Democratizing Derivatives: Gatsby Redefines Speculative Options Trading

In an interview with Benzinga, Jeff Myers, co-founder at the commission-free options trading platform Gatsby, discussed reducing barriers and creating a community around options trading.

How It Started

The story goes like this: Myers viewed a pre-viral video of a passenger being dragged off a delayed United Airlines Holdings Inc UAL flight.

“I was on Reddit. I saw that video very early in its viral trajectory. There were maybe five or six videos that got posted from the plane, and I saw the first one,” he said.

Cognizant of the negative impact this development would have on United’s stock, Myers sought to trade on the information.

He contacted a colleague and asked for advice on the matter.

“I was like, ‘I’m not an expert and I don’t really even understand what security I would want to dive into to try to take advantage of this, but I’m sure, even as an unsophisticated casual trader, this is going to go viral, and United’s stock is going to dip.’”

Myers scrambled: he attempted to set up a brokerage account that would allow him to speculate with puts on a downmove, but the process was too laborious and time-consuming.

At a certain point, he gave up.

“Obviously, there [was] no way I was going to do that, but, in the process, I realized that all these traditional brokerages are too complicated for someone just trying to exercise simple strategy.”

Subsequently, Myers and Gatsby’s other co-founder, Ryan Belanger-Saleh, became very interested in options, and decided to leverage their combined expertise in tech and finance to create an intuitive trading platform.

You can see companies like Gatsby competing at the Benzinga Global Fintech Awards on Nov 19. in New York City.

How It Works

The founders identified two major opportunities in the space: practicality and social sentiment.

“Conceptually, buying options is very simple. But, when you’re looking at like, you know, the Think or Swim platform, it is very intimidating,” Myers said.

“We [wanted] to build a platform and make it social because casual traders that are analyzing various markets, every day, don’t necessarily have the inspiration — even if they want to find some — so, the social feeds give them ideas and a sanity check before they make a trade.”

Gatsby procured a team of finance titans and developed a non-intimidating platform.

Users can now trade simple options strategies on the same assets professionals have access to, but with a twist: easy-to-digest breaking news, corporate reports and social community sections are available, making it easy to identify and act on minute-by-minute trends.

“By default it’s public to the community. You build communities around people that you love to find inspiration from, and you can add a comment and share why you made a trade,” Myers said.

The platform will automatically show traders within the social community, what ticker someone traded and whether it was a put or a call.

Where The Product Is Headed

The present state of Gatsby is geared heavily toward the novice trading of long options, Myers said.

“We just don’t want to overwhelm [traders] with data that goes too deep for them.”

The firm later on may also integrate more complex strategies, like selling contracts, in an unconventional, risk-mitigating manner, he said.

"It’s called Adaptive UI — basically, we get index scores on traders based on a handful of characteristics. Depending on how sophisticated a trader appears to our system, we might offer them more complex strategies."

Gatsby provides users what they need to execute a trade, like an understanding of what a particular strategy entails when the underlying asset moves in a certain direction.

“We don’t want [education] to be baked into the app, but we do want to make sure our users are being safe, so understanding what you're getting into” is essential, Myers said.

Gatsby’s most complex strategy available to trade is the straddle option, which is a neutral strategy that involves the simultaneous purchase of a call and put option at the same strike and expiration.

“We do teach users what a straddle is; [for example], once [traders] have bought a call in a company, we say, you can take a counter position here,” he said.

Overall

Gatsby is built for the new or casual trader that wants to speculate with minimal research and analysis.

“We go for small accounts. We are going after our friends: Gen Z and millennial types of traders.”

A large disconnect exists, in Myer's view: conventional brokerages don’t have the vision or the will to accommodate small, inexperienced investors that want a shot at picking a direction in the markets.

The answer, he said, is in Gatsby's holistic, easy-to-use platform that delivers what is demanded: a commission-free options trading for accounts that are hundreds of dollars in size.

Related Links:

Stripe Valued At $35 Billion

Payscape: A Payments Solution For Small-, Medium-Sized Merchants

Photo courtesy of Gatsby.