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Sosnoff Says | Robinhood Syndrome

Sosnoff Says

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Just so there’s no confusion at all, I am not endorsing a competitor’s platform or another brokerage business with this Sosnoff Says. I’m a homer and a fierce competitor, that will never change. I am all in on tastytrade and tastyworks which I believe is hands-down the best eco-system of financial service companies in the world. However, I continue to find the Robinhood story fascinating. Financial media and the rest of the industry seem to want to see Robinhood fail and I don’t get it. Everyone seems to relish in talk of the company being a train wreck. I wish I owned a $8.6B train wreck! But make no doubt about it, Robinhood is a legit outlier and a success story of incredible proportions. Between thinkorswim and tastyworks we have built some amazing brokerage businesses in the last two decades but Robinhood, they’ve changed the industry in ways we dreamed about but couldn’t make happen ourselves. I don’t think I’ve ever seen a company in the financial service space engage an entire generation and do so in the face of massive amounts of bad press, bad technical issues and losing a 1/3 of their revenue as interest rates dropped to zero. Robinhood has involved a generation in a way I thought was doable but just couldn’t figure out how to get it done. Here’s the bottom line, there are 15 million more people interested in finance and trading today because of them and that’s amazing. More importantly, it’s time to stop the ridiculous nonsense about the dangers of investing and trading and not knowing what you’re doing. That’s total bullshit spewed by clueless and jealous financial media editors and supported by conflicted legacy competitors who remain living in the dark ages. First, nobody knows what the markets are going to do next so enough with the ‘expert knows best’ garbage. And second, everyone starts out the same way. Robinhood gets crap for encouraging people to throw spaghetti against the wall and see what sticks. Before you think that’s crazy, how do you think every one of us got started? The exact same way only we paid ridiculously high commissions for the privilege of being able to play the game and lose (or make) our money. I had no clue what I was doing in 1980 when I started trading and I was doing the same thing the kids are doing today trading on Robinhood. Experimenting. Except in 1980, all my money went to the brokerage firm. And look around the industry, it’s not just the people running tastyworks who started out that way, it’s also the people running TDA, Citadel, Peak 6, IB, Susquehanna, Simplex, Wolverine and every major prop and HFT firm in America. Let’s face it, every game changer, disrupter and outlier has to rattle a few cages along the way. Some stories are not going to be pretty but in the end, this industry needed a jump start. We were missing a generation. Learning about markets, trading and taking risk has so many benefits it’s highly likely that the next generation of superstar entrepreneurs just made their first stock trade on Robinhood or lost money on their first speculative option trade. Who the f*** cares? I made money on my first option trade and then lost all my money, all $2000, on my next ten trades. Nobody thought Drexel Burnham was being careless nor did they care they were charging me $25 per contract in commissions. In fact, every amazing talent in the world of finance today, probably started out the same way. Experimenting. It’s perfectly fine to learn finance by doing. It’s perfectly fine to play the game. It’s perfectly fine to make or lose money. It’s perfectly fine to play the markets as opposed to video games. It’s perfectly fine to learn to take risk. And it’s perfectly fine to credit Robinhood for being able to create something other firms have spent billions of advertising dollars trying to figure out. I tip my cap to them and I think it’s great for the business in general. Personally, I will watch tastytrade and always use the amazing tastyworks HFT software for trading. The Robinhood app is simple, basic and seemingly way behind from a logic and usability standpoint for most traders but that’s not the point. A new universe of traders and investors has been released and that’s one of the best things to happen to finance in decades. We’re never going backwards again.

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