Online trading platform apps have been bringing a new generation of investors to the stock market. Thanks to apps like Robinhood and All of Us Financial, the casual investor is no longer forced to use bank-run brokerage firms.
But after the controversy that stemmed from Robinhood’s management of the Reddit-fueled GameStop stock surge, the market is opening up for new apps to manage trades.
One of those is Gatsby, an app focused specifically on options trading. It’s an example of how the online trading ecosystem is changing, becoming not only more competitive, but also broader in scope.
Apps are branching into more than just stock trading
Apps like Gatsby focus on options trading, which is a form of trading in which users reserve the right to purchase stock in the future. The purchasing decision is based on whether or not you believe that the stock price will increase or decrease, also known as the call or put.
When you purchase the option, you dictate the price at which the stock will be bought when said option expires.
So if you buy an option with the bid set at $100 and the stock is sitting at $110 when it expires, you earn the net difference. The price of the option itself varies based on the terms of the option and is typically less than the value of the stock itself.
This is the allure of buying options: with the same dollar amount, you can potentially increase the net gain of your investment.
Options trading is a risky, long-term investment strategy that is often overlooked by amateur investors. What Gatsby is doing is removing the barrier to entry for options trading with their simplified version of the practice. The app allows users to simply purchase the put or the call and wait for the terms of the option to expire.
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Online investors are looking for a combination of community and gamification
As the GameStop rally showed, when trading is combined with a robust online community and the allure of gamification, online traders–even people who’ve never considered trading before–respond en masse.
This is something that the creators of Gatsby and other recent trading apps have taken to heart.
In Gatsby’s case, the simplified investing model it offers is enhanced by the way it brings gamification to the stock market. The online community Gatsby cultivates allows users to collaborate on tracking trends in the stock market and make bets on puts or calls accordingly. As we have seen with the way the Reddit community banded together to purchase GameStop, AMC, and Nokia stocks, this is a factor that could reap huge rewards for a cohesive community of investors.
In addition to offering users the ability to come together to share their speculations, which has the potential to pay off in major ways for them, Gatsby further incentivizes its platform with a combination of taking no commissions or contract fees and offering rewards for purchasing options.
Online traders want more than just another way to do what Wall Street does
As the hype surrounding Robinhood turns to disillusionment, casual investors are looking for alternatives. This fall from grace is not only due to Robinhood’s handling of the GameStop surge met with severe criticism and a class-action lawsuit, but a deceptive business model.
Forbes previously reported that “Robinhood was designed to profit by selling its customers’ trading data to the very sharks on Wall Street who have spent decades–and made billions–outmaneuvering investors.”
The new generation of trading apps is taking that disillusionment to heart, focusing on offering users an alternative that they can trust. Gatsby, for example, exclusively deals with its users in the cash gained from stock transactions, eliminating the need for a traditional brokerage firm in options trading. By doing so, Gatsby can make a profit without selling data to Wall Street.
The high-risk, high-reward world of options trading is opening to a new generation of investors, signaling yet another significant evolution in the democratization of the stock market. As consumers continue to make their demands clear, I think we’ll continue to see new apps emerge that are more committed to their customers than to the big banks and Wall Street traders that have monopolized the market for so long.