New York, NY – Retail options trading in the U.S. has reached unprecedented volumes, driven in part by platforms like tastytrade, which employs an "entertainment" model to educate and engage self-directed investors in complex financial strategies. This surge in activity has prompted discussions about the inherent risks involved for individual traders.
Tom Sosnoff, co-founder of tastytrade (now tastylive), has been instrumental in popularizing options trading through live shows and educational videos. The platform aims to demystify complex strategies, making them accessible to a broader retail audience. As noted in a recent social media post, “As US option volumes reach records, Tom Sosnoff's tastytrade is selling complex strategies to retail traders through live shows and videos.”
The significant increase in U.S. options trading volume, particularly among retail investors, has been a notable market trend, with factors such as increased online accessibility and financial education contributing to its growth. Much of this activity is concentrated in short-dated options, including zero-days-to-expiration (0DTE) contracts, and single-name equities. This heightened retail participation has even influenced the dynamics for institutional investors.
However, the accessibility of complex options strategies to retail investors has raised concerns among regulators. The Financial Industry Regulatory Authority (FINRA) has issued warnings, such as Regulatory Notice 22-08, highlighting the potential for retail investors to engage in these trades without fully comprehending the associated risks. FINRA emphasizes that while options can serve legitimate purposes like hedging, they also carry significant speculative risks, especially when traded on self-directed platforms without professional guidance.
Despite these concerns, tastytrade has achieved considerable market success, underscoring the demand for its unique approach. The company, which also operates the tastyworks brokerage, was acquired by IG Group in 2021 for approximately $1 billion, signaling the significant value placed on its platform and user base within the financial technology sector. The company continues to provide risk management tools and educational content, advising users to understand the comprehensive risk disclosures before trading.