The Pomp Podcast - #1421 Tom Sosnoff | World’s Greatest Trader Reveals His Secrets

Episode Date: October 14, 2024

Tom Sosnoff is the Founder of TastyTrade and the CEO of TastyLive. He is also an entrepreneur with over $2 billion in exits. In this conversation, we discuss economic data points that may be wrong, how he built such great products, how he thinks about trading 100 positions a day, why he makes 18,000 trades per year, and the daily mindset of a trader.  ======================= Buy book: https://www.amazon.com/Live-Extraordinary-Life-Anthony-Pompliano/dp/0857199927/ ======================= Gemini is the safe and secure way to trade crypto. Gemini is offering eligible new users the opportunity to earn $100 in BTC when they trade $1000 in crypto within their first 30 days of signing up. Head over to ⁠⁠⁠⁠https://www.gemini.com/partners/pomp⁠⁠⁠⁠ and start trading crypto to earn $100 in BTC. ======================= Wondering where to go for financial advice? Domain Money makes financial planning simple. No hidden fees and no sales pitches - you get a personalized roadmap to your goals, from dream vacations to retirement. Flat-fee advisors create a plan tailored to you, with zero pressure to invest. Don’t be like most people who’ve never had a real conversation about their financial plan. Book a free strategy session today at ⁠⁠⁠⁠⁠⁠https://www.domainmoney.com/pomp⁠⁠⁠⁠⁠⁠While I'm not a Domain Money client and they are paying me, I've seen first hand the value of their service through the free plan they did for one of my brothers. Yes, I might have an interest in promoting Domain Money, so just like any major financial decision, it's important you understand what the service is and if it's right for you so make sure to see important disclaimer at ⁠⁠⁠⁠⁠⁠https://www.domainmoney.com/t/legal⁠⁠⁠⁠⁠⁠ ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's up, guys? Today, I've got a great episode with Tom Sosnoff. He is the founder of Tasty Trade and the CEO of Tasty Live. He also happens to be an entrepreneur with nearly $2

billion in exits, including selling Thinkorswim, the great brokerage account, for $750 million back during the global financial crisis. This conversation will blow your mind. Tom brings a fresh perspective to understand why many of the data points that you've been told, they're wrong, why he built such great products how he thinks about trading 100 positions per day why he makes 18 000 trades a year and what exactly is going on in the trader's mindset throughout the day given so much information so many different moves in financial assets and why he also thinks that he could literally just tell you all the answers to various economic outcomes or political outcomes and you still couldn't trade it correctly this conversation will make you laugh and it also

will inform you. Here's my conversation with Tom Sosnoff. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Gemini. Gemini is a fantastic platform. How do I know?

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Go check it out today. Go to domainmoney.com. All right, guys, I've got Tom here. Tom, I thought a great place to start the conversation is you built the same company twice and you sold it for $1.8 billion, give or take, combined. You built these interfaces that have been the gateway to trading for millions of people over the years. You built Thinkorswim, then TastyTrade. Help me understand, what was the insight that you had as to why a new interface would lead to such value creation? I mean, it's just incredible that you were able to do this two different times and sell these companies for so much money? Well, the easy answer is why not us? Why not us? I'm a weird entrepreneur. I don't really care. Like I'm never trying to solve a problem. I don't

believe that good entrepreneurs should ever try to solve a problem. I believe you should just kind of do, you know, stay in your, whatever your strength is, wherever your know-how is strongest, just stay in that kind of lane and just do it better than everybody else. And I think we were lucky we were able to pull it off twice. When you talk about staying in your lane, you are a trader. You started your career in the pits. And I think you told me that you do between 13 to 18,000 trades per year. Is that right? What are you trading? 18,000 times per year is a lot of trading. That's like what, over 100 trades per day? It's probably, it averages probably 75 plus, you know i don't know exactly yeah um but uh yeah most days like between 75 and 100 trades and is

this like you put a position on and five minutes later you're still in the same position or you just have a massive portfolio so i have a lot of so so i'm a very short my perspective is basically 45 days so i'm not like a typical passive investor i don't i mean i do have a stock portfolio with some stocks i hold for a long time but for the most part i have about i would say on average about 100 different positions in everything. We're talking commodities, all listed products. So commodities, stocks, and mostly option strategies. And so all those positions need adjustments. You need to put on new ones. You need to take off old ones. My time frame on average is 30 to 45 days, like the whole duration of the trade. So things can be adjusted every single day.

And what does it take to make it into the long-term portfolio versus the short-term portfolio? So you see a company, you see a commodity. A loss. A loss. Okay, explain. A paper loss. You know, you buy a stock, it goes down, it's a long-term hold.

You know, I mean, in the option world, you don't have to deal with that. But in the stock world, that's, you know, that's my life. Okay. And then when you're looking at something, walk us through, let's say that you're looking at equities. Sure. And you know that your proclivity is for 30 to 45 days. what are you looking for to say, hey, I'm going to put this position on? And then do you go into

the trade knowing what are the milestones or kind of things we're going to look for that's going to tell you to sell that? I go into the trade. I'm a very simple trader. I don't care about fundamental analysis, cyclical analysis, anything. I don't care about anything macro or anything like that. I'm strictly base everything off implied volatility and I base everything off expected move. Now that doesn't mean I'm not directional because I am. So part of my portfolio is non-directional Delta neutrals, we say in the option world. And part of my portfolio is very directional. And, um, but I set my kind of mental targets at where expected move is. And let's just walk through, um, you know, you wake up, do you immediately run to the computer

and like, let me check these hundred positions that I have. Okay. So like, how do you manage hundred positions and what does the day look like for you oh well i'm always on you know like i'm always i'm always involved in mar but but my day so i have a weird schedule i i usually get up at four and i live in chicago um i'm an email junkie too so i answer you know about an hour of emails from four to five because my brain works best really early in the morning same late in the day i start to everything starts to get fuzzy i start to melt down but four in the morning man And I'm good. So four in the morning, I'm answering emails. I'm going to look at the market, but I usually don't trade that early. The only thing open, by the way,

at early in the morning is the futures markets. And I would say about 20% of my positions are futures and futures options. So I may adjust futures options around five in the morning, but for the most part, I'm not going to put on new trades. I'm just going to adjust existing trades. Like let's say crude oil moves $2 overnight. I'm going to adjust my crude oil position, flatten it out, and then answer emails more. And then after the market opens in the morning, that's when we start to get, you know, it opens 830 Chicago time. So that's when we start to get more aggressive. Now, what is your target? Do you have like, I want to make 1% a day? Do you have a 1% a week? Is it just no target at all? And you're just like, Hey, I'm just looking at

the assets, my target. And this is what I say to anybody, because first of all, it's hard for me to put into... The easiest way to explain about active trading targets is to talk about it as a multiple of risk-free rates, because nobody should be actively trading if you're targeting to make 7%. If risk-free rates are, let's just say 5%, and you need some multiple of risk-free rates to make it all worthwhile. So the way I like to explain targets has nothing to do with you know, daily, weekly, monthly, or anything like that. But at the end of the year, you know, you need to set up a target based on whatever your risk profile is at a minimum of three times risk-free rates. And a maximum is usually, you know, who knows, it could be anything you want,

but for, for most people, it's somewhere between let's say 22 and 32%, like somewhere in there, that's your target. It doesn't mean you get there by any stretch. It just means if you're going to put in all this work, all this resources, you know, all the time it takes to manage all this stuff. And a lot of it's fun too. You have to have some in your head, some multiple risk-free rates. So sure. 20%, 30% in that range. I think that's fair. Is it just like a big video game? Yeah. And how do you know you're winning? Is it just literally the return or is there some other measurement? It's literally the return, but you know, you're winning. If you do a lot of other things, right? Like I can't put a, like, I don't know if I would have

built these companies if I hadn't traded my whole life and was totally okay with, you know, when we built Ingersoll and we just rolled the dice with all the money we had, you know, literally for 20 years, just roll the dice. And we built Tasty. We almost did the same thing. There is, you know, you have to have a certain tolerance for risk that you develop through all trading. Trading makes you think faster. It makes your brain process decisions way faster. I mean, you trade, you know and and so you do everything faster and the most successful entrepreneurs make fast decisions period and as you're trading you have 100 different positions yeah um i think a lot of people would say hey concentration builds wealth diversification uh would protect it but you're

still trying to make money you're still trying to build wealth um and so does the diversification actually hurt you in that pursuit it may i don't know like in bull markets like when you have a when you have um let's talk about like the last you know decade or something or last five years when you have a concentration of seven or twelve stocks that basically you know controlled this market as far as returns go it definitely hurts you know because you're not going to be in those stocks and if anything you're probably going to be short of um i think in a flat market to a down market to just kind of a normal more more normal market i said more normal um it probably helps you know non-correlated positions are great when when something ugly happens when the hits

the van non-correlated positions save your ass when everything's going up and everything's very concentrated you know i mean you would have rather been in five tech stocks over the last five years yeah i think i saw a statistic that over the last five years the tech sector of the s p 500 was up like 25.9 or something uh compounded which means that uh you actually outperformed majority of the venture funds during the same five-year time period and you had the public liquidity. And so, is that something where you're almost barbelled? Like you have 100 public positions, but then you had a massive concentrated bet in the private market and building Thinkorswim and then Tasty? Yeah. I mean, listen, that's interesting how that works. And I always say that

the reason we were able to do it is because that's just the way our minds work. You know, like there's just, that's, we were comfortable with that risk. Yeah. I mean, it's, it's hard to say that it's hard to, it's hard to rationalize it any other way. I don't think it's that risky, right? Like you are by all measures, an expert in trading, uh, because you've been doing it for so long. Well, what's risky is that, that in the industry, you know, you're talking about a business that runs at 50%, let's call it 50% net margins, which is pretty, pretty good. there should be a hundred firms, but there's not. So it's not that easy. Why?

Because building the technology and building the right, attracting customers to a space that's this narrow and attracting customers to a space that has kind of, you know, not necessarily a great reputation because big passive firms that annuitize money management don't want it to be. It's a challenge. There should be more firms. There's not. How do you look at the difference between a thinkorswim or Tasty versus, let's say, a Robinhood or a public kind of, you know, some of these firms that I think are kind of mobile first, design heavy, Pioneer, payment for order flow stuff, et cetera. Like, are they all competitive with each other or are they kind of different parts of the market? No, they're all pretty competitive. I mean, we view every customer, whether you're a Robinhood customer, public customer, you know, Schwab customer, Fidelity customer, we view them all the same.

They all should be our customers when we look at it. Um, but you know, that's, that's like, I don't know. Um, I mean, those companies have done a great job, you know, with, um, I've always been impressed with Robin hood. Um, and there's a couple of companies out there that are, you know, to me have always been impressive, but, um, you know, we, we've always also been impressive in our own right. You sold thinker swim for 750 million, give or take, and you sold tasty for 1.1 billion. Uh, second time you just had more knowledge and experience.

you got a bigger number or were there things that you did differently the second time that uh kind of drove a better outcome well fingersome was we saw thing or swim in 2009 and that was you know during the big meltdown so we it was a billion dollar company before that we were public and then it sold off a little bit um you know in the kind of all the financial stocks in 2008 2009 sold off but we were very particular about not taking cash so they tried because cash is accretive to company you know if a big company is buying you out they want to give you cash because then it makes the deal accretive we wanted stock so if you want to hear a fun story i would love it okay so fun story so td ameritrade was started by the rickets um joe rickett started it back i

I think, for $25,000 in like the late 70s, early 80s. Joe's an incredible entrepreneur. I don't know if you know him, but whatever. He's he's still alive today. And I think he's a rancher in Montana or something like that. But anyway, so Joe started it and built it up. But then in 2009, TD Ameritrade wanted to buy one to buy think or some.

But the Ricketts also wanted to buy the Cubs and the Ricketts needed cash to buy the Cubs. So what never has actually been discussed is we did kind of a three-way trade. I don't know if you remember when Joe Ricketts gave the money to buy the Cubs to his son, Tom Ricketts, who runs, but that's a close family.

So they needed about $800 million to buy the Cubs. They had about, let's say, they had plenty of money, billions, but they only had a certain amount of cash. So to raise the cash and we wanted stock. So we got the stock from the Ricketts. The Ricketts got the cash from TD Ameritrade. We did a three-way trade.

No way. Yeah. So you actually didn't get stock from TD Ameritrade. We did, but that's how it worked out on paper. It was like a three-way trade. It was a three-way trade. That's pretty cool. Yeah, it was really cool.

Did they bring that idea to you guys, or did you somehow know that they wanted to buy the Cubs? Well, it was pretty public that they wanted to buy the Cubs, and the CEO of TD Ameritrade worked the whole deal. Fred Tomczak, who's now the CEO of the CBOE. So it's a small world. And Fred is a great guy, and we've stayed friends all throughout the years. If you had to give yourself a grade on taking the TD Ameritrade stock, A plus, F minus, where would you- Well, we took the stock at $11 or $12. So I don't remember the exact price, but it was around, let's say $12. And we were able to, it never traded lower. So that was a good trade. And what do you think you ended up selling it at?

Probably between 18 and 30. Okay. So you really sold for way more than $750 million once you actually got out of the position. Yeah, but don't tell anybody. Yeah, I won't. Nobody listens to this. Don't worry. Okay.

And then what did you learn from the first acquisition that you then went and implemented in the second one? Was there another three-way trade? No, but what I learned is that, so when we built, we started building Thinkorswim in 1999 and we were just a bunch of floor traders. we didn't really know anything about building technology not at that level so we learned a lot about building technology but when we sold it we realized there was a missing piece or at least i thought there was a missing piece and the missing piece was the content piece like we built

this cool technology and we did some content but we didn't like we never took the content to the next level and things like cnbc and bloomberg and you know wall street journal parents, all the content, financial media drove me crazy because it was such, it just wasn't interesting to me. It wasn't, you know, it wasn't engaging. And so I thought there was room for a digital financial network. So we had this crazy idea about building a content-based, you know, digital network. And it turned out to be the largest digital network, financial digital network in the world. And we started it in 2011 as TastyTrade. And the first investor was TD Ameritrade. So you got the people who bought your company to be your first investor in your new thing.

Our only investor. And they did that because they were just like, you're amazing? Or was there some sort of competitive dynamic where they were like, we can't let this guy squeeze out of our grasp? No, they did it because for the right reason. I said, listen, you guys are amazing entrepreneurs. And we knew you weren't going to stay here. And we would be foolish not to roll the dice with you one more time.

And they did. and um they actually tried to buy tasty again a couple years later you know five years later but we do you remember theo epstein when he was when he okay yeah so so theo epstein once i heard him give a talk and he said you know 10 years is like my number that's what he said that's when he left like boston to go to the to the cubs and uh we held binger sentiment we built it in 99 2000 we sold it in 2009 and we built tasty in 2011 we sold it in 2021 10 years um and in both times that entire 10-year period there was no like real activity like nobody really came after us in either company like in we built tasty not one person talked to us for 10 years

but 10 years into it five companies tried to buy us 10 10 years into think or swim three or four companies tried to buy us at the same time like somehow like word gets out i don't know how it happens do you think it's that you crossed over some sort of financial milestone do you think that it's like no i think investment bankers can't keep their mouth shut yeah they just go to some conference and everyone talks about it or something they're like holy cow who are these guys yeah and um yeah so you know the reason we did the deal with ig group um with their london based public company is i wanted to go global and i couldn't do it my it's just too hard you know it's really hard where i am in my life it was too hard for me to start getting licensed in all these

different countries and everything. So I really wanted an opportunity to take Tasty Global. So we chose IG Group as a partner and they've been a good partner. We'll see what happens. So in 2009, you sold at the bottom of the market. In 2021, it sounds like you sold at the top of the market or close to it. And was that intentional in terms of understanding where the market? No, it wasn't intentional. That was the 10-year period that was up. But what's funny is in 2021, if you remember, that was the SPAC mania. And we had all these SPAC offers for double. We'll give you $2 billion. We'll give you 1.8, crazy numbers. And we're traders. And we were looking at each other like, OK, we're not worth that. Why would somebody give us $1.85 billion in a SPAC deal

for Tasty when we think we're worth 1.1, 1.2, 1 billion, somewhere in that range? and like, it didn't make any sense to us. And we're always like, if something is too good to be true, it's, you can't, it's, the markets are too efficient. They can't, something has to be broken. So we didn't take that. We took the lowest number that made the most sense to us because we thought that meant that we were probably, you know, at least that made that deal seem like it was sustainable. And it was. What was the concern that you were going to take all stock in the SPAC and then it would trade down. And so your 1.8 would become like 500 million? Part of it. I mean, we would have got a couple hundred million out of it and we would have had

to turn that couple hundred million. We had two concerns. One is that we're really good at what we do, but what we're not really good at is we're not like a traditional marketing firm. So a couple hundred million dollars extra wouldn't mean that much to us if we had to spend it on marketing because it's not our strength. Like global marketing. When I mean global, I mean, you know, all US and some big, huge national campaign. I'm not sure we would have converted on that. So that was one of our concerns. The other concern was, hey, you know what? These SPAC deals look, they look stupid. Like it didn't make any sense to us. If I could have shorted every one of them, we would have. Do you short in your portfolio? Oh my God. Yes.

Okay. So why didn't you short the SPACs? It's really hard to. When the new issue comes out, you virtually can't sell it for a certain number of days. And then they're hard to borrow. And there are issues with SPACs. It's very hard to sell. There's no options right away. It's almost impossible. It was almost impossible to short SPACs. So shorting in general, there's some very good short sellers who have, over the last couple of years, maybe even months, kind of throwing their hands up in the air and said, Hey, I'm not shorting anymore that we obviously have the game stops of the world and things like that. But these are people who really

weren't on the wrong side of those specific kind of, you know, mania type trades. Are they just getting old and they don't know what they're doing anymore or is shorting now much less desirable than maybe it was previously? Well, I mean, the market's, you know, shorting stuff when the market just doesn't do anything but go up every time it sells off, it goes higher. I think that, you know, my history in markets is, is I spent almost 20 years as a market maker, which means you're just the counterparty. You know, when you're standing there making markets, you just do the opposite of what anybody else wants to do. You're almost like a bookie in that sense. Okay. What do you want to do? And I'll buy the bid. I'll sell the offer. I don't care what you want to do. So you're

the counterparty. So for me, I've always been a contrarian. Something goes up, I sell it. Something goes down, I buy it. It's not that I, I'm not a short seller. Like I only sell short. I'm a short seller because if something goes up, I sell it. Now, how do you kind of balance that with a data point I saw recently is that the single best day to buy the market is at an all-time high because one, three, and five years out, the outperformance of buying on the all-time high price versus any other day of the month or any other day of the year is hundreds of basis points. And so is it just like the longer the time period? It's just, that is the most curve fit, ridiculous, like data I've ever heard in my life.

That is only applicable in hindsight in a bull market. If you were to say the absolute, so, so we, so Tasty's a think tank, just so you know. And you could not have come up with a more, that is a, that is crap, totally. You think so? Oh yeah. We've researched this because people have said that. So, so we have a think tank, which is just a bunch of PhDs, physicists, mathematicians, everything.

Small people. Smart, way, way smarter than any than I am. And so we studied that exact fact using a lot of data. We basically so we have our own database, but we use essentially we go back to 2005. Most of our data goes back to that. We go back to 1990 with some stuff. But we've studied that since 2005. And I'm not talking about one, two and five years out or one, three and five years out. But there is absolutely zero, because I've always heard, you should buy breakouts and all this stuff. There is zero truth to that. Markets are completely random. There's no statistical significance whatsoever that you should buy tops. Now, why does momentum investing work so well? Who says it does? Well, you look at returns. I'm not saying that it's better than other investment strategies, but it does seem to work in the sense that people who buy on momentum tend to make money more times than they would necessarily sell or lose money.

Again, there's a difference between a bull market phenomenon and random efficient markets. Do we have efficient markets? I think we do. Do you? No, I think that the market is, we're just in a perpetual bull market forever because the central I believe in positive drift. Yeah. So I believe in- What is that?

So positive drift is just that over time, everything gets better. Like I believe positive drift for everybody. Like if you said to me, hey, here's where I am in my life right now, my arguments, well, 10 years from now, you are going to be doing better than you're doing today. And 20 years from now, you're going to be better than- I think that everybody that commits themselves to something, we have positive drift in our lives and we should. And we have positive drift in the markets.

Over time, the markets are going to go higher. but I don't think that we, I don't think that's an easy perspective to have. And I don't think that that, I don't think that with respect to markets that actually helps people. See, my thought has always been, um, and we should call out that you have a very kind of trading centric perspective. Uh, I, as I told you, started out trading and very quickly realized, Hey, maybe I should just buy and hold and whether I'm losing or winning on paper, like just hold is a little bit better. Um, but my thought process has always been, uh, If you are younger, which I think is an important caveat, so call it, you know, sub 50 years

old or so, you have 10 to 20 year, you know, kind of timeline based on a whole bunch of different factors. It is very hard to make an argument that markets will not be higher over a 10 to 20 year time period. It sounds similar to your positive drift. But in the last, I don't know, five years, maybe, maybe eight years, it seems like the central bank has perfected the playbook where if we get near a market downturn, they're just going to stimulate the hell out of the market and economy to the point where you could ask

yourselves, like, have they outlawed a bear market? Do you think that we'll ever see another three to five year kind of sideways to down market? Yes. You think so? Yes. I don't know. So the one thing that's changed to me is, first of all, the movie, the script really doesn't change but what's changed is the speed at which things change okay so the i don't know if we're ever going to see another five to ten year bear more i don't think like the 70s is going to happen again um and i'm not so sure that we're going to see another you know 2008 2009 which was what 500 days or something like that because the speed at which things move now is just so crazy fast um so we call that like the the rate of change or the gamma with respect to the markets has completely

changed so you might be right in that sense we have like weekend bear markets yeah right right like in crypto i always laugh like everyone goes home on friday they're euphoric somehow on saturday everyone's like oh my god it's over and then by monday again the markets are up everyone's happy yeah i mean we haven't there's an entire generation that's never seen you know that's really never seen a prolonged pullback yeah i mean look i i remember in 2021 there's this particular person that was you know beware the bear market beware the bear market doing the whole thing golden sacks uh no this is like a venture capitalist okay and i remember i wrote a piece i said um you know the difference here is one i think that the markets are now heavily manipulated

not in a nefarious or malicious way but they have a stimulus playbook and they're going to stimulate like literally the word stimulate means they're going to push the stuff back up um but two and maybe most importantly is uh there's an entire generation of people who i'm going to call them the crypto generation but it could be gamestop or you know whatever assets um the volatility that they experience let's say in holding bitcoin where there are you know thousand percent upswings eighty percent drops and happen multiple times um and in those thousand percent upswings there are five six seven eight fifty percent drops or thirty percent drops along the way yeah they're just used to a level of volatility that you wouldn't normally see in the traditional stock market yeah and so um

they kind of have like the diamond hand maybe the better thing is like there's like the diamond hands generation right it's just like the volatility and the speed and also like they're are used to this yeah and so um my argument was if a bear market comes you think that like oh the younger generation is going to get punished because like they committed all these you know sins of the timeless investing principles or whatever and my point was like no dude these people are crazy they're just gonna get on the internet and be like hold right and they're not gonna sell and they're gonna come out the other side like look how smart i am and so if you actually look over the last two or three years yeah that's i mean sure some people sold but

actually most of them just held for two years and not even two years maybe it was a year of kind of down yeah and now we're hitting new all-time highs you know it seems like every week or whatever and so in a weird way you're almost training people to behave in a way that also helps to mitigate bear markets yeah the crypto world has not helped the active trading world there's no question about that it's not so the beauty about crypto is that it's like you said super high volatility and it's essentially a tech stock with super high volatility it's a tech play with super high volatility which we love the bad thing about crypto is that it's dead money and so what does that mean meaning that most people buy crypto and that's it it's just like that's the play you you

go out and buy just like buy and hold you buy and hold yep yeah it's it's just and and you can't borrow against it and you can't sell anything against it so you can't reduce your basis like you can't sell calls against it you you can't sell puts to get long it you can't borrow against it it's absolute dead money so in the brokerage world we offer crypto and digital assets as much as we can with the with you know with the sec overreach but we do as much as we can do but the money goes in and it never comes out like that money never gets turned it never gets played it never it's it's never in play which i think is definitely bitcoin maybe some of the other cryptos That is part of the pitch is like, hey, buy, hold, you know, forever, give it to your kids and it'll be worth more money.

Whether that ends up being true or not. What I do find interesting is now that these assets, you know, we have the Bitcoin ETFs, we have E3 ETFs. Do you think that all of the options, all of the borrowing, like the financialization of these assets is coming? And so 10 years from now, people will be able to have access to all those tools and therefore that might change the dead money? There's no question that all the derivatives are coming. But sometimes it's the first to market play. And I don't really think that the cash market in digital assets is going to change dramatically because that particular marketplace and the players in that marketplace are very different than traditional derivatives traders and everything else. So I don't see that dynamic changing. But the bad thing about it is you have this entire generation of young people that loved getting involved in digital assets, loved crypto, love all the stories.

I love all the technology, but they're not learning anything. They're just stuck in this again in this dead money, this dead pool of money that doesn't mean anything, because even if it goes higher, who cares? They're not learning anything. They're not learning anything about finance or anything about strategy or anything about the rest of like all market structure, which to me is so important. Like just being long Bitcoin. Great. So what?

It goes higher. Who cares? So you made a little money. Now what? You didn't learn a damn thing. And that's my biggest issue with crypto. And listen, we're huge advocates of the space. We're the lead investor in ZeroHash, which is one of the largest digital asset settlement

companies in the US. We help to, we finance that company. where I'm on the board there. I mean, we've been fighting for crypto assets on our platform from day one. You know, I love the space. I love the technology. There's so much.

I think the whole world's going to be tokenized. Do you really? Yeah. You think like the US stock market as well? Not exactly. But I think US investors will be able to trade in a lot of other places that we currently can't trade because we have to deal with currency conversion,

quotes clearing all that kind of crap and i think that will be tokenized yeah what about like hours of operations well you know one of the things i think people like about crypto is it trades 24 7 365. um it's a lie that the stock market only trades in the kind of the narrow hours of operations there's now overnight trading yeah at times there's been studies that show overnight trading actually performs better than you know kind of regular hour trading sometimes it's not true um do you think we just eventually move to 24 7 trading in u.s stocks um i think well we we already have 24 five in futures. So the futures markets have been 24 five for years now. Um, and crypto has been 27 and 24 seven. So, um, the problem with stocks is that the liquidity doesn't

necessarily drop that much in the stocks, but it dries up in like the options and places like that, because there's no place to lay everything off and the high frequency firms. It is really hard for us to find high frequency firms that want to make markets over, you know, overnight. Why? Because they don't want to. Because they don't make any money. Because there's not enough liquidity. And so the problem is that we're stuck with exchanges. And exchanges, remember what a crypto exchange is. It's not really an exchange. It's a high-frequency market-making firm. The problem with the New York Stock Exchange and all the different option exchanges and all the different NASDAQ is they stink. Their technology stinks. They stink. Nobody makes markets for them.

If you take the high-frequency traders out of the equation, there's nothing there. Like these whole markets are run by, you know, high frequency, high frequency prop firms that essentially are are the most important and dominant factor of creating a marketplace efficiency. When we look at, let's say, Tasty, what are the assets people are trading that would surprise us? Like what are the most popular assets that are being traded on the platform? Well, I mean, I don't think it would be any different than the most liquid assets. It's like if you're talking about equities, probably the two most outside of ETFs. I mean, obviously the SPX because of the zero days and the big product that it is and the spies and queues and things like that. If you're talking about equities, Tesla and Nvidia are the two biggest that trade from a customer perspective.

I mean, occasionally you'll find something that's hot all of a sudden or something that has earnings. So a lot of people might play for earnings or stuff like that. But if you're talking about just like, you're probably talking about 20 or so stocks dominate about what feels like 75 plus percent of the Doritos business. And it starts with Tesla, NVIDIA, and it works its way down. You mentioned zero-day options. I believe that's now more than 50% of all options trading in the United States is zero-day. What has been the impact of that introduction of those assets? um i mean the more the more the the more the merrier you know the more the better i mean

i don't know we shouldn't take full credit for this but they were our idea really and we introduced those to the cboe in 2006 and we introduced dailies and weeklies and they didn't have them and they started them in the spx and so we actually put the whole proposal in front of the CBOE back then and they adopted it. Wow. What do you think about people who say that the stock market is just a casino now and people are just gambling? Yeah, it's ridiculous. Yeah, I think so because the difference is that gambling has an embedded negative edge and the stock market doesn't. So the challenge here is that in the stock market right now, you can trade, let's say using the SPY ETF as an example, you trade 200 shares of SPY, it's $100,000, right? A little

over $110,000, $116,000, 200 shares of SPY. And the market's a penny wide. So basically for $2, you can buy or sell $116,000 worth of Notional in the S&P 500. How's that gambling? In gambling, you did $116,000 notional at Caesars Palace, give them extra 10,000 or more, 11,600 or whatever you want to say, but give them that. That's the juice, the vig that they're going to take off the top. That's gambling when you can't possibly win because you can't make that back. It's mathematically impossible to make back that negative edge because after you lose a couple times, you've got to essentially win twice as many times. In the stock market, everything is without mechanics everything is relatively close to a zero-sum game and as you see many of

these assets and kind of investors you know kind of uh learning about this stuff how much of your trading is just you sit in front of a screen you can look at a chart you know steve cohen's like famous for this uh he can just look at the chart start trading he didn't even need to know what it necessarily is versus are you reading uh mainstream media are you consuming other content but like how you deciding what to do well i love i don't really consume other content at all but we have all our own content so i love to fade our own hosts like i i love to fade our own hosts our own guys on on on our own network because if if any of them have a macro idea i'll take i'll do the actual opposite i think that's the best thing why but just because i know they're probably going to be wrong um but

we we is that just because everyone is usually wrong when talking about macro everyone's usually wrong about everything they want if they think if people are really sure that they know something like if you said to me tom i it's tuesday so there's no games tonight but if you said to me like last night i really love the dolphins you know i said fine i'll take tennessee you know that's just the way my mind works um but i don't look at charts so but i do follow a lot of stocks and a lot of commodities and so um you know i have my own opinions about price extreme both ways to something gets too cheap. Something gets too expensive. I have my own idea. And is that just gut intuition? Yeah. And it's just dialed in over 40 plus years of just looking

at these charts and understanding prices and well, just looking at the prices of these assets and understanding, Hey, NVIDIA has been trading in a certain range. And is that towards the bottom of the range right now? And so it's a buy versus, you know, tomorrow. I'll tell you a funny story when we built Thinkorswim because you use Thinkorswim when we built Thinkorswim, you said were in college, right? So we came off the trading floor. We had never used a chart ever. So we built Tinkerson. We didn't build charts. And we launched the platform without charts. And people were like, what the F is wrong with you guys? How do you launch a brokerage platform without charts? Everybody uses charts. We're like, they do? Because I had never seen anybody use charts.

Spent 20 years in the business and never saw a person use charts. So we're like, really? So let's get some charts. So the guy you were watching when you said to me, this is your network. His name is Tim Knight. He built a company called Profit Charts. I met Tim in 1999, and he was one of the first entrepreneurs in Palo Alto. And he built this platform called Profit Charts. I called him up.

I didn't know him. I called him up and said, hey, can we, you built yours in Java. We're a Java platform. Can we embed ours, your charts in our platform? Because we needed some time to build a charting platform. He goes, sure, I'll lease it to you. So he leased it to us. And that's how we became friends 25 years ago.

But we had no idea. We built the whole platform without charts. That's incredible. Anybody use charts? Are there charts in Tasty now? There are reluctantly because we want people to use numbers. Like charts don't mean anything. There is, and I'm going to get a lot of shit for this.

I'm sure from your listeners, but there is no proof that you can look at a chart and something that happened historically has anything to do with what's going to happen in the future. So what are you looking at then? When I look at price? Yeah. Oh, it's just, you know, I'm just thinking, hey, this thing was $100 two days ago and now it's $80. Maybe it's cheap. So let's use that example.

How do you know it's not going to $70 or $60 or $50? You don't. Okay. So you just buy and close your eyes? Well, we don't really buy anything. We'll sell it out of the money put. So, you know, I'm an option trader more than I'm a stock buyer. But don't get me wrong.

I do buy stocks. But I would sell the put. And so you're basically saying, hey, with that gut feel and the instrument that you're using, you've got a higher probability of winning than not. Sure. Okay. Exactly. What's the best trade that you've ever made? He's like, selling my company in a TD Ameritrade at 12 bucks?

No. It might be. No. No, no. that's there there's a lot of not company-wise yeah um the best trade ever um well i have a best story about a trade okay okay you're probably how old are you 36. you're too young um you remember desert storm yeah well i know what it is yeah right right so there was a kid that used to um clerk in the ox pit which was the s p 100 at the time and he always wanted to be a cameraman