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How much is the Nike logo worth? This may seem like a facetious question but it’s not. That famous tick is known all over the world. To see it is to immediately think of some type of sporting activity. For many it’s probably a sign of reliability and quality. So how do you put a price on that?
Well, after writing that first paragraph, I went to Wikipedia and apparently the Nike swoosh is the most valuable logo in the world at $26bn. The source of this valuation appears to be a clickbait Forbes article, so it may be a dubious claim. Nonetheless, it highlights the fact that stuff which is hard to quantify can be worth a lot of money.
And that brings us to a much beloved options trader called Tom Sosnoff. Readers may know Sosnoff as the founder of tastytrade – the US options broker that IG acquired a couple of years ago.
The interesting thing about tastytrade is that it was founded as a media platform in 2011 and it wasn’t until 2017 that the brokerage arm was launched. So basically they did well making trading content and then realised, ‘hey, loads of potential customers are watching this, let’s make a broker and then we get more money’ – a smart move.
But the thing about media is that people tend to gravitate towards certain personalities. For example, Janan Ganesh at the FT seems to get a lot of clicks. People like watching a number of right wing pundits DESTROY their lefty enemies with FACTS and LOGIC. Presumably there is a Guardian equivalent of this as well.
The point is that people tend to enjoy consuming a media personality, as much as they enjoy the media they create. I for one like it when they confirm what I already think as it makes me feel better about myself.
The result of this is that you can end up with an individual that drives a large amount of your traffic and thus advertising revenue. In the case of tastytrade this would be leads and/or clients that sign up to the brokerage arm of the company.
If you look at tastytrade’s output, a lot of it is basically built around Sosnoff’s personality. He’s even in the thumbnail of loads of videos that he doesn’t appear in. There are probably a sizeable number of options trading dorks that would immediately think of him if you showed them a grey beret with some cherries on it (but definitely not me).
Even when tastytrade held an event in London, all the marketing around it was focused on Sosnoff. From pictures it seems like they got a full house – and the venue was a big one.
Which then leads IG into an interesting position. If we assume Sosnoff left the company, what would happen to their traffic? And if he then just set up another media company, he is also probably mates with all the other hosts that he seems to have some bants with. Maybe they would all go with him as well.
Then what happens?
To launch options trading or to not launch options trading?
One of the things we’ve spoken about here before a lot is the idea that most of the big players in the industry are moving into adding listed derivatives. This is mainly a US phenomenon but there are plans to expand it into other jurisdictions.
If you look at IG’s annual report, they now have tastytrade entities in Canada, Australia, and Singapore. So presumably the plan is to launch options trading in those places at some point.
This raises a couple of interesting questions. One is whether this should be a tastytrade launch or integrated into IG’s existing offering.
On the one hand they have different offerings. On the other it’s weird to compete against yourself. This feels like the kind of thing you could probably figure out in 10 minutes but that IG will pay some branding agency millions of pounds to do for them.
The other question is whether this is actually a good idea in general. Options are not as big a money maker as CFDs and never will be. That is the reality. If you are selling them to people that would otherwise use CFDs, that would hit your bottom line.
However, you have another angle to this, which is that there may be a sizeable number of people that want to trade futures and/or options but will never touch CFDs. Based on anecdotes I think this could be true but I don’t know if it is in reality.
The other question is then whether you could switch clients over. So if someone trades options with you, perhaps they will see that trading CFDs is a better option or the only option in some instances. For example, trading long or short UK small caps using spread bets or CFDs is probably going to be your only option (no pun intended) and would be a superior product in my view.
There is another interesting marketing angle as well, which is that these are not subject to the same restrictions that CFDs are. If you look at tastytrade’s website, it looks a lot like a pre-2018 broker – no risk warnings and you can get a deposit bonus.
People in the UK will have long been subject to the regulatory side step that companies use when they market their equities ‘investing’ services to clients, which aren’t required to have risk warnings on them.
Futures and options are arguably more interesting in this regard. Firstly, they are more profitable in and of themselves, so it is good to market them. Secondly, there is more of a crossover between them and CFDs. Someone that wants to speculate already using futures/options seems more likely to be interested in switching to CFDs compared to someone that has signed up to buy stocks.
So what will happen? I don’t know. I guess we’ll wait until the marketing agency has their invoice paid and we get to see it all in real time.