Tom Sosnoff

Tom Sosnoff (born March 6, 1957) is an entrepreneur, options trader, co-founder of Thinkorswim[1] and tastytrade, and founder of Dough, Inc. He was Senior Vice President of Trading and Strategic Initiatives at TD Ameritrade.[2][3][4][5] Sosnoff promotes option trading as an important financial strategy for the individual investor. He has promoted this view by founding an online financial network, tastytrade, and by developing software products to support individual investor options trading.

Tom Sosnoff
Born (1957-03-06) March 6, 1957
New York City, New York
NationalityAmerican
FieldFinance
Options trading
Entrepreneurship
Alma materUniversity at Albany, SUNY
Websitewww.tastytrade.com/tt/

Early life and education

Sosnoff, a native New Yorker,[6] got his first job as a caddie at the age of 13.[7] In 1979, Sosnoff received a BA degree in political science from University at Albany, SUNY and immediately began working for Drexel Burnham Lambert.[2][7]

Career

Starting in the early 1980s, Sosnoff, through the Sosnoff Sheridan Group, was a lead market maker at the Chicago Board Options Exchange. By 1999, Sosnoff believed that option trading would largely move online and that individual investors would become interested in trading options if they had the software tools to do so. This led to his co-founding of Thinkorswim in 1999.[8][9] In 2009, Thinkorswim was sold to TD Ameritrade for approximately $606 million[5] and Sosnoff personally received $84 million.[4] In 2011, Sosnoff announced that $20 million in venture capital had been raised to support his idea for a financial network called tastytrade.[5] His aim in founding tastytrade was to create a financial news show focusing on options, which mixes content with comedy somewhat like the "Daily Show".[6][9][10][11] In 2014, a Silicon Valley venture fund, Technology Crossover Ventures, invested $25 million into Dough Inc.,[12] also founded by Sosnoff, which includes tastytrade.[13][14] In 2014, Sosnoff was co-winner of the EY Entrepreneur of the Year Midwest Award.[15][16]

Options trading

Sosnoff advocates options trading as a viable long-term financial strategy for individual investors. He argues against financial experts who claim that options trading is too risky for individual investors. According to Sosnoff, the use of call options and put options can reduce the risk of owning stocks, and options trading is a portfolio management strategy that is well-suited for the individual investor. He devotes considerable time on his financial network, tastytrade, and in seminars demonstrating the mechanics and strategies of options trading.[3][6][17][18]

According to Sosnoff, the two main keys to successful options trading are the market liquidity of options and understanding volatility and, in particular, implied volatility and implied volatility rank. Options trading can be successful in liquid underlyings, when volatility is properly assessed, and options strategies appropriate to an individual investor's risk and financial resources are used. For example, for an investor with a sufficiently large margin account, with stocks with liquid options and high implied volatility rank, selling a straddle or strangle might be a viable strategy. Similarly, for an investor with a smaller margin account, selling an iron condor or iron butterfly (iron fly) might be more appropriate. When implied volatility is low, a calendar spread might be a better option.[6][17][18]

Sosnoff argues that, while liquidity, implied volatility, and implied volatility rank are crucial to successful options trading, there are other key elements. It is important to trade small, by which he means that individual investors should invest only a small percentage of their portfolio in any given stock, options, or futures position (e.g., selling only one or a few option contracts).[9] By investing in many small positions, losses can be minimized, as long as positions are uncorrelated.[6][17][18]

While liquidity, understanding volatility, trading small in uncorrelated positions, market awareness, and delta neutral portfolios are essential for successful trading, according to Sosnoff, trading mechanics are also essential. Trading mechanics are heuristics that an option trader learns when applying option strategies. For example, rules of thumb for when to roll call and put option contracts as a function of time to expiration and moneyness of a position are examples of trading mechanics (heuristics).[6][17][18]

In Sosnoff's view, the introduction of electronic trading platforms created new investment opportunities for individual investors, but the software tools required to take full advantage of online trading are lacking. He views the continued development of options trading software as critical for individual investor success. For individual investors to be successful, they need graphical user interfaces that instantly bring together relevant information so that investors can use the best strategies and mechanics for options trading. To this end, Sosnoff has devoted considerable effort to the development of software platforms for the individual options investor.[6][8][17][18][19]

References
  1. Roeder, Davis (September 26, 2006). "INVESTools to buy thinkorswim for $350 million in cash, stock". Chicago Sun-Times. Archived from the original on April 17, 2016. Retrieved June 11, 2015 – via HighBeam Research.
  2. "Executive Profile: Tom Sosnoff". Bloomberg Business. Retrieved 25 April 2015.
  3. Fink, Jim (May 28, 2010). "My Evening With Options Trader and Entrepreneur Tom Sosnoff". Investing Daily. Retrieved 25 April 2015.
  4. Marek, Lynne (July 16, 2011). "Thinkorswim's Tom Sosnoff dives into the talk show pool". Crain's Chicago Business. Retrieved 25 April 2015.
  5. Needleman, Sarah E. (July 6, 2011). "Online Financial Talk Show Tastytrade Piles $20M On Its Plate". The Wall Street Journal. Retrieved 25 April 2015.
  6. Cohen, Deborah L. (October 28, 2010). "Tom Sosnoff Wants To Produce A 'Daily Show' For Investors With Tastytrade". Reuters. Retrieved 25 April 2015.
  7. Fox, Bud (March 22, 2010). "Interview With Thinkorswim's Tom Sosnoff". Benzinga. Retrieved 25 April 2015.
  8. "Chicago Tribune Business Finance Notebook Column". Chicago Tribune. December 23, 2001. Archived from the original on April 18, 2016. Retrieved April 25, 2015 – via HighBeam Research.
  9. Daleela, Farina (November 8, 2009). "Tom Sosnoff: A Q&A with the $600 million man behind Thinkorswim". Daily Finance. Archived from the original on 12 November 2009. Retrieved 25 April 2015.
  10. Pletz, John (November 9, 2013). "Dough's big-name backers aim to woo millennials into options". Crain's Chicago Business. Retrieved 25 April 2015.
  11. Samuelson, Kristin (July 2, 2011). "What I'm buying: Tom Sosnoff". Chicago Tribune. Retrieved 25 April 2015.
  12. Stack, Caroline (February 2, 2014). "How Tom Sosnoff's team is taking dough.com to 1 million users in just two years". Built in Chicago. Retrieved 18 June 2015.
  13. Pletz, John (July 18, 2014). "Sosnoff, Ross get $25 million to make Dough rise". Crain's Chicago Business. Retrieved 25 April 2015.
  14. Kutler, Jeffrey (February 14, 2012). "Trading Technology 30: Tom Sosnoff". Institutional Investor. Retrieved 11 June 2015.
  15. "EY Entrepreneur Of The Year™ 2014 Midwest Awards". Smart Business Network. June 30, 2014. Retrieved 18 June 2015.
  16. Kacsmar, Mike (January 16, 2015). "Informed Trading For Traders, By Traders". Forbes. Retrieved 25 April 2015.
  17. Sears, Steven M. (September 20, 2014). "Five Questions You Must Consider". Barron's. Retrieved 25 April 2015.
  18. Rudolf, Sarah (July 27, 2011). "Five Minutes with Tom Sosnoff". John Lothian News. Retrieved 18 June 2015.
  19. "Future of Banking and Investing". C-Span. October 16, 2013. Retrieved 18 June 2015.
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