media and uh today's episode is going to be just an absolute blockbuster. So, thank you so much for joining us. Tom Saznoff is a trailblazer in the online brokerage industry, driving innovation and financial education for investors of all levels. He offers up expertise in the options market as co-host of Tasty Live L live airing daily on the Tasty Live Network. A former floor trader, Tom became one of Chicago's most well-known serial entrepreneurs in fintech when he built a breakthrough options trading platform, Think or Swim, which was eventually sold to TDM Trade for $750 million. Leveraging over 20 years of experience as a market maker for the CBOE, one of the original OEEX traders in the S&P 100 index pit, Tom pursued his vision to educate retail investors in options trading and build a superior trading platform. Tom Sasnoff, welcome to the show. >> Thanks for having me. >> All right. And I know there were other things that I was supposed to read. It's just so much. You're you're extremely accomplished, man. Um, can I can we start with the markets question? Yeah, sure. >> I was going to do this whole thing like state of the markets and like do this whole wind up about this is doing this and this is up that, but it's it's almost like a stupid question I feel like because I think your ethos is let's find a way to make money no matter what the state of the market is. Do I have that right? >> I'm a strategist if you I'm a trader. I I really don't care what the market says. >> Okay, so that's what I wanted to get to. how how did you come about that um mindset as a market participant because most people don't start off as what they end up as and so I'd love to just hear that journey for you and then we can get into the state of the markets >> so I started this business different than most people because I started in the trading pits where you don't decide so I I spent 20 years in the S&P 100 so you don't decide what you want to do you just take the other side of whatever order comes in the crowd so I grew up never having an opinion about the markets. I grew up just taking the other side of what anybody else wanted to do. So, I'm a pure contrarian. >> Okay. Because that's where the money that's where the money is to be made. >> That's the only way you can that's the only way you can trade. So, when you're a floor trader, the other traders, it's like going to do you play poker? >> Yeah. >> Okay. So, if you go sit down a poker table and it's just a bunch of professionals, you guys don't even want to play with each other, >> right? >> But you have to wait for people like me to come by, you know, to blow some money. Um, it's the same thing in the trading world. The professional market makers don't trade with each other. They just wait for customer orders to come in. If there's no customer orders, they just stand there with their hands in their pockets. >> Okay. So, what what year did you start out uh trading and how did you get the job? >> I was I got uh I grew up in the So, I'm 68. >> Okay. >> I grew up um >> You look, by the way, you look great. Nobody would guess that you're 68. >> So, I grew up in New York and I went to Sunni Albany. >> Okay. >> And it was 1979 when I graduated college and there was no freaking jobs. I mean, it was the middle of recession. Interest rates were 20%, 19, 20%. >> And it was hard to get an interview. I got an interview on Wall Street. I was a political science major. I thought I was going to be like a lobbyist. And I got an interview on Wall Street with Drexel. If you remember Drexel Burnham, they were a good firm, like a boutique firm. And they offered me a job on the spot. So now I'm in finance. >> And I got a job with Drexel. I was there for probably about >> nine months in their training program. And one of the met a couple of guys there on their trade desk and they were like they didn't really like the retail business. They wanted to trade. So they go they were all married though. They go you move to Chicago and we'll put up the money. >> Okay. >> And it was $50,000. I thought it was 50 million at the time. And so they put up 50 grand and I packed up my car and just left and went to Chicago. Never. >> You needed somebody physically on the floor in those days. >> Yeah. You needed somebody. Yeah. But but so so it's the it's like 1981 just before the market explodes. These guys get a little bit short. I forgot what stockck it was. I'm on the floor three days. They lost all 50 grand. I had I made $18. I I remember like it was yesterday. I made $18.75. Three teenies. 316. That's $1875. That's $18.75. Nothing else. >> That was your commission for what? >> No. No. That was my commission. That's how much I actually scalped. >> Oh my god. >> 18. And and of the 1875, 1250 of it was given to me by other traders that just were like, "Hey, welcome to the business." Okay. >> So, that was the end of a 16-year bare market. >> Yeah. Basically. And that and they blew out in it was it was like less than two weeks in there. So, now I'm in Chicago. I got $1,200 maybe to my name, you know, but I paid the rent for I'm on a seat that I can't afford to pay for and because seats are expensive and I had to figure out, you know, and I figured it out. >> That's Dude, that's that's an amazing origin story. And so your formative experience is not sitting as like a strategist trying to figure out what's the year end price target for the S&P. You have to figure out how to make money on Monday and then Tuesday you have to figure out how do I make money on Tuesday. >> I eat what I kill. >> But that was such an interesting time because >> it was the greatest thing ever. I I had never been to Chicago. I grew up here and they they said why don't you fly to Chicago and check out the city. So I landed Chicago and I I took a cab. I went up and down Lake Lakeshore Drive just to check it out. And then I met this guy who I didn't know who was a lawyer from New York who hated law and he was now a trader. He takes me on a trading floor. It's the old trading floor and it's all options and everybody's screaming and yelling. It's the most wild place I've ever seen. And I walked down there within 3 seconds. I'm like this is where I got to spend the rest of my life. >> It was the most amazing place. It it will it will you know it was the last frontier of like true capitalism in my mind back then. And I didn't even know what I was doing. So in 1981, like how long did the psychology take to change when people were like, "Wait, maybe this bull market is real. >> How long did people fight it for?" >> I have no idea because when you're in the pit, you don't all you care about is making 108s or 100s, >> you know? Like, >> so you really don't give a >> You You only care about what orders come. Can you scalp that order? That's it. >> It's not It doesn't matter if it's a bull market or a bare market because you're affecting trades right now that are going to close very quickly. >> Yeah. I always tell the story of the the kid sitting next there was a kid sitting next to me or standing next to me and we became friends over the years and we're still friends today and he when the Dow crossed through a thousand for the first time he goes take a picture because you're never going to see this again. Like the numbers we were talking about are insane. >> Are you still a contrarian by nature? >> Oh my god. Yeah. >> So trading back then was a physical job. >> Very physical. All just big freaking guys. >> A lot of ex- football players and Right. Like a lot of like big guys because they could get close enough to the action. But a lot of everything like so, so I started a couple years later I started to make some money and I started a prop firm and so we hired lots of traders. I probably hired 50 traders over the years and I hired a first round draft pick from the Kansas City Chiefs that blew out his knee and and so he was the largest he was he was a offensive tackle, the largest human being ever. You couldn't move him no matter what you do, >> but he didn't make it. >> Okay, >> I hired a professional wrestler because he was just he looked he looked like Goldberg. Remember what Goldberg looked like? Of course. He looked like exactly like him who once broke three people's ribs in the bond. >> He had the traps like he >> he was steroided out. He was just insane. He was the largest widest. He wasn't that tall. He's the widest human and people were petrified of him. But he never made it. And then we I also hired like some crazy rocket scientists, some kids out of like Carnegie Melon with um master's degrees, PhDs, the whole deal. And they didn't make it. So you never knew. But then you get some kid from some southside parochial school in Chicago that didn't even go to college and they kill it. So, who makes it and why? >> It's a really good question and I we could never figure it out because back then the learning curve was kind of long and the people that made it, you know, at some point it just clicked and I I can't explain like we we couldn't tell in ad like we had no idea if we hired somebody if they were going to >> What about now? Can you tell now? Like is it a personality type or what? >> So, now it's now it's now there's no more computers now. Now it's all computers. >> But what I love about what you're saying is it e we had Mark Fischer on the show. Um I know Mark Fisher. >> You know Mark, I'm sure. I don't I mean I only had did one interview with Mark Fischer. I did not know him as a trader, >> right? So, but Mark told us the same thing. >> Yeah. >> He's like a lot of people try to do this and you'll be amazed at who actually can do it. >> Yeah. He's a new he was a New York >> junkie. He's a futures trader, you know, like futures traders are very different. Like in Chicago you had the CME which was one guy kind of trader and then you had the SIBO, you know, like I did a really fun interview. I did a documentary on Louis Borcelino. >> Okay. >> Do you remember? No. >> Okay. >> Should I know who that is? Uh he was for years in the 80s he and 90s he was like the biggest futures trader. >> Oh wow. Okay. >> Yeah. And then he he's got a great story. I'll send you a link to documentation. It's unbelievable. >> Yeah. I would watch the out of that. I love I love that stuff. All right. So let's do state of the markets though. So >> I would assume a year like this one got to be a lot of fun for traders. There's a lot of ups and downs but predominantly like the bias is high. Maybe the volatility is not as much as you would want it to be if you're intraday. So, so our business is volatility based. >> Okay. >> So, so we do better and Tasty is a um uh is a firm where 90 plus percent almost 95% of our business is listed options, futures and futures options. >> That's what the users on the platform are trading. >> That's right. >> Okay. >> So, we're like the largest derivatives boutique in the world. But we don't trade a lot of stocks. So, customers don't come to us for stocks. They'll go to Schwab or E Trade or Fidelity or whatever, but they come to us to trade options and futures. >> Okay. Well, they'll do that separately from where they're doing their stocks. >> I mean, some people do. >> Okay. Why? What is it about Tasty Trade that makes them want to trade? >> It's just it's just a way better platform. I mean, it's just the technology is faster. Everything work everything is from a single interface. You can do all the different stuff. Like the other interfaces are all legacy interfaces. They're old and clunky. >> Okay. >> So, did April make your year? >> No. >> Why not? because we don't like when people get hurt. >> Okay. >> And and you know, April, the trading volumes were great, but you get situations where like some of your best customers >> and they don't come back. >> Well, they come back. Everybody always comes back. There's nobody ever goes away. But some of our good customers got hurt. Yeah. >> You know, because we're a premium selling firm and you know, you got slapped in April. April's kind of, you know, it was good for business, but not good for the overall business. Could you explain what you mean by that when you say we're a premium selling firm? >> Well, our the way we teach and the way that we so we we we're a think tank. We have two businesses. Our our primary business is our brokerage firm. >> Okay. >> Okay. And that's pays everything. That's, you know, that's our business. That's our revenue. We're a 300 and something million dollar revenue brokerage business. >> Okay. >> Um way more than that actually. But then we have a network that that which is actually for content marketing and we don't charge anything. That's all free and it that's how we kind of get that's how we compete marketing wise with all the big firms. >> Yeah. >> And the network when we built it the reason I built this I didn't like financial media traditional. I didn't like CNBC. I mean listen I like those guys. I just didn't like the content. I don't like interviews with people. I don't like I don't care what somebody else has to say because that's goes back to my mentality. Yeah. So I didn't like Bloomberg, you know, I didn't like CNBC. It doesn't make any sense to me. Why would somebody listen to what somebody else thinks? Who cares? They don't know anything. So So we built Tasty. >> Duncan, we could edit all that out, right? All right. >> So So we built Tasty to to build a firm strictly around around quantitative, you know, probabilities, statistics, um quantitative just math. We're just we're a math freak firm. And you can do that in the options world because the options everything is just a uh is a derivative of flexuals. So everything you can figure out expected move, you know, everything's based on vol. >> You're trying to figure out like what's in the premium, how much of this is time value, how much of this is intrinsic? >> No, we're really trying to figure out is is is the premium pumped relative to it. >> Is it priced correctly or not? >> No, it's always priced correctly. It's always I'm trying to understand what is the math what is the math trying to figure out? Okay, so everything's always priced perfectly. That's why firms like Citadel and all the other, they're amazing and they price everything perfectly. So nothing's mispriced. Okay, but sometimes volatility is high relative to itself and sometimes it's very low. >> And so what we do is we try to help customers when it's high, tell them what they can do, which like optimize strategies. And people really love math. You know, here here's our basic premise and everybody told me this would never work. People are super smart and I believe people are smart. People are good and they're smart. When I say good, they're just most people are decent. So, the premise behind Tasty was >> we're going to give you we're going to tell you everything we know about trading and hopefully you use our platform because it's a it's a goodwill, good faith marketing plan and it worked. >> And the reason people liked it is because we challenge them with math rather than tell them you know tomorrow you know Nvidia's going down or tomorrow Nvidia's going up. What we do tell them is based on the way options are priced, Nvidia for the next 30 days has a $17 move higher or $17 move lower. So set your strikes wherever you want because that's going to be right 70% of the time. >> Okay? >> Cuz that's just a math model. >> Who are these people? Who who are your customers? >> Like who are your like hardcore users? >> Oh my god. Well, we have, you know, I don't know, half a million customers. >> Okay. All all walks of life. Is there anything that they have in common? They're probably very intelligent. >> But everybody's intelligent. Like I I know you don't think so, but in the world of self-directed trading, >> yeah, >> everybody's our customer. Here, I'll tell you a quick story. So, once we built a a institutional platform years ago, I built a platform that's still used today by Schwab. It's their institutional platform now, but I built it 25 years ago. And when I built it, I built it with partners. We had partners at um ABN Ambro and um UBS, you know, a couple of big institutional firms. And I built it because I thought it would help us, you know, grow our business and our name and stuff like that. And every firm that signed up for it, I would say, they go, "We want it exclusive with our customers." And I go, "I can't do that." Because, you know, Meil Lynch says, "Every customer is their customer." And UBS says, "Every customer is our customer." And then says, "Every customer is our customer." So I look at business the exact same way. every customer at Robin Hood, every customer at at Think or Swim, every customer at Erade, every customer at Fidelity, they should be our customers, but obviously they're not. But that's the way I look at the business. We don't have, you know, we could have a 18-year-old kid. We could have a 90 I think our oldest customer is like 99. You know, I don't know. Very short day. >> They never leave at that age. >> Well, you don't buy right, you know, you don't buy. >> So, so you mentioned zero day. >> You don't buy the green bananas. You mentioned your customers got hurt in April. So, >> most most options expire worthless. We know that. So, is your thing like, "All right, instead of being the sucker who buys the options, sell them." Is that the deal? >> Yeah. >> But don't a lot of institutions do that trade also? Like, how do you how do how do uh >> institutions are pretty on on on unbalanced? They're pretty dumb. First of all, they don't have the expertise. They don't have the technology. They don't have the expertise. And they're very limited by liquidity. So institutions have to trade in a very narrow set of you know that's why you have such a concentration of just all you know equity wealth but it's the same thing for options. If you're an institution you can't move $25 million in option which is nothing if you know in very many stocks. You have like five or 10 five or 10 different underlyings max. So the the futures world with respect to options is I mean the institutional world with respect to options is pretty limited and we don't do any institutional business. >> Okay. We're 100% retail. >> So options trading is at record highs. >> Yes. >> But I thought there was an interesting uh juxosition that I wanted to show you. Can we put up this uh cash and money markets chart? >> It's weird to be in an environment where people have never traded more in options. Whether it's volume of contracts or dollars, any way you want to look at it, it's an absolute explosion. >> Yeah. But then at the same time, total cash and money market funds is at an all-time record high and like a very pronounced one, almost vertical. >> Yeah. >> People will look at that options chart and they'll say it's a speculative mania cuz they're stupid and they just infer. >> And then people will look at this cash and money markets and they'll say, um, everyone's bearish. >> Neither of these two things are true. >> There just is a lot of cash and a lot of activity. And neither one of those things have to signal anything about the environment. They could just be things that are happening in and of themselves. I I think you'd agree with that. >> Yeah. The markets at the S&Ps are at 6,700. I mean, there's, you know, you're talking about an enormous amount of wealth is created. That's why there's, you know, you could take a little bit of money off the table and you still have the same position you had on, you know, a year ago. So, that's why cash is so high. >> So, you you said people are smart and investors today are more informed than they've ever been. First, Fidelity made this video in 1994. We've got a 4 secondond clip. John, show us the time. >> When I say the word stock market to you, what comes to mind? >> Confused. >> I don't even know how to read the >> Too much of a gamble for me. >> Unbelievable. That's 30 years ago. Where how did >> how much more informed is the public today than they were 30 years ago or even 20 years ago? I I mean the dissemination of everything because we all you know we all have everything in whatever in Tik Tok bites now um it's it's got to be significantly you know it's significantly higher here I'll give you a number that's really interesting when we built thinkers um was 1999 2000 and the amount of option business that TDM trade did was between seven and 8% of all their volume. Now they had a web-based platform but remember they had bought like you know bunch of different firms so pretty big and 78% of their volume was options and they did zero futures business when they recently sold to Schwab the TD trade their business was over 70% options and futures when you add them together they're mid70s >> wow that was only that wasn't that much you know that wasn't that many years later >> right so the the investing public has grown more sophisticated over time. Well, also they've grown more capital efficient. So, the problem right now is you got stocks like you take a hundred shares of spiders, just as an example, $67,000 for 100 shares. >> The average retail customer has a 504 or $50,000 portfolio. >> And so, you know, I mean, that's the average online customer. You know, there's obviously places like Schwab where the customer size is bigger, but you can't even buy a hundred shares of stock. >> Yeah. So, why would you why wouldn't just either sell a put where you put up, you know, $8 or $9,000 or sell a put spread where you put up $250 or buy a call spread or buy a call, whatever you want to do. >> What is the limiting factor? It's the lack of understanding of how these instruments work. >> Not really anymore. Now there's so much content out there. There's the technology is so freaking good. You can't believe how good the technology is today. >> Yeah. Well, one of the reasons why I think people feel more comfortable with stocks than options is not having to constrain their opinion of what's going to happen into a set predetermined window of time. >> So people will say >> because that's old school way of thinking. >> I understand. But but I wanted to ask you about that. So people will say like, "All right, I'm going to buy Alphabet. >> Yeah. >> If I'm wrong, it'll go down $20, but I'll just hold it until it goes up." Cuz that's how people operate with an option. You're dead. >> Nobody in our world thinks like that. Like I couldn't I haven't found a person, you know, I mean, I respect, you know, the the people that can do that, that can get away with that like, you know, the Warren Buffets of the world where you can hold something for 20 years until it's right because nobody's ever leaving you. But in today's world, you're only if you're a money manager, you're only good as good as your last quarter or your last month. And if you are a trader, you know, none of that plays well. >> Well, you won't survive as a trader. You couldn't do that. >> You're dead. You're dead. So, the only way to keep yourself in check is kind of is trade size. there's nothing else. But again, the technology today and the information that's available to you like I mean our platform we'll we'll show you your like you get your worst case like we'll give you a sear number. We'll we'll basically give you everything to 99% of the occurrences. >> Okay, >> you know there's only 1% outliers and that's kind of you know so the only way genius fails >> is when you trade too big. Okay. So, you're showing people here here's the here's the mathematical probabilities of what could happen here. You don't know what will happen, but you're stacking the odds in someone's favor by at least presenting them with upside downside. >> No, we're not giving we're not we're we're stacking the probabilities in their favor, but it's not a theoretical edge. >> Do you understand? >> It's quantifiable. >> It sort of is quantifi quantifiable, but it's not a theoretical edge. What it is is it's just we are just explaining to somebody. So in other words, if you want a 70% probability of success on every trade you make, you can do that no problem. And law of large numbers will deliver that return will deliver that win percentage to you, but they won't necessarily deliver return to you. >> I was about to say what's the gain if you're if it's that high. It's got to be relatively low. >> So So you so so the gain is less. You take more risk. You risk more to make less, but you have a higher win percentage. So you mentioned edge and how the market makers are so good, the prices are always right, the technology is so good, the information is so good and quantifiable. Yeah. Does that make alpha or edge much harder paradoxically because everybody knows everything? >> Of course. Yeah. I mean, yeah, there is no such thing as edge anymore. >> Are there a lot of are there a lot of retail options traders who make a living and that's their sole source of income is the money that they're pulling out of the stock market? >> Yes. >> That's pretty impressive for somebody to be able to do that. >> It's really impressive. Is that one in Is that one in 10,000 or is that one in a million? Like how like what are the odds of of somebody getting good enough and being consistent enough and emotionless enough to be able to really do that? It's extremely rare. >> We we've done we do >> I'm sure you've seen it. >> We do a shitload of research on this. Okay, this is this is my word. >> Well, this is what I want to learn. >> But let me just say finish up what with what you said because I think it's important. So the reason that we take that high probability approach to trading is not because it means you're going to make a certain return. We do it because we teach people to win. Like all we care about because we can't make you money or whatever. All we care about is you learn how to be how to have a winning how to win more than you lose and then hopefully you figure out how to turn that into a positive return >> and position size. So I I'm with you. So I'm a gambler. >> Yeah. And I would much rather do a three-leg parlay where I buy points and it's plus 120 as opposed to an eight leg parlay that's plus 1300. That's never going to happen. >> But the problem with that trade the problem with that bank >> Oh, I know. I lose money. Believe me. >> Yeah. Is you have you have an embedded negative return. You cannot over time make money. >> Correct. >> In the trading world. So, so I'll give you a couple stats. Interesting. So, in the gambling world, you bet $100,000, you're basically paying $10,000 in fees. Okay. You bet $100,000 in the trading world. Okay. You're paying $1. Because if you're trading something that's liquid like $100,000 of Apple, $100,000 in video, whatever it is, it the difference between the bid ass differential is one penny. So it's $1 to10,000. That's why, you know, if you want to gamble, have some fun. But it's not it's impossible to make money. >> So I used to lose three to five cents for every dollar that I was betting and FanDuel. Yeah. >> And the bottom fell out for me thanks to the Chiefs and the Texans and Chargers game. But anyway, so now I'm down to like six to seven cents loss for every dollar. But that's right. Yeah. I lose six to seven% of my bets or the dollar of every. So in the trading world, it's it's it's it's a level playing field and that's it. You know, it just depends on how you do it. There's >> But is it as much fun? >> Maybe more fun. >> I don't know. It really depends. I have fun gambling, too, but it's different. >> Okay. So, the question, the question about how many people could realistically be professional traders. >> So, think of it like a because it's such a level playing field if you, you know, make enough trades. It's all about making enough trades because then you average out what you're supposed to, which is just classic, you know, law of large numbers. >> That's like p That's like poker. If you have an edge, the longer you play, the longer that edge, like the more money that edge should deliver to you, >> of course. But even poker, the rake is is pretty big compared to trading. But so, so I'm going to break it down like just a nor like this is how our customers go. 16% of the people blow out. The attrition rate is about 16%. >> Within how much time does it take for that to happen? >> I have no idea. It could be it could be it could be a it could be 3 months, 6 months, a year. >> Michael's case, first trade. When you say blood, you mean account goes to zero or they stop trading? >> They account goes to zero or they or they stop trading >> and that's why they stop trading. >> Yeah. Yeah. The reason people stop trading is because the account goes to zero. >> Um and and >> so 16 All right. 16% >> 16% blowout. 16% >> outperform some crazy multiple of risk-free rates. So let's say risk-free rates are 4%. Right? So 16% deliver returns over 20 or 25%. >> Wow. Okay. So both that's both sides of your distribution curve. Everybody else falls in the middle. >> Everybody. >> And what's the middle? Just whatever. >> The middle is whatever. So So you have 34% above the midline, which now for me the midline is some multiple of risk-free rates. And then 34% fall below the midline, which is you don't you don't beat risk-free rates. >> So if there's no edge, why do people trade with you? >> Well, there's there is we try to optimize the mechanics because it's fun. >> Hell yeah it is. Because here there is such a demand for speculative uh um there's such a speculative demand because of either asymmetric upside or just hey I I want to do something you know I want to I want to take some risk. So the I will argue the reason people trade is so that they make quicker decisions. So their brain processes decision-m faster. So they're probabilistic in the way they think about everything and they become a much they build wealth at a at a rate that is that is higher that if you run into anybody you've ever met that's that's very wealthy, they make the quickest decisions you've ever seen. And the reason for that is their brain just works faster. It works for athletes. >> Is that real? >> 100%. >> Really? That's why that's why you have athletes like that can play play Brady. >> Can I Can I pause you though? >> Yeah. >> So then why are all the famous investors obsessed with telling you how slowly they operate? >> Howard Marx, Warren Buffett, Charlie Mer. >> It's they're they're 100 that's from a year's past. >> You find that interesting? >> No, I don't. I used to hate I hate like Charlie Munger used to drive me crazy. I couldn't listen that guy. You know, when you start when you start when you start like I mean I used to until he died I used to rant against him all the time. I'm like shut the up. You know you're this is not good for a business. >> Okay. >> I there's so much. >> So quick decision- making is alpha. >> Even if they're not good decisions, just the fact that you were able to be decisive, you're saying is how you get rich. >> So I've been doing this on the retail side now for 25 years. 20 years I spent as a market maker and then 25 years building Thinker Swim and Tasty. >> And if I told you the number of people that said, "You know what? I couldn't trade for shit." >> But my business exploded from what I learned from trading. >> Oh, I love that. >> It's incredible. >> Okay, >> it's incred the numbers just off the charts. >> Well, you know what? Money won is better than money earned. And the reward, the dopamine hit from seeing that exponential growth in a short period of time. I mean, what's nothing better? >> I'm a grinder, so I'm a little different. Like I'm I'm somebody that like, you know, I don't really get that kind of asymmetric upside because I >> You're not looking for lotteryies feeling. You like to win consistently over time. >> Yeah. >> Okay. I think I'm that way too. >> But you can't have longevity in the trading business if if you're just shooting for long shots. It just you you'll you'll >> No, you die. >> You'll bust. >> Can we talk about that 16% that are at the top of the distribution? >> Okay. So these are the 16% of people who are earning far in excess of the risk-free rate, multiples of the risk-free rate. >> That's the only way you can measure it, right? That's the only fair way. >> Okay, fine. So what is it about those people and how do you replicate them? How do you find them? And how do you bring more of them on platform? >> I mean, first of all, we try to bring everybody on platform. So it's not like, you know, we we don't the the >> But those are great customers because they'll be with you forever. >> Forever. Yeah. >> Yeah. I mean, in this business, remember in in the brokerage business, you know, at TD Merch, I think it was 6% of the customers did 80% of their business. At Tasty, it's like 20% of our customers do 80% of our business. >> So, >> you're right. That's what we want. I mean, those we want to teach people to hang around for 40 years. Um, and you know, >> Tom, are you born that way or can can anyone become that top 16%? >> Oh, anybody. >> Anybody can. >> Yeah, anybody. So you sound so you agree with um the turtle traders like the idea what they said like basically if if anyone walks in off the street and does this method they can become a trader. So you sort of believe >> it's not exactly the trading places thing but but um uh it's a little different. I think anybody can become a successful self-directed investor. I think the key for me is teaching people to improve their basis. Like when you first start, you know, what's the greatest thing to do? Just improve your basis. Just just give yourself a better statistical chance than somebody that buys something. It's a 50/50 shot. Give yourself a better statistical advantage. And then also teaching people about financial strategies and also how to use like this technology and how, you know, how the markets work. It's so valuable. You understand everything. You know, I mean, we've probably taught five million people over the last 25 years. >> Okay. If someone's going to if someone's going to go on that journey with you, how much of their day does it monopolize? Cuz if you have options trades on, it's not set and forget it. Buying hedging trades right now. >> Yeah. You haven't traded in 10 minutes since we've been talking. No, but like somebody has to >> I am a junkie, just so you know. >> Somebody has to be committed to like I'm going to have alerts set. I don't give a >> No, but I know. I don't care. >> Is that relevant to the to the people? >> I mean, you don't have to. You know, you do whatever you want. Like, it's it's like, you know, all right. You like to gamble on sports. Okay. How many times on a Sunday do you look at your phone to see what the score is? >> Looks away from his phone. >> Okay, there you go. Same thing. I mean, you know, you and you still work, you know, you figure it out. It's just like anything else. >> The 16% of the elite traders, I would imagine that there's a lot of turnover in that group. Or are you saying that it's okay? >> There's some Yeah, there's always there's turnover in everything. But you know what? Like you can't you can't overthink this stuff. Like the the world's moving. There is no question that on the retail side, I'm not talking about the institutional side because that never changes. It's old. It's legacy. It just stays the way it is until somebody completely disrupts it. But on the retail side, everything's moved shortterm. You know, whether it's zero DT options, whether it's, you know, trading, you know, the biggest growth we have is in futures options. The biggest growth. It's like we're like 25% year-over-year in futures options. >> There's not enough leverage in futures. options on futures. >> Options on futures >> as opposed to just straight trading futures. >> Yeah, we're the largest we do the largest percentage of options on futures of any firm in the world. >> Okay. >> And it's crazy, but that's what customers are attracted to. >> What's the purpose of options on futures more leverage dollar? >> No. Strategic. >> Tell tell me more. >> Strategic. You can you can you can you can make money if you're wrong potentially and you can lose money if you're right. You can you can bet on something staying inside a range. >> Okay. You can risk a little to make a lot or you can risk a lot to make a little depending on what probability set you want. The the model for futures options is the exact same as it is for listed options. Doesn't make a difference. >> Do you uh do you think that overall the explosion in retail trading um that I I would put like the beginning of that let's say March April of 2020. I know retail trading has been growing in popularity forever since Charles Schwab, you know, in San Francisco, but just in the last four years, five years, it really feels like a renaissance. >> Do you think that um on balance that's been a great thing for most people or a really great thing for a small group of people or like do you have like a philosophical take? >> Yeah, I think it's been a I think I think you're you're talking >> I'm positive on it. I think you're talking about like kind of really that meme stock movement in 2021 and what exploded from that, you know. >> Well, I I don't know like uh 30 million new retail traders or whatever the number is. >> That was the inflection point. >> Most of them young. I >> I agree. I think it was transformational moment. And of course, I'm going to say it was amazing for the business and and I don't care if some people lost money because we introduced >> life. >> Yeah. And we introduced markets and trading to, you know, maybe 50 million new people in the end, you know, because there was obviously carry on after that. So, I mean, no, it's huge. It's great. Introducing teaching people about managing your own money is so freaking important. And nobody wants to touch this because they're all scared, but nobody realizes, hey, you know what? You're just as smart as the next guy. You're maybe probably even smarter. >> Yeah. Do you What do you say to somebody who says, all right, I tried this. I tried to be very active. Yeah. Yeah. >> Made a lot of decisions quickly. >> They weren't great decisions. It turns out in hindsight >> and it made me very anxious. Would you ever say to somebody, "Hey, you know what? I actually think you would be better off with ETFs and don't do this." >> Well, we would never say that, but I'd be totally fine. Like, I wouldn't like like I we don't tell people. I I build technology and I write content, right? >> I don't talk to people about their, you know, their stuff. I mean, >> you're not anyone's financial adviser, >> right? I I'll answer I'm an email junkie, too, so I answer like a gazillion emails a year, but I will help people with they have a question, but I don't tell people what to do. >> Okay. What's the coolest story you ever heard from somebody who learned to manage their own money and trade on your platform and what happened for them as a result? >> The coolest story? >> Yeah. Like what's like a what's like an awesome outcome? >> I'm not sure how the outcome ultimately resolved itself because there were some negative things. Can't wait to hear this. See you later. But the coolest story I ever heard, which was back when we owned Thinker Swim, was there was this woman who came to an event that we did. She was she was nice. She was an accountant. She was a CPA. And she was she had gone to Wake Forest. She's really smart, master's degree. And we started talking because she was a huge North Carolina basketball fan because she grew up there. She loved Michael Jordan, the whole deal. and we started talking and she moved $100,000 from wherever she had her money because she was really intrigued. We did an options seminar was like 2005 and she emailed me a couple times and and I had no idea and she moved $100,000. So my partner Scott comes up to me one day, this is probably 2007, 2008 and he goes, "Do you know this woman?" Cuz she says she knows you. And I go, "Yeah, yeah, I met her in like, you know, North Carolina. I was doing a show, whatever." is super nice. She writes me emails all the time. He goes, "She's up $10 million this year and she's firing and she's firing like thousand lots, you know, in the S&P." Yeah. >> It's like 2008, 2009. And I'm like, "What?" Like I I go, she moved to $100,000. I go, "No, she's up 10 million right now." Okay. And and she's like, >> you know, probably early 60s, like the quietest, nicest southern woman, you know, like like and I'm like, "What the hell?" So, so they're watching her because when you get when you start trading a certain size, you know, you pop up on our wrist monitors. Yeah. So, you know, and and she's a premium seller and all this other stuff, but she mostly sells puts and she caught the absolute bottom in 2000 end of 2008 to beginning of 2009, she sold a ton of puts and over that period, she made $100 million. >> No way. >> Started with $100,000. She made 100 million. Now, >> she the story has a bad ending and I don't really want to get into it because >> you married her. No. >> All right. >> I got I got my own problems there. >> But but um uh but but she legit made and people would be like and we did a series on her for a while. Like we we we told the story because it was great and so many people write to us like it's all You guys are so full of you know? Like and I'm like, "Dude, we watched this. We watched everything cuz we were worried about firm risk." >> Yeah. >> We couldn't shut her down. >> Did you copy her trades? >> No. No. And she traded. She was by the time she >> What was she doing though? so special. >> She was just selling size. >> She was just selling 5,000 lots of of different uh strangles and condors in in the SPX >> and that's a lot >> back then. It's she was the biggest trader in the world for a short period. >> So when she was right, she made a lot of money. >> Yeah. But she didn't have a lot of draw downs because what she did is she always stayed long delta which means long she always stayed on balance long the theoretically long the market. And so she caught from 2009 to like 2013 >> and she just >> she developed this on her own just using your platform >> using our using the analytics on our platform and I interviewed her I I was just like Tony and I interviewed one and I really just shaking our head but like it's noting possible like it doesn't because and the guys in the SPX pit who were all friends with still cuz that's where we grew up you know with on the trading part so she would route the orders and they'd be like they'd be calling us and be like what what the's going on how does this woman write you know >> can you share what you what you nicknamed her cuz You definitely had a nickname for this whale. >> Oh, yeah. Yeah. >> Oh, our nickname was Karen the Super Trader. Karen the Super Trader. >> Karen the Super Trader. Okay. >> Um, what did that tell you about the power of your platform? It it didn't it didn't that that was that wasn't it because because I mean that was the thinkersome days and then when we built tasty you know it we we changed the game again like thinkers changed the whole industry you know and it also I was going to ask you about this later tell us for the audience that is not aware of what Thinker Swim is let's let's do this now >> my first trade was on Thinker Swim 2008 >> there you go >> why was it called that why do people still talk about it in glowing people love Think or Swim. >> Beautiful platform. >> Um, what was it about it? And then why'd you sell it? >> It was a cultlike firm. So, yeah. >> So, I was I was in trading in the OEX pit one day in in the S&P, you know, 100. And my partner was Scott Sheridan. We've been partners for 37 years or something. And we still are. And I turn to him, I go, you know, everything was going electronic in the end of 1999. And we were also short the market and those stupid internet stocks were exploding. We're like, we're I was just in a bad mood. And I go, I'm ready to try something different. I've been doing this for 20 years, standing in one spot, literally like in in two feet of space. And I'm like, I you know, I'm sick of all these guys spitting on me and, you know, sweating on me and all that stuff. Like, let's try something different. And we had already built a money management firm. So, we were managing a half a billion dollars of like some institutional money on top of trading, all this stuff. But I'm like, I want to try something different. I want to build something. And I got a great name, Think or Swim. Nobody will ever I made it up. I just walked through my I tell my wife, I go, "Think of something. What do you think?" She goes, "I idiotic. >> It's a great name." >> So, so I go, "Nobody >> would have been a great name." >> Nobody. And they when we when we launched the platform, Crane Chicago, which is like a business paper, they go, "Worst name for a brokerage firm ever." Someone wrote a whole story. And I'm like, I told Scott, I go, "We nailed it cuz if this person hates it, we got it." And and so we built Thingerwim and we had a you know we had built it with seven guys originally and a bunch of Russian developers because there was nobody around in the US and it turned into be an amazing cult firm with a really beautiful piece of technology. Um and it still exists today. It's one of the best platforms. Um, and the reason we sold it was because, first of all, we're traders, right? And at the time was the meltdown in 2009 because we didn't know. >> Oh, that was the era that >> Yeah. So, we were trading over a billion dollars and then we dropped down to like, you know, let's say 600 million because of they killed all the financial stocks in 200 end of 2008, early 2009. And then all of a sudden, you know, TD had tried to buy us twice before and we turned them down both times. And then Options Express started talking to us and another couple firms. We had three firms bidding for us at >> Was their offer lower than the previous ones? >> They were all about the same. But here's why we did TD merch. >> Who were you negotiate? Are you Is this Mowglia or is this Ricketts? >> Mowglia? No, it's not Ricketts. It's Mowglia was the CEO at the time. >> Okay. >> And so I was negotiating with Joe who I'm friends with to this day. >> Yeah, we're friends with Joe. >> Yeah. So, my favorite Joe Muggley story is we're sitting, we're negotiating this deal and Joe and I'm in New York doing a show cuz I'm just always promoting and I'm in New York doing a show and Joe calls me up and I go, "Why does your phone sound so bad?" He goes, "Cuz I'm taking a shit." He goes, "Are we done? Are we done with this deal yet?" And I go I go, "I guess." Okay. >> How could you say no? >> Exactly. >> Yeah. Yeah. Yeah. >> Anyway, so and but but here was the problem. This is even a better part of the story. So, we agree to the deal and and and we're, you know, we think this company's worth we think they're paying a little bit more than we're worth, but but that's because all the financial stocks are killed. And TDM trades trading for $11 at the time. >> Yep. I remember >> they killed their their stock. So, we're like, >> we don't want cash. >> Smart. >> We want stock. >> Like selling a putt, basically. >> Contrarian. >> Cuz I cuz I thought their stock was too cheap and I thought it in the hole. >> So, I thought our stock was too cheap, but I thought their stock was even cheaper. So I'm like, I want your stock and they're like, we want to give you cash because it's a credib. >> It was it was not a good deal. It was I shouldn't say it wasn't a great deal. It was a great deal for them, but they wanted to do all stock. But then the beautiful thing is at the exact same time, the same exact day, month, whatever, the Ricketts, Tom Rickettts wants to buy the Cubs. >> Okay. >> And the C so to buy the Cubs, he needs cash. >> Oh, it's perfect. So he needs about 350 million cash over what? So they could buy the Cubs from I think it was Sam Zel or whoever that time. So So Ricketts, the Ricketts need 350 million. We want stock and TD wants to do the deal for stock rather than I mean for cash rather than stock. So we did a three-way deal and we never announced this like to the public, but the Ricks got their $350 million cash. We got our stock and TD was able to, you know, was able to keep their stock. What a story. >> Perfect timing. >> Three a three-way deal at the exact same time. >> There would have been a cool way if you would have gotten the Cubs, but I but I I guess >> well the biggest mistake I made from that is that so when we did that then Tom Ricketts goes cuz we're all kind of friends, you know. Um and we even sponsor the Cubs today. We're one of their lead sponsor. >> He's alone. >> Oh yeah. Yeah. They're great. He's the best owner in sport in Chicago for sure. >> Well, he deliver he delivered finally. >> But we're on the mound. >> That's cool. Tasty trade. >> Tastes on the mound on Wrigley. every every every you know every tele every telecast. But so Tom goes, "Listen," he goes, "Tom, you should we still need a little more cash. You should throw some money in for the Cubs because it's a good deal." And I'm like, "I think it kind of is a good deal." But I just was like, you know, going through this intense deal to do the whole deal. So I didn't buy to the Cubs. I missed that. But anyway, that's why we sold it. >> How long did you sit around until you said, "I got to do this again." >> So it was two years. And I and and and then Mowglia left and this guy named Fred Tomzac took over TD. >> And Fred was Fred was great. He was a great CEO. And we're very good friends even to today. And Fred comes in and um he's he says, you know, he wants us to work there, me and Scott, for a couple years. You know, we signed like a three-year deal. After two years, I went to him. I said, Fred, you know, this is not for me. Like I I you know, this is too corporate for me. you know, I'm a, you know, I'm t-shirt wear. I mean, I'm not, this is not me. So, he goes, "What do you want to do?" I go, "I have an idea. I go, I want to build this financial network called," and I didn't tell him what, right? Because I know he hates all my names. He hated the name, Thicker Swim. And now I know he's going to hate Tasty Trade. And, uh, I go, "All right, I'm going to build this financial network called Taste Trade." He goes, "That's the dumbest idea I've ever heard." He goes, "But I'm in for 20 million." >> Because he goes, "He's betting on you." >> He goes, "Whatever you do, I'm betting on." And so, they were our first investor. We never even took the 20 million. took a piece from them. Um, and uh, and and so he supported it, which is great. And then and then Taste Tra was born in 2011. We sold it in 2021 for 1.1 billion. >> Wow. Unbelievable. Unbelievable. Michael wants a fist bump. >> So, you sold it, but you're still there. You're still part of it. >> Yeah. Well, no. I don't need like the specifics in your contract, but like you s you you sold it. >> Who bought it? >> IG group out of London. >> Okay. All right. Are you having fun now that you took all that risk off and you can just do what you do, do the shows, and >> you know what? I don't give a crap about the money. I know it sounds weird, but like >> Well, you were doing okay before this. >> Yeah, you were okay before this. You didn't need the money from this. >> Well, I mean, it's always like you always like you want to be like it's your legacy kind of thing. Yeah. >> Like it doesn't it didn't change my life at all, but you know, I still work my ass off. I mean, this the company we we sold it four years ago. It's worth double that today. >> So, what still drives you? You're just competitive. You're a maniac. >> Yeah. And plus, I don't have any hobbies. >> Well, this is your hobby. You love Stay with us. >> Plus, you know what? So, this is going to sound weird, but I work with all my friends. Like, most of us have been together 25 to 45 years. Like, these are my only friends. Like, this is what we do. And so, you know, so I work with my friends. But I still have fun. >> Dude, I get a text from Michael like every 3 months and he's always like, it's always some version of like, I feel really bad for you that you can't enjoy the ride that we're on. Like, we're working our asses off. >> He's a miserable prick. >> I'm such I guess I'm I guess I don't appreciate what you just said enough. >> See, say it again. >> You're working with your friends. It's not about the money. So, I I check every one of those boxes that you just said. I'm working with my friends. >> Yeah. >> I like I do need the money. I'm not in your situation, but like I'm okay. It's not not every day is uh do or die the way it used to be when I was a retail broker. So, I'm fine on money, but I just can't like on a daily basis. I have ups and downs. Sure. >> But I don't appreciate it enough. And can I read this? Yes. >> This is what Michael texted me. >> Make me cry, but yes. >> No, because Michael's my friend like first and foremost, right? >> Um so, so and I feel bad about it because I know he's right. So, he goes, "Uh, I wish you could, this is yesterday, uh, two days ago, 7:30 at night. I wish you could enjoy the ride. It's going to end one day. These are the best days we're ever going to have. Literally doing everything we ever dreamed of and more. It breaks my heart that you can't find the joy in this." Or, if you are having fun, you have a weird way of showing it. You don't have to respond, but I had to get this off my chest. And that's maybe the fourth time he said some version of that. >> I'm a good friend, right? You are a good friend. I wouldn't say that I'm not having fun. >> Yeah. >> But I'm definitely underappreciating the aspect of it that you just described. >> Well, fix me. >> So, the only thing that money is good for. The only thing that I mean, of course, there's I shouldn't say only thing, but the really nice thing about making some money is that you can afford to do things that you have fun with. Like, I don't give a crap about buying I don't even own I'm a I'm a minimalist. I don't own anything, but I I I'd love to be able to do things where I'm having fun. And so like what I do, I'm having fun. Like the investments I make, I'm having fun. The businesses I build, I'm having fun. I'm not going to do anything at my age. I'm not doing anything anymore, which is not fun. >> Okay. I don't And you don't have to. So, all right. So, I'm not >> How does How does Josh have fun? >> Well, no, no, but I'm not in I'm not in your I still have to do >> I got enough problems. I can't help out. >> No, no. I still have to do things that I don't want to do, but it's okay. Like, this is what I'm I'm This is part of my journey, part of my adventure. >> You have a lot of years on me. You probably did a lot of things that you didn't want to do, but you knew you had to. And then your success, the point that you're at now is like you don't have to do those things anymore. So, I'm not there yet, but I'm closer to being there than I ever in my life thought I would be where I am able to say no to a lot of >> Yeah. And I think I under I think I underappreciate it, but that might just be this is the way I am. I can't do anything about it. >> You know, one of the things also that that's a really fun takeaway is that I like the fact that I have made people that have hung around with me like very wealthy, too. >> I love that. >> You know, we Scott and I and and Christie, we gave we gave away $50 million. We gave $20 million to our employees when we sold Think or some and 30 million when we sold Tasty. This is in addition to everything else. We just gave them like just handed out checks for $30 million on top of everything else we've done. So we >> that's got to be the best the best feeling in the world. >> The best. >> Okay. And you see these people still every day or often. >> So one of the things with wealth is that you do lose a few friends because some people can't handle it. It's it's a weird thing. Somebody that I know when we were a lot younger sold their business to Goldman Sachs and I said, "It's amazing, right?" And he's like, "Yeah, but I lost a couple of friends." I go, "Why?" And he's like, "Because some people couldn't handle it." And >> people that don't have the money that you do can't be your friends anymore. >> Yeah. >> Maybe from jealousy or whatever. It's something. But and I see it sometimes in business, but my friends, we've been like the hardest thing was >> like there's a bunch of people that you know that I've hired over the years that I think have done your show. I think Did JJ do your show? >> Not yet. >> Oh, not yet. But like Q did your show, right? >> Uh Steve. >> Steve Cor. >> So like these are guys that we all traded together in the pits, you know, and it's hard, you know, like and Tony, same thing. The first time I offered Tony a job, he's like, I'm not working for you. And the second time I offered a job, not working for you. JJ was the same way. I offered him a job, he goes, I'm not working for you. And then and then Q is, you know, Q is the first time he's I I tried to bring him in, he's like, I'm not working for you. like we stood next to each other in the pit, you know, and then and then and then a year later. >> You get that though because if the situation were reversed, >> I totally get it. >> You would probably like if you were JJ Kenahan and you were like, >> "Yeah, >> working for Tom." >> No, I totally get it. And then and then but you know, then years later, you know, they're they've amassed a ton of wealth because they they just bought in and they learned so much and you know, it just it's it's cool. Like that kind of stuff is cool. Like we have a tree that goes to every firm like Robin Hood and Erade and every single firm out there has Thinker Swimmers and everything. >> You're like the Bill Parcels. >> I think I actually Tom I think that's actually the coolest thing in the world. Um what do you think about Robin Hood? What's your I mean this is the mo I would say >> I don't give a crap. >> No, no, no. I mean the success that they've had and what they built. I think it's amazing. >> Yeah, it's amazing. >> Okay. So I think >> I mean if you >> in the last 10 years it's definitely the most exciting uh new brokerage business to come along. >> Sure. I mean they they you know they clicked the viral button and it worked and the virality that they did I mean I I was trying to do that for you know I mean I mean I'm not I had an amazing career but like what they did incredible. >> Um I don't I don't give a crap like I mean I like those guys you know on balance I like those guys but I'm also a competitor. I want every one of their customers. >> They kind of bent the industry to their will with uh 0% uh commission. Dude, that's why TD had to get bought by Schwab is because of Robin Hood. >> Why? >> Because the commission free trading destroyed the business. No. Of TD Marit trade. It didn't. >> No chance. >> Come on. >> No. >> What do you think it was >> that TD sold? >> Yeah. >> Because they had a bunch of idiots on their board who just wanted to take the money. They were so they they >> You don't think Commission for Trade? >> No. Here TD Merit Trade was owned 40 some odd percent by TD Bank, right? >> TD Bank was in trouble for like, you know, bunches of crap, but they also they hated each other. >> They wanted to hit the bid. >> They just wanted out of that thing. Everyone's like, you know, I mean, no, the Ricketts, Joe Ricketts and Schwab, they hate each other. They don't want to do the deal. >> I'm sure I'm sure that's true. The way that I see it is that when Schwab had nothing to do, >> but when Schwab said, "We're going commission free, too." >> Yeah. >> Schwab stock got hurt. Let's just say 10% of making went commission free. >> But TD got destroyed and then Schwab said, "We're buying you with our stock. We're just going to swallow you." >> No, that's not And and TD Ti at that point was doing 70% of their business in options. They didn't go commission free. >> Okay. >> They only went commission free in stocks. They didn't even care. It's nothing to them. >> They had a they had a uh they had a no commission platform of ETFs for the RAA custody side of the biz >> here. When we when we went to when we did the thinker some TD deal at first they were doing about 300,000 to 400,000 darts a day. That's trades >> daily average. Yeah. It's it's number of trades. That's back in 2009. They were doing about three or 400,000. At the first board meeting, I walked in, I said, "We're going to do a million trades a day because of our platform. Because you bought toss, you're going to do a million trades a day." They're like, "No way." Within six years, they were doing four million trades a day. When they sold to Schwab, they were doing over four million trad. They were killing it. They sold because they were dysfunctional. They didn't sell because they had to sell. >> Do you think they could have stayed by themselves? >> You know, a lot better than we take your word for it. >> They could have survived with zero dollar commissions. They don't make nobody. We all have zero dollar commissions. Everybody has zero dollar commission. >> So payment for order flow, margin lending, that like would have been enough reason to stay independent. >> Of course. Okay. The Robin Hood going to zero. None of us have have gone to zero on options or anything else. And so we've all just went to zero on stock because nobody makes any money on stock anyway. >> Oh, let me ask you a question. >> Options is the better business. Options and futures. >> Is it because the spreads are so wide? Like why are options such a great business? because you can actually make money with them and and because the customers the customers like them because they're strategic and the firms like them because because they can actually make a little bit of money. You can't make any money in stocks. >> Yeah. >> So, >> the technology is really expensive to deliver and the marketing is really expensive. Everything's expensive and nobody helps you. So, you know, you've got to get market share. >> I want to ask you about option strategies in ETF rappers. How do you feel about that? >> I don't care. So, we do. So, do you think that those products are worthwhile? Do you think they're like executing that those strategies well or what are they missing? Like why why aren't they working as well as they should? >> Because they stink. You just have >> You ever get called for help with any of that stuff? >> Well, I have one friend that's really good trader that manages one of those funds, but I'm not going to bring him into this. But the other >> is it YieldMax or No, >> I I don't know the name. >> Okay, so let me let me read this real quick. >> Okay, >> this from our friend Jeffrey Pek at Morning Star. Yield Max Coin Option Income Strategy ETF gained 42% per year. From its 2023 inception through 2025. Okay. >> Over that period, the ETF received nearly $2 billion in cumulative net inflows. Um, and his daily assets average around $560 million. So Jeffree says, how much money did investors in this ETF make in dollar terms over that period? Because it's up 42% a year. It's still only two years, but still they didn't make any money. They lost $35 million in total. How do investors lose $35 million in an ETF that's gained nearly 42% per year? >> I don't know. >> Amazing. >> Miss So they're they're buying and selling at the wrong time. >> No. >> Horrifically. >> What else? >> Here's here's the problem with these and I don't want to get into like a lot of the problem is that they can't use the they can't use the listed markets >> because the listed markets are not big enough for what they want to do. So what happens is they are forced to go into the OTC markets and they just get they don't understand how bad they're getting ripped off by JP Morgan, Goldman Sachs and everybody else. And so so they're at like, you know, like where customers are trading one tick off mid price, these guys are trading 10 or 20 ticks off mid price and they don't give a because it's not their money. >> So the ETF sponsor, the asset manager can't go into the same options market that you and I can go into because these are $500 million funds, >> right? >> Okay. So there's not enough size in the contracts they want to buy. So they go into an OTC market where it's a little bit more of a wild west like the pricing. >> The counterparty is just some bank >> and the bank and the bank has to lay it off in the public marketplace in some way. So the bank has to has to have enough edge to find >> they have to capture something in between. >> Sure. Sure. So the difference is I I'll explain the difference. So the difference is when our customers trade and Citadel is the counterparty, >> Citadel makes money on scale not on edge is tiny. It's like a fraction of a penny, but it's all about scale. It's all about doing, you know, billion trades. >> A billion trades. So, it's all scale. It's just the high frequency game is a scale game. The game that these guys are playing is the old school way where they're giving up the edge to the counterparty and then the counterpart is Goldman, Morgan, whatever. And um and that's a just an absolute like conceptually I'm okay with it. It's just not my thing. You know, I don't like the product. >> I mean, they've gotten popular. >> Yeah. >> Amongst investors. This is why we're asking about it. But remember what happened in 2007208 remember what most popular fund was then closed end closed end covered call funds 150 of them were created every single one of them had business >> yeah they they did not survive the financial crisis right exactly >> counterparty risk >> or was it something else >> it was it was structural risk >> structural risk >> yeah structural risk and it was counterparty structural the whole deal but they didn't survive none of them did >> because you mentioned ABN AMRO there was a moment in ' 07 where the entirety of the retail brokerage business was selling structured notes. ABN was one of the biggest counterparties. Lehman, >> well, those were those were different, but the the >> Lasal Street, >> when you think about the the whole credit default like era then and you know, so we were just having this conversation the other day cuz cuz we so firms like us, we sit on a lot of cash like let's say we have $8 billion in customer capital. I think it's some but it's all cash because nobody nobody buys stocks. I mean, nobody brings their portfolio over to us. It's all just trading. So we probably have, you know, four or $5 million, billion dollars in cash all the time. So in 2008, it was a little less than that, but in 2008 or seven, every firm on the street was like, why are you guys leaving your money in overnight repos and treasuries, you know, cuz you could get four 6% more cuz that's your revenue. That's your only revenue. And I'm like, yeah, but >> who's the counterparty? Like like this is customer funds. And if you remember what happened in when the meltdown in 2008, E Trade almost went out of business. >> Commercial paper started blowing up. Money markets were blowing up. >> Not only Leman but but you know um Meil Lynch basically had everybody who lattered out just like a couple years ago when the you know with the silicon. >> Yeah. But but this was even way worse in 2008 because everybody jumped into those credit just to get just to ladder out and get a little bit more money on their money. Even TDM trade if you remember then they their money funds went under a dollar. >> Yes. Famously. famously. So the firm that had zero risk was was Thinker Swim back there because we didn't do any we only left all the money because we're like that's not our business. So in the middle of the crash I called Ken Griffin and I said cuz he had bought all the E Trade. >> Which crash? Oh 08. >> 08. >> Okay. >> I forgot that Ken Griffin bought E Trade. >> He basically bailed out E Trade. >> Yeah. >> Okay. So I called him and I said, "Ken, we're you know we're doing great. We had no problems. We had no issues at all. you know, maybe we lost five or 10 million dollars and just, you know, customers blowing out, but other than that, we had no other issues. So, I go, I want to buy part of E Trade from you, okay? And he he was like, "Listen, Tom, it's a it's a trade because I don't know if this company's going to make it." He goes, "I wouldn't feel good about selling you." He goes, "If you really want one, I'll sell you a piece, but I wouldn't feel good about it." And I was like, "Okay." And and we didn't I didn't do anything cuz I >> It's for that reason you're saying like, "Why was it a business at that time?" cuz he wasn't sure that they were going to make it. He He was like He was like, "They got so many mortgage issues and so many credit default swap issues that I don't know if they're going to be able to pull out of this." And he goes, "I don't know if you know what you guys can afford to lose." And I'm like, "That's fair. Thank you." And I didn't do it. And and it and to be fair, it took a couple years for him to make any money on it. >> Okay. I want to I want to uh >> But that would have been fun if we bought E Trade. >> I want to finish by asking you a culture question. Uh New York versus Chicago. Where where'd you grow up? You grew up in New York? >> Queens. No, I grew up in I was born um in Manhattan. My mom was a grad student at at Barnard Columbia and um then we moved to just outside of White Plains. >> Okay. Westchester. >> Yeah. Okay. >> About 20 miles from here. >> All right. Um you obviously are the center of the universe in terms of the Chicago trading scene. At least that's the way I've heard it. Yeah. >> Okay. Um but you've worked in New York, too. >> Yeah. What do you think is the big what are the big cultural differences between traders in New York, traders in Chicago, Wall Street versus Chicago? Like what what >> Well, we the first thing we would say in Chicago, there are no traders in New York. >> There's there's there's there's a financial community in New York that is huge. >> Yes. >> Um there are a lot of lawyers and bankers in New York. >> There's a lot of money managers and um there there's there's a massive business here of, you know, assets under management, things like that. But we would argue there's no traders. you would say like the activity at the New York Stock Exchange, the NASDAQ is more uh public relations at this point, less trading, but I could say the same thing about the CBOE is is gone. The the physical floor at the CME is gone. >> Yeah. But those those exchanges are still they're the monsters and and and mostly all the high frequency firms. I mean, Citadel moved to Florida, but most of the high frequency firms are still in Chicago. >> Yeah. >> And um and there's still a pretty, you know, dominant trading community there. >> Okay. Um, but you know of like Protale and and that kind of stuff, you know, professional prop firms. >> Tom, you're never going to stop, right? You have you have another trick up your sleeve. What's next? >> I do. >> Of course you do. >> Do you know Do you know Do you know what it is yet or this airs tomorrow? >> This this this airing tomorrow. Why? Do you have a big announcement coming? >> Maybe. >> Maybe. All right. >> Good for you. >> Yeah. >> Tom, this has been such a pleasure. uh we uh we've we've followed you from afar and uh I I've always looked forward to asking you these questions and having this conversation. So, thank you so much for being here. We um we always end this podcast by asking people what they're most looking forward to. Sounds like the thing that you're most looking forward to, you can't say, but maybe what's the second most uh exciting thing. >> I should I don't want to make it seem like it's some mystery thing, but but there's um I'm just, you know, I look for me what's really fun is building stuff. Okay. >> You know, so I'm I probably most look forward to seeing, you know, like like what kind of cool stuff can we build in the future? >> Okay. >> Like that's it. I mean, I'm not, you know, I'm not going to ever retire. You're right. >> Oh, it's tasty AI. >> I mean I mean when I'm doing something on stage, I always say you when I'm when I drop dead here, just roll me in the dumpster in the back. I'm cool with it. That's okay. Like I I want to die doing this stuff. >> Love it. >> So you're the man. Thank you so much, Tom. Thanks. All right, guys. We want to say thank you so much for listening. Please like and subscribe. Do all the things. We appreciate you. Great job on the show all week. John Duncan, etc. Whole team. Shout out to the whole team and we'll talk to you guys soon. Thank you. Thanks so much. [Applause] [Music]