The coronavirus has sent a wave of new retail investors into the stock market in 2020. This flood of new investors, many of which are younger traders, has been a result of multiple factors: stay-at-home orders, stimulus checks, zero-commission trading, and the rise of free and accessible trading apps.
Many of these new young investors have also trickled over into the options and equities markets. Third-quarter 2020 results from Nasdaq showed a new quarterly trading volume record in U.S. options. In Q3 2020, Nasdaq’s U.S. options market reached a quarterly record of 660 million contracts traded. This being a 52% increase year-over-year.
Looking at new accessible trading apps, one such platform that has garnered a lot of attention is Gatsby. Launched in December of 2019, Gatsby is an options trading platform that’s focused on making options trading beautiful through its modern and sleek design.
Co-CEO of Gatsby Jeff Myers spoke with Benzinga about the recent boom in the options market, as well as, how Gatsby has been designed with the younger generations in mind.
When asked about the influx of new traders, Myers attributed this, in part, to the fact that more young people are paying closer attention to the markets.
“This is partly because they're aging into having money and a growing appetite for managing that money in sophisticated ways, and partly because of the spike in volatility and movements in the markets driven by the pandemic,” he said. “This created the perfect storm for young people to jump in and exercise their newly discovered strategies and tools.”
New Traders Are Here To Stay
In a recent Q3 2020 earnings call for Cboe Global Markets, the company cited the new generation of retail traders as the main contributing factor behind record 2020 trading volumes.
“In the third quarter, retail trading led the way to a 42% increase in equity options trading at Cboe with smaller, short-term positioning trades,” said Ed Tilly, President & CEO of Cboe, during the earnings call.
And according to Myers, there is optimism surrounding the continued growth of the options market with leaders of the biggest exchanges in the world expressing this sentiment on recent earnings calls.
“The trend of growing interest in retail trading does not show any signs of going away anytime soon,” said Myers. “The markets have become a form of mainstream entertainment, and this has brought new traders in droves, both in equities and options and more.”
Building A Platform For Young Traders
For many traders, options can be daunting. Understanding different strategies and concepts can be confusing which turns some investors away from entering the market.
Gatsby is working to demystify options trading by providing an easy-to-understand platform for users.
“We clearly lay out the different strategies that you can utilize in your options portfolio, and the social aspects of Gatsby provide an awesome, engaging way to get new trade inspiration, or an idiot-check before you make a trade,” said Myers.
In appealing to young traders, Gatsby has reimagined zero commission trading. The app features what they call, Gatsby Rewards. This reward system allows traders to work their way toward milestones where they can get prizes and gift cards. The app also provides the ability to share your trades with friends.
As they continue to innovate their product offering, Myers noted that their users have been expressing a lot of interest in trading spreads. Following the overwhelming response they received, Gatsby recently implemented debit spreads this month, and will be launching credit spreads next month.
“Spreads are an awesome way to buy and sell options with hedged risk, and for much cheaper ticket sizes,” said Myers.
It’s impossible to predict how this trading boom will pan out, but we are only at the beginning of what will be years of young retail investors changing the markets. And emerging trading apps such as Gatsby are reshaping the way these new investors view and approach the landscape.