Good morning and welcome to HOOD Summit 2026. We're excited to have you here with us today. The opening session will begin in 10 minutes. Now would be a good time to take a seat. Please welcome to the stage Robinhood Chairman and CEO, Vlad Tenev, and Chief Brokerage Officer, Steve Quirk.
What's up, everyone? How's everyone doing? Well, thank you for rising early with us. I know it's a little bit-
Has the coffee kicked in yet?
Yeah, there we go. Good.
Who was up all night trading?
I think there's a coffee station out there, isn't there?
How are you doing?
I am doing well. Yeah. It was really fun with the presentation yesterday, but it was very fun talking to everybody afterwards. It is always fun to hear what is resonating and how you are going to use it. A lot of people were talking to me about what they are going to use and what they are excited about. So that was really fun.
What did you hear? What was your favorite?
I have heard a lot about the hours. A lot of people are excited about having the ability to be able to trade when things are happening, because so much is happening. I do not know if you guys saw this, about five years ago, they did this study about the market's performance if I just traded in the day and bought, and if I bought after the market closed. It was, the market significantly outperformed if I traded in that period and invested in that period.
All the gains and the big moves happen overnight.
Yeah. It was kind of cool. It's just something that's really interesting.
I'll tell you my least favorite part of HOOD Summit so far, because it's been generally good, but there's been one part that's left me very unhappy, which is because we have so many people, it's over 1,500, our biggest yet, I wasn't able to get through the entire selfie line. I apologize in advance if you see me shuffling around to places. They've told me that if I had to take a selfie with everyone and their significant other, it would take me 72 hours. Which is amazing. I remember when this was a little intimate thing, and the first HOOD Summit in Miami was-
Yeah
a couple hundred people.
But you know what's really cool? I probably met 50 people who have been at every one of them-
Yeah
yesterday, which is really cool. It's really fun.
Yeah. I had a conversation at the Saturn V rocket last night with a few of the customers, and, by the way, the Saturn V rocket, did you guys see that last night?
Yeah.
That was just an unbelievable piece of engineering. It made me very proud to be an American. And also realizing that that was built in the '60s.
I know, it's crazy.
We've got a lot of work to do to catch up to that. This customer came up to me, and they were like, "I hear you talk about ownership, but really, what I love is agency." The thing that I appreciate most about traders is we all believe that you should be able to do whatever you want with your money. Nobody should be telling you, "Don't do this with your money." Our job, as creators of this platform, is to make sure you have the best tools and capabilities possible. Some of my favorites, every time we launch a new asset class that you can't trade anywhere else, like the first true perps
Yep
that have come in the U.S., the first predictions for earnings. Robinhood will be the first place where you can trade regulated KPIs for earnings, which open up a new class of strategies.
Yep.
Then you have 24/7, which again, you'll be the first people in the U.S. to trade stocks on Saturdays.
That's another big thing. Not to mention the Robinhood Agents, which will allow you to trade while you're sleeping. I think that I'm most excited about seeing what people can do with all these new tools and all the new opportunities that you're going to uncover.
And then the one thing that you did not mention, which actually connects all of them, is social. Because part of what makes this such a great event is not only you listening to us, and by the way, we are you. I have been a trader for, I do not want to say how many years, but it is a lot. I was on a trading floor during the 1987 crash, so it has been a while. So, I think like you think. That is what I strive to do, is make sure that you get access to everything that professional traders have had for years. But I also think it is equally as important that you learn from each other, and the best way to do that is by giving you tools like social so that you can collaborate with each other. And if there is best practices, this is not a zero-sum game.
You can all be winning, and this scary market loses. So I think that social is going to be really powerful for people, particularly if I am newer to the market, because there is a learning curve, so you need to catch up and figure out how to navigate markets, particularly volatile ones. And I think social is going to be really powerful there.
It reminds me, I had a couple people come up to me and say, "This is a great event. It felt like you invited a bunch of your friends over.
We are all your friends.
Were some of those friends out late in your living room?
I think they were up late trading. Or enjoying that giant Rocket Lab, which I was happy that I got to spend time seeing that. Yeah, I think that the best value at this event, which I encourage people to keep trying to capture, is making introductions with each other. I know a lot of people are still in WhatsApp groups and Signal groups from prior years. We are trying to make it easy and conducive to create real relationships, because this is not a typical business networking conference. You are all here because you want to be here. This is a great opportunity to find others that care about trading and markets and learning just as much as yourselves.
Yeah. I think there are all kinds of sessions, and Obi is going to come out in a minute and walk you through everything that is going to happen over the course of the day. Before we do that, I think we want to thank some of our sponsors and, of course, thank you for all being here. A lot of you have made trips from. That is the first question I always ask when I meet everybody is, "Where did you come in from?" Man, it is all over the place. It is kind of cool. The sponsors we want to thank, as you can see up here, the Cboe, CME Group, NASDAQ, State Street, AWS, iShares, Direxion, Sage, TipRanks, VanEck, and Roundhill, are all out there, and they all have booths.
Some of them were. I could not believe how long the lines were to get to some of those sponsors yesterday. It was kind of exciting. I did not know what they were giving away, but I wanted to get in line.
No, these guys, they've been really amazing, and we partner with them on all kinds of products.
A lot of the products we announced yesterday were really made possible with partnership by these sponsors. A lot of what we're doing here is we're not just bringing people together, but we're building infrastructure for what trading looks like in the future. I think that involves companies big and small. I think increasingly, Robinhood is a part of global trading infrastructure in a way that we weren't maybe five years ago.
Nexus. We're the nexus.
Yes.
One other thing I would say, what I love is when people say, "I love all these things you're doing. This is so helpful." What I would like to see, because we get a lot of great ideas from you. You're the people that are the ones that are oftentimes telling us, "Hey, if I had the ability to do XYZ in addition to this, it would be really powerful." Those are great things for us to hear, and you could tell any one of us. Abhishek's right over there. I'll give you his cell phone. Call him 24/7.
I've been pointing people to you.
Oh.
I had someone come up with very explicit futures trading feedback and-
Okay
I was like, "You know who you should talk to?" And they said, "I know you're going to point me to Q.
Yeah. Yeah.
He's right there.
I like it, by the way. I love it. Please, I want to hear from you. We all do.
He was trading futures backstage.
I was. That's where we get a lot of our good ideas. With that, I think we're going to bring out Obi, who is our emcee for the day. I think we're going to bring out Obi.
Hey. Thank you, guys. Welcome to day 2. Enjoy it.
See you.
Obi.
Thanks, Q.
By the way, he's a big White Sox fan.
Thanks, Vlad.
He's kind of excited.
It was a good day yesterday. It was a good day. Thanks, guys. Thanks, Vlad. Thanks, Q. Good morning, everyone. How are we doing?
Good.
You can do better than that. How are we doing? There we go. I know you guys had some fun last night. I'm Michael Obucina. I'm better known as Obi.
Oh. All right. Thank you.
I am the head of education here at Robinhood, and I will be your emcee and master of ceremonies here on the main stage today. You will see me throughout the day keeping things moving, making sure you know what is happening across Summit, and trust me, there is a lot happening, so make sure you know that schedule. For those watching online at the main stage live stream, we will stay up during breaks, so if you need to step away, grab some coffee, come back, set an alarm. We will keep that live stream link running all day on YouTube, popping in and out as you are able to. All right. Let us walk through the day starting right here on main stage. We are going to kick things off here in a moment with a live edition of the RiskReversal podcast.
They will be discussing the state of the markets, everything from the AI trade in the midterms to other forces shaping markets into year-end. These guys are my favorite. They are fantastic. Then we are going to get hands-on with those new agents that we saw last night in the keynote, Robinhood's VP of Product, Abhishek, who was sitting about right here last night. We are going to work with professional trader Kris Abdelmessih, and two of our app store partners, SpotGamma and Quiver Quantitative. They are going to be going through some examples of building some options trades using agents. It is going to be really cool. Then we take a short break at 9:45 A.M., and at 10:00 A.M., that is when all the other stages open, podcasts and the trading lab, which I know a lot of you experienced yesterday.
Then when we return, Guy Adami is going to sit down with State Street's Matt Bartolini for an ETF State of the Union. Then Q will make his way back on the stage with the CEO of Bruce Markets to take us behind the scenes of the 24/7 trading infrastructure that was also announced last night. Last but not least, before lunch, our friend Kevin Avery from Chat With Traders, a very popular trading podcast, is going to sit down with Geneva Trading CEO, Rob Creamer, CME Group's Craig Bewick, and I will be on that panel as well, and we are going to follow a futures trade from your screen to the exchange to the market maker on the other side. It is going to be a really fun conversation.
Then we break for lunch, but please don't even think about leaving early because we've stacked some of our best sessions in the afternoon. Starting on the other side of lunch at 1:00, we're going to do a session on the midterms using the prediction markets hub, and we'll be joined by a former presidential campaign manager, a leading pollster, and our friend Danny Moses to build a trading plan for the 2026 midterms. Robinhood Ventures, if you guys have heard of that, we're going to have a panel with. Does anyone know Cathie Wood?
Yeah.
Ooh, that's right. Cathie's going to be here, joined by our very own CFO, Shiv Verma, and head of Robinhood Ventures, Sarah Pinto, and they'll be moderated by our good friend Dan Nathan, who you're about to see on stage. This might be one of my favorite sessions of the day, we turn inward to The Mental Gam e of Trading. Jared Tendler, who's a mental game coach, is going to go inside the mistakes that our brains somehow convince us to make when we're in the middle of a trade and like, "Oh, this is a good idea." We're going to have a little session on how to improve our mental approach to trading, so please stick around for that. I've seen the rehearsals. I've worked with Jared on this. It's going to be a lot of fun.
Then we wrap the day and summit with my favorite tradition for HOOD Summit, and this is Lessons From a Legend. We've done this every year. This year, Cboe's JJ Kinahan sits down with a true professional and legend of the retail trading world, Tom Sosnoff. Has anyone heard of Tom?
Yeah.
Yeah. He's well known in the industry. I've actually started my career working for Tom, so we're happy to have him here. Then to close things out, we're going to bring Vlad and Q back on at the end of the day, wrap it up, and send you guys to happy hour. So that's it for the main stage. Fully packed day. But as you guys experienced yesterday, we've got the trading lab all the way on the other side of the convention center. It's smaller, more intimate, built around more hands-on live trading workshops. We're going to have sessions on options, technical analysis. We're going to explore futures trading, and then you may want to sneak early for this one. The guys that are coming on stage here, the famous big short traders, they're going to do a master class on how to trade from the short side.
And then, of course, schedule-wise, the trading lab starts every hour on the hour, starting at 10:00 A.M. and finishing at 2:00. Seats are limited, so if there's a session you want to be there and be involved with, get there early, get a good seat. Then don't forget the podcast stage. All day long, we've got live conversations with traders, industry leaders across markets, AI, options, futures, crypto, technology. There's a lot going on, and if you're torn between what you want to see, don't worry. Everything's getting recorded, so if there's something that, "Eh, you know what? I can't decide," pick the one that you want to be involved in because we built Q&A into every one of these sessions. You'll see mics here. You'll see mics over in the other stages. Get involved. Ask questions.
Don't be afraid to get up, because we want you guys to learn from these experts, and there's no better way than asking them right in front of them. Then, of course, besides the stages, you guys have already experienced this yesterday, but we've got Braindate. We've got the Robinhood NASCAR out there. Take a picture, and then rest your feet, get some coffee, hang out in our sponsor lounges. Don't forget lunch is at noon. Happy hour starts at 4:30. So my wish and my hope is that you guys get out there, ask questions, meet somebody new, make the most of your day, because this is jam-packed with trading education, community, and of course, we like to have a little fun. So once again, are we ready to go?
Yeah.
All right. Fantastic. There's really only one way to start a day like this, and we got to talk markets. So please welcome to the stage Robinhood's Chief Investment Officer, Steph Guild, famed Big Short investors and founders of Seawolf Capital, Vincent Daniel and Porter Collins, and your friends and mine, co-founders of RiskReversal Media and co-hosts of CNBC's "Fast Money," Dan Nathan and Guy Adami. This is RiskReversal live at HOOD Summit. Let's give them a hand.
Good morning, people. Hey, Obi, don't leave yet. Just wait one sec. A round of applause for Mike Olbichin. I mean, unbelievable. Put this together.
Obi.
And his team. You're going to see a lot of Obi. Obi is the man. We love him. Thanks for having us here, folks. We're excited, clearly. I'm energized. I was here last night. I did not get a seat. I sat in the back. It was full, and that's a tribute to all of you. There was a saying at Goldman Sachs when we tried to put on trades, "Take a partner," and that basically meant, if you have an idea about something, bounce it off somebody else and let them sort of look at it and see it through a lens that maybe you didn't look at it through, and that really helps.
If you think about the community you've built here at Robinhood, you can do that in a material way, and given what I saw last night, it's going to make it a lot easier. Without further ado, I have an amazing panel here. You will notice Danny Moses is not here. He didn't want to sit next to Vinnie. He said it's too much. You'll see Danny later. But the Porter and the Vinnie are here, along with my dear friend Stephanie Guild, and obviously Dan Nathan. Steph, I'm going to start with you. Obviously, the topics are energy, the topics are interest rates, and the topics are AI. That's what's dominating. But there are other things going on. If you're looking across the spectrum, and you do amazing work by the way, you're really fortunate to have Steph Guild here at Robinhood.
What sort of stands out to you over the last few weeks?
I think obviously the things you said, and the things that worry me about it is just the trickle effect from the higher costs, and what that does to the consumer, what that does to the cost for businesses to run themselves. I also think that you're kind of seeing it play out in the markets where there used to be much more breadth, and now the breadth has come in where it's concentrated in the kind of largest names. That's probably how it's playing into the largest names are not being as impacted by it more recently. Actually, there's something I was thinking about with it, which is, it used to be that if you worried about growth, you could just go buy the largest tech companies and kind of hide out in there.
I'm not sure that's actually where you should hide out anymore, but I think that instinct or reflex still exists in the market, and that's maybe why you're seeing the Magnificent Seven catch up and there being much less breadth right now.
We play this. Any "Fast Money" fans out there? Don't lie if you're not, but if we make it to January 20 years. Anybody ever seen this show? Somebody please say. You can yell and scream. By the way, we have mics, so at the end of this session, to the extent you have questions, we're going to ask people to sort of go down either aisle. We'll leave some time for Q&A. But we play this game on "Fast Money." If I had told you six months ago the following would be happening, and Steph, I'm going to go back to you. Six months ago, I said to you, "Oil's going to be either side of $95. 10-year yield's going to be approaching 5.25%.
A war's going to be lasting for five or six months in the Middle East." Then I said, "Okay, given those things I said, where's the S&P?" I will tell you what I would have said, 6,500, if not lower. Yet here we are, couple percent from an all-time high. Does that surprise you in any way?
Can we add in the Fed's been hiking rates, too?
I'm going to add in, by the way, the Fed's been hiking rates. Thank you, Porter, for that.
Actually, my target was around 6,500, with give or take 100 points around that. I am actually really surprised that we've been able to bear through a war that hasn't ended, oil prices that are not going down, and rates that continue to go higher. Although the rates thing I'm not at all surprised about, because I feel like I've been saying that they should be higher for a while. One thing I think that's helping offset that is that we do actually have growth. It may be fueled by capital spending that could be at risk, but it is there, and that's the only thing I think that's been offsetting the higher rates.
Vinnie, nothing surprises you. I've been around you long enough. You're very measured. But again, all the things we talk about, to me, it is surprising the resilience of the market. Maybe it's against the backdrop of earnings growth, which is supporting, but the earnings growth is seemingly coming in a very specific area. Thoughts on that?
Few things. The market breadth right now is terrible, as we've discussed. Let's also keep in mind we're running 5% fiscal deficits. That creates revenue growth for somebody out there somewhere. Like you said, it's very concentrated. But how much longer, I always ask, can this last where we have such a bifurcated? The market breadth is horrific, and it can resolve itself one of two ways. It's either going to resolve itself where the cap-weighted names are going to come down, or the names that have gotten crushed. Take a gander, hopefully no one has been trading this, and if you're short it, great, but take a look at the stock McDonald's. Just look at the chart. It's horrible. I look at what's causing some of this market breadth, and I always go back to market structure. Think about everyone who works.
You get your W-2, right? You're usually saving money from that W-2. It's going to target-date funds, which are cap-weighted funds. There's a flow of money going into the market that just goes to 10 or 20 names. The rest of the names in the S&P, while they're getting some drips and drabs of money, they're not getting anywhere near the amount of money Apple's getting. You put a dollar in the market, what is it? 8% to 10%'s going to Apple, 8% to 10%'s going in Nvidia. This is just money you're getting every Friday from your salary straight to the market. It doesn't have a brain, doesn't know what it's buying, it's just structured to go there. I think the structure is holding up this market for the time being.
I'm going to put a pin in that, which is a phrase that I'm reticent to use, but I will this morning. I'm going to go to Porter real quick. You guys, when I say you guys, you and Vincent Daniel and Danny Moses, who is floating around, get labeled perma-bears, which is not true. You've both, all three of you, found opportunities in a lot of different things, extraordinary ones. Energy has been a place that you guys were early, and in our world, you were early and right. Typically, it's early and wrong. Still opportunities in energy here, regardless of what you think about the underlying commodity in crude oil?
Well, I think this war has forever changed the structure and dynamic of the energy market, right? I think that buyers of natural gas and crude and LNG are going to be very reticent to rely on the Middle East just because there's so much turmoil, right? That's just been the history of it. I think the structure of those markets are going to be changed for a long time. Hopefully the price of oil does come back down. I think the asymmetry in the energy trade was much better when everyone hated it and oil prices were very low. But I would point out that there hasn't really been much of any multiple expansion in the energy names. It's just been pure profit. Profits are up and people are discounting, obviously, the curve on the oil. I don't think there's a lot of expectations built in.
The average investor still probably doesn't own oil stocks. The index sure doesn't. I think it's 2% or 3% of the index as well. I think that a lot of these big energy names are great places to own for dividends and cash flows. So, yeah, I think it's a nice piece of people's portfolios.
Moves have been extraordinary. Some of the refining stocks are trading like biotech names.
Yep.
People look at that and say that's unsustainable, but if you think about the backdrop and the earnings growth, it all goes to the bottom line, seemingly despite the moves, there's still room in these things.
Well, this is one of the reasons we were so bullish on energy is that if you look at what happened to ESG, they were retiring all these refineries for a long time. Here, we're in the energy capital world here in Houston, and the world hated energy. Still does, right? They've been retiring refineries, and now in Russia, we're blowing up refineries, and there's been lots of fires, whether there's vandalism or whatever, in a lot of different refineries. Just the supply-demand, there's a lot of demand still. The supply is shrinking. That's why Marathon stock goes up every day, right? Probably one of the best-performing stocks in the market.
It's amazing. The three best things that happened to energy, in my opinion, over the last, let's call it five or six years, the prior administration, this is not political-
Yep
they were very clear about their want to sort of put the energy business into the ground. When front-month crude oil traded down to -$40 a barrel, that sort of was a wake-up call. What you just said, ESG, and all those things forced these companies to take a hard look at their businesses and sort of operate better. Steph, I know you do some work in the energy space. Is there an accuracy to that?
No, I think it's right. If you also think about, like you said, back in 2014 when oil prices dropped a ton, it was another wake-up call for energy companies. I think if you always take a bigger step back, I like investing in sectors that have been through it already and had to realize how to be efficient in a not great environment for them. That's why I think energy can do well going forward because the demand is still there, and they know how to run businesses without very much help or resources.
I've not forgotten about Dan Nathan. We started a company about six years ago. Any RiskReversal Media fans out there? You can raise your hand if there's got to be somebody. By the way, you right there, Junior, Amanda is doing great, by the way. If you see her, it's her birthday, so please wish her a happy birthday.
Well done.
Dan Nathan, I have gotten to sit next to on "Fast Money" for the last 17 or 18 years, and he is obviously not the voice of skepticism, but he is somebody that brings up things that a lot of the people out there do not really bring up. I will tell you, Dan brought up early and correctly what was going on in sort of these private equity names. Although they bounced, they are sort of back on a trajectory lower, and this has been a concern of yours now for a while. Obviously, not financials in a historical sense, but financials in the importance of what is going on in the world.
Yeah, I think Vinnie, Porter, Danny have been all over this. You guys have drawn correlations between the thing that everybody is talking about and what are some of the second derivative trades about that, and I have learned that cut from you guys. When you think about how this infrastructure build has been financed over the course of three or four years, I think it is very instructive to see who are some of the beneficiaries right out of the gate, right? Essentially, who are being dragged along, and we can do the industrial stuff at another point, but the financing of this is the most important point. You go back to, I do not know, 2019, 2021, when Microsoft, one of the best credits in the world, it has a better credit than the U.S. government, invested $13 billion into a startup, OpenAI.
They own 27% of that company. Just think about that, for that sort of investment. They could raise as much debt as they need to build out whatever they want to do, right? Some of the other companies that they were investing in were having a harder problem or a harder time doing that, but they were leveraging off of their investors and ability to do that. You take it a step further and you say, all right, Microsoft can use their cash flow, they can use their balance sheet, they can use their ability to raise debt. Where did some of the other folks have to get a bit more creative, right? They had to go into the private equity, private credit, really, space. Those guys get funded by a lot of the banks, insurance companies.
I mean, the list goes on and on. Here we are, three, four years into this. Microsoft's, the major hyperscalers, they have used a lot of their cash flow. They have levered their balance sheets, that sort of thing. Where do they go? They go from the guys who make fees, right, lending into this sort of stuff. That is where you get to these private equity, credit, whatever you want to call them, alternative lenders. They have traded really poorly. In many ways, I think they have been sort of the canary in the coal mine for how this trade might go. These are great companies, and I know you guys know this. Apollo and KKR and Blackstone, and the list goes on and on. The stocks trade like dog shit, okay? They just do not trade particularly well.
I don't know how you can look at the performance of those, look at all the exposure that they have, look down the chain of where they get their capital, how they get their returns, and say to yourself, "This is all going to go well in a straight line." Last thing I'll just say, a KKR strategist, it was in the Financial Times. I literally just read it 15 minutes ago. He's talking about concentration risk. He's talking about how basically the concentration in investment-grade debt in the U.S. for AI-related stuff is 6.3%. That is double the 30-year average of any one sector. That company, which has lots of, I guess, toes in the water all around this trade, are basically saying, or one part of that organization, be careful of concentration because if things go sideways, we're going to have some problems.
Vinnie, how important are interest rates in this whole thing? Porter correctly told me that the Fed is on this rate hike cycle, it appears, and whether you think it's a good thing or a bad thing, that is what's going on right now. Bond market is telling a story that the equity market either chooses not to listen to or just doesn't think it's a big deal right now.
Well, when I think about why rates are rising, and there's a lot of reasons, I just go with D, all of the above.
All of the above.
All of the above. Whether it's higher than expected inflation, a crowding out element that while the treasury needs to refinance a ton of paper, AI has a lot of debt requirements and requirements of debt issuance. You also have an interesting dynamic associated with who's buying treasuries, how levered they are, and as volatility increases, they need to degross. So that is happening as well. Every single reason you give me, it really doesn't matter. Higher rates really hurts markets at the end of the day. And of course, I forgot one of the biggest ones, which causes a lot of the inflation, which is this war. This war and the lack of supply of energy and oil and diesel, which finally funnels itself into the economy with higher costs, which requires higher inflation.
I say, well, in order for markets to really resolve itself, getting back to this market breadth and all the other stocks, the non-20 AI-related names that are going down, how in the world do they go up? You have to get rates down. But how do you do that? Well, the first thing you need to do is to end the war, and that would decline. Again, this is nonpartisan. I'm just using market-related stuff. I think we're probably done with rates being at 0% or 1%. We were talking about it in the back. That's kind of the anomaly. But if rates were to rally 50 basis points for the right reasons,
you can see some interesting things that happen in the market, but you need a catalyst. I don't think it's just going to happen just because it happens.
What is the catalyst, though? As you said, it's a war ending potentially, or it's a stock market that sort of rolls over in a meaningful way, and then maybe you do see a flight to quality in the form of the bond market, which is historically something that happens.
It's two ways. You end the war, and then we could have a disinflationary kind of mini boom. I don't think it'll last super long, but it'll last long enough to be a tradable event. Or you have the other way. The other way is what you said, which is rates eventually start biting into everything. Perhaps this AI CapEx boom by next year, the rate of change turns negative, and then all of a sudden, we're going to have a more recessionary environment that's pervasive in the economy. If that is the case, then you'll probably get rates lower because inflation will turn into disinflation and potentially deflation.
Porter, you guys obviously do a lot of work in a lot of different areas. Latin America is something that we talked about over the last couple of days. There's an election in Brazil on Sunday. The Brazil ETF, the EWZ, had a great move earlier in the year. It's backed off a little bit. Opportunities in Latin America if you're trading, if you're playing our home game here.
Well, Vinnie and I worry about everything. If I look around the U.S., there's not a ton of bright spots. I'm trying to look for idiosyncratic stories that go up. If I look at it from a macro perspective, go to Latin America, you've had a big shift in terms of regimes, Colombia, Brazil, Peru, that have all moved more conservative. What that basically means is liberalizing the economies, opening them up, allowing them to grow faster. They're called emerging markets, and usually emerging markets, people worry about them because they have more debt. They actually have less debt to GDP than the United States does, and that basically all these developed economies do. You have better growth. The earnings multiples are at least half of what you see in these markets. No one's really looking at them. They're very well-run companies.
We were talking earlier about companies or countries that have been through periods of long, hard times. This is case number one in Brazil or whatever, that interest rates are 14%. Imagine if the interest rates the Fed raised to 14%, I think times would be a little harder here. That's the way I look at opportunity. The election is this Sunday. If you see a move more conservative, Jair winning, I think that's really an opportunity to say, "Hey, growth is going to be a lot better. Inflation can come down and rates can come down, and you can have a good cycle." I think that we worry about rates going up here. In Brazil, I don't know. Where can rates go? 14% to 11%? That's a pretty big bull cycle that's going to occur there.
That is the stuff that we look for, sort of asymmetry. I think I would look at Sunday night's election and say, "Is this a tradable event?" That is what I would look for.
Vinnie, you are a master at finding names that nobody has ever really talked about or heard of until everybody is talking about and hearing about them. Are there any of those names out there now? If you want to go to Latin America, because there are a lot. You think about Brazil, resources, banks, minerals, the whole mining stocks. It runs sort of the gamut there.
I will give one name. You guys are very familiar with CME in terms of a name and a company. What if you can own the CME of Brazil?
It is B3. They are the Brazilian exchange. They kind of have a monopoly in many respects. EBITDA margins are 60%-70%, and stock trades at a fraction of the multiples that typical exchanges trade. If this election goes, the stock has done reasonably well. If the election goes well, we believe it will really pick up. So a name like B3, a name like XP that we recently bought, which is kind of like the Brazilian Charles Schwab. A lot of the things that people.
Not as good as Robinhood.
What?
Not as good as Robinhood, of course.
Correct.
The Brazilian Robinhood.
It is the Brazilian Robinhood. It is not as good as Robinhood. Indeed. It does not have the technology. To me, we are sort of buying the Brazilian equivalents of things in the United States that trade at much higher multiples.
Just out of curiosity, process for the people here, all traders, is it just rigor that gets you to these names? Is it just doing the work and natural curiosity? Because I'm sure a lot of people are saying, I say it, and I'm supposed to have done this for the last 40 years. How do people like Vinnie and Porter find these things?
Yeah. Well, first off, forgive me, Guy. Me and you have a lot of gray hair, right? So we've been doing this for a while, so that helps to a certain extent. We've kind of seen a lot of things. Porter and I like to start with a thematic of where we think the world is going, and then from there, we find things from the bottom up. After that, it's just, I mean, I stupidly like to sit in balance sheets
Yeah
and look at these things and study them and be challenged by it. Even with names when you're wrong, it's like, "Wow, this stock sucks and we own it?" That was a fun analysis I just did. I know that's weird, but it's just
It's not weird.
the way I'm built. Well, you might say it is weird.
No, it's not weird. I love it, too. I love being a nerd.
Yeah.
Well, that's what I was going to ask you, Steph. It's about the process, and obviously you have an extraordinary process. So walk us through how you sit down during the day and sort of come up with a thesis you come up with.
It's not too different. I would say we actually start in Robinhood strategies as a quantitative process first, because I kind of know that sometimes my own opinion can get in the way of good fundamentals or data or finding something interesting. We have proprietary factors that we built that kind of give us what are the value stocks, what are the growth stocks, what are the quality stocks? And that's where we fish. Then I'll also have kind of a thematic. And I read a lot. I read articles and listen to podcasts, some finance, some not finance. Obviously listen to "RiskReversal," but I also like listening to things that are not financial. But people will bring up things that they're doing, things that they're talking about. I also have kids that will tell me what people are doing.
My daughter asked me for a JBL speaker the other day, and I was like, "Should I look into who makes those?" She loves Starbucks. I kind of start forming a view of the world, taking all of that in, and looking for things that not everyone's talking about yet, try to pair that with the quantitative kind of bottom-up process.
Dan goes down the rabbit hole every day. The information, all the different things you read, to your credit, we talk about sort of cyclicality, I want to come back to that, but valuations matter, obviously some stocks trade at ridiculous valuations. Then you look at a name like Nvidia, which last I looked is trading at about 19 times next year's numbers, 100% earnings growth, 100% revenue growth, broader market, probably trades at 22 times, to the extent that they even have peers, probably half of the valuation. I ask out loud, why is that? Is it an opportunity or is it a warning flag?
Let's go back 26 years. I did a RiskReversal podcast on Friday. I'm just going to kind of give it a little push here. You guys have to go listen to Jim Chanos, who is the guy who found the Enron fraud. To us, he's that guy. We love him. He's a friend of ours. Then another guy named Gary Marcus, who is a very prolific AI skeptic, but an academic, we had the two of them together. Gary brought up Nvidia, but Jim really kind of nailed it. If you are Nvidia and you are at the center of this entire ecosystem, they kept on using the, if you're selling shovels in a gold rush, that is Nvidia. They've been able to have margins that we've never seen a semiconductor company ever have. They have these moats.
They have this crazy market share. They have everything. Jim's point was, if you believe everything that we've just talked about in this whole conversation, about the technical aspects of it, the market aspects of it, all the opportunities, and you're Nvidia, why would anybody who is dependent on your chips and your allocation, the list goes on and on. Why should that trade at a higher multiple than the company? I'll put it to maybe Porter and Vinnie. Think about that. You could be skeptical of the circular financing. You could be skeptical of the competition that's coming. You could be skeptical of just them being the Cisco, this is the thing going back to 1999, of this whole sort of trade, and when it kind of goes pear-shaped, they're going to be ground zero for it.
But in the meantime, the stock has gone sideways for 6 months. It's back towards those highs. They seem to have to pull up every rabbit out of a hat. Now this new $150 billion buyback that they're actually instituting. It's not like, "Hey, we have this dry powder if the stock comes back in." So they're making a judgment about the valuation of their stock, and I'm just curious how you guys think about that, because Jim's point is a great one. You can take all of these qualitative inputs from someone like Gary Marcus, but Jim's actually not thinking about that. He's thinking about the quantitative aspects of this.
Vin?
Good point. And my perspective is they're right. And I look at names, if I thought that the AI narrative trade, CapEx cycle, whatever we want to call it-
Is going to have a negative rate of change. I'm not thinking about Nvidia as the first thing to short. I'm not. I'm thinking more of the very heavily indebted names, some of the data centers where the business models are questionable to begin with. Right? I would look towards that to short more. So I'm in complete agreement with Jim on how the direction I would trade this if I felt like the AI trade was on its last legs.
Yeah. But by the way, they're the ones that have the pricing power too, right? So they're invested in Neo Cloud. They turn around and buy their chips at a 77 gross margin for Nvidia, understanding that this is, for them, they got to get it while the getting's good, right? And it's been good, Porter. So, help us think about that, because that is the most- You're not going for Nvidia. If anything, Nvidia might be a great pairs trade. It might be that hedge against shorting this stuff that are their customers that have the questionable unit economics.
We've gone bearish.
On Nvidia?
On the AI trade. We're talking the risks.
Yeah.
We're talking about risks. I will say that I probably underestimated how powerful AI would be in my life and the quick adoption everywhere. You're seeing, we saw the presentation last night. It's being incorporated into everything. I think that, in one way it's scary, right? Are we able to be able to sustain the job growth we talked about on our Substack, just called "What Are We Doing?" I talked about accounting jobs. Are they going to replace accounting jobs with AI? The answer is probably yes, right? I worry about that, and I think that AI's probably going to be more powerful than most of us think. That's at odds with the business model and the financing of all this stuff, because two companies, OpenAI and Anthropic, have $2.5 trillion in debt.
That's a lot of debt for companies that don't make any money, that really don't have any prospects for making money. I think something needs to change, right? We're all going to need to pay a lot more for compute for these companies to be profitable. I use Gemini. I pay $20 a month. I'm not a power user of this stuff, and I think it's amazing. I'm not paying. When companies start replacing a lot of humans with $100,000 of compute power, that's when I think the profitability of these companies will really take off. But that's obviously scary, right? I think we're at a very interesting point of the world, and the markets are seeing the trepidation. The markets are very uneven right now, and I think that's the way I see it, too.
Steph, historically, when cyclical stocks are their cheapest, that's the time to avoid them, and conversely, when they get expensive. Is cyclicality even a thing anymore? Because if you listen, if you watch daytime business television, you'll hear a lot of people say it's different this time.
Famous last words. I do think it's a little bit different this time. I think it used to be much easier to analyze the market and the economy, and they were a little closer together. I think now we're on, and I talked about this yesterday on another podcast here, but I think we're on two timelines. I think we're on an AI timeline that is tech-enabled and the life that we might all be living, but then there's another timeline. I think about my parents. They were like, "Yeah, we used ChatGPT once." There's a whole lot of people out there that AI has not entered their world.
It's like the Progressive commercial.
Yeah. Yeah. Like your parents.
Yeah.
I just think there's still a lot more growth coming because there is a lot of people in the world. What is it, like 2% of the population that are actually participating in this? It is really hard to change behavior. It takes a while to change behavior. It takes a while to change behavior inside organizations to use this AI. That's why I think we're kind of on two timelines. So the timeline that used to be the timeline, and this is where I used to use timelines. I use the word bifurcated.
Yep.
That's not doing well. Consumer names are not doing well. 20% of the largest 1,000 stocks are down more than 15%, and it's all some software companies like Intuit, so accounting's over, and then Adobe, and then it's consumer names. Some of them have stock-specific stories, but some of them are just because consumer sentiment is down. Not a lot of people in the bigger world think things are great, but then I feel like a lot of us here think things are better because we are in that other timeline of seeing that growth. So I think that's almost what the market is struggling with right now, too, under the hood, even though the VIX is not high. Because it's coming together. The one other thing I wanted to say about Nvidia is that I wrote a piece about Nvidia becoming a bank.
Yeah.
If a bank takes deposits and lends them out, and then lends their name, and then often concentrates in sectors, Nvidia's doing all of that. Even though they say they don't have financing, like you said, they lend money out.
Yeah.
And that's on the order of, it's not that big compared to their revenue. It's like $500 billion from what I could find deep in the disclosures. But I think it's probably more than that, and they're the most incentivized to keep things like that going. And that's why I think this can go in a circular motion for longer than we think should.
Yeah. Just by the way.
If you guys got questions, there's three mics here. I wanted to make one point. Guy, you asked about process, and last year we were at the HOOD Summit and they rolled out Cortex, and we got to see the blue guy with Vlad's voice last night, which was pretty cool. But they updated a lot of these products. And when you talk about what are some of these second derivative things, last week when Muse came out, or two weeks ago, did you guys see all the companies that have subscriptions? They all got killed, right?
Yeah.
Like literally. All of a sudden you could use an agent to go into all your crap and find the stuff that you're not using anymore, subscriptions, and kind of log out of them or unsubscribe from them. Those tools, I think, are the things that give you the ability to find those other trades, and I think that digging into those. All right, Guy, you played host. We didn't get any Guy Adami opinions here.
No.
I will say this because you guys know Guy well. He doesn't love to take any recognition for anything that he's done well in his life. Uniquely, you and I have had the benefit. Steph's been on with us on the podcast a lot. You guys have been. We've had amazing strategists, investors, analysts. You've been steadfast in rates going higher. We don't have to dig into that much, but here we are. We're at this level. It's broken out to a five-year, multi-year high. Forget trading yields right now. If we were to see a pullback, there's a whole host of things that you just laid out, Vinny, and we can have these kind of. What would you trade? What would you do away from yields in the stock market that you think is a great way to reflect yields coming back below 5%?
If yields come in from, let's say, five and a quarter-ish, where we are now. Let's say call it four and three quarters, so we can do that math. You have to say, okay, what is the backdrop for that to happen? Then I say to myself, okay, what has higher yields created a headwind for that is still a structural trade and it comes back to gold? Vinny, I think you probably agree with me on this one. Gold's obviously had a really difficult couple of months. Had a bounce, I don't know, let's call it mid-August or so, but it's pulling back now, I think solely on the back of yields being higher. I'm of the belief if the bond market continues to erode, there will be a point in time where that becomes bullish.
Under that scenario, I think that's when gold is going to really flourish. So I think the gold story's intact, Vinny. The fact that the Netherlands, a few weeks ago or a month or so ago, announced that they were repatriating their gold, I think it was 80 tons of gold. I know that's a wonky story. I think that's a big story that came on the heels of France doing it earlier this year. I think it was 14 or so years ago, the Germans did it as well. That is a telling sign. So in what Dan just laid out, Vinny, I say the gold market's going to work in a material way. Go ahead, Porter.
We're a little bit older than the Robinhood crowd, but I think they see the same thing we do with Bitcoin. Bitcoin has been in a bear market for quite some time. It's sort of peeking its head out of the closet here and trying to do a little better. So I think it's sort of similar. It's the debasement trade, right?
Yeah.
We're not going to be able to pay this debt back with what the government's doing. We're running 5% fiscal deficits as far as the eye can see. We're going to have to print the money. That's the only way that we're going to be able to pay for Social Security and everything else going on. I think this debasement trade, whether you choose Bitcoin or choose gold or choose the gold miners, I think that's a trade that will be here for a long time.
Vin?
Yes. It's also a question of what is causing the rates to go down 40, 50 basis points. Is that somewhat sustainable? Is inflation coming down with it? I'm talking real inflation, not fugazi CPI prints and saying we're actually getting reduction. If oil went from $100 to $75, keep coming back to this war, that would cause a chain effect on inflation, and as a result, I think there would be even more things. Yes, gold. Yes, Bitcoin. I agree with that. But there would probably be even more things to buy over a six to nine-month period.
I'm looking out in the crowd. Again, if you have questions, the microphones are there. But Steph, we have a few minutes left. We haven't talked politics, nor do I want to talk politics, but there is an election coming up in the next 35 or so days. Historically, elections are market-moving. Have you done any work around that? I'm going to come to you, sir, but go ahead, Steph.
Not very much other than to know that usually markets will rally post an election because knowledge is calming. But for this one, I feel like we end up being in this uncomfortable middle maybe because less will get done in Congress and-
There's so much getting done right now?
Well, I think they were trying to get stuff done. Now I'm just afraid that the attention will turn toward going after your enemies, and I don't want that. I would rather it be just focused on getting stuff done, and instead it will be more of ridiculousness. But there'll be more support for, I think, data center pullback, spending on that, and putting in regulations on that kind of thing. So, I'm a little worried about the AI infrastructure.
Sure.
Not all of AI, but because of that. Otherwise, I do think knowledge ends up usually creating a rally in the short term.
Sir.
Hello. Really what you say, Steph, about timelines. I think I see it every day with my family. I was having this conversation with my sister where she's like, "AI is going to be doom. Everybody's going to be unemployed," and things like that. But then you see Jensen in the All-In podcast talking about how people are saying things like, "In 6 months, all entry jobs will disappear." Then it doesn't happen. Then zero accountability on those kind of things, right? You see big tech companies hiring again. So how do you have conversations with those people who feel like AI is going to kind of destroy everything, but you see that reality doesn't match that, and how you face that conversation, I will say it.
I think movies like "The Terminator" haven't helped because I think if AI becomes physical, then I saw this meme the other day, and I said this to my friend. I'm like, "I always say please and thank you to my agent, because if they do become physical, they'll be nice to me in the end of it." But I think just sharing the data points that you just shared to me, I think is actually the right way to hit it head-on. I understand why it's scary, because it feels like a person that can come in and just do whatever you were doing before, but I personally have not seen it that way. Like you, I feel like it's made us do more with less in that I can do other things while things are happening.
We run reporting now using AI, and we've uncovered stuff that we probably wouldn't have uncovered with just humans alone. That makes us a better, stronger company, and it makes us be able to go and do more strategic things. It doesn't actually get rid of us. To me, it makes us do cooler things than the more annoying things.
We have Rip from "Yellowstone" here. It's good to have you.
That hat's awesome.
This is Colin. He's one of my friends.
Oh, ha. Thank you guys for being up there. I appreciate all you guys' commentary over the years. I love your guys' podcast. Thank you so much for sharing everything with us. My question is pretty straightforward. I do some agentic trading with Robinhood, of course. Now I have to go and bolt on Claude. I'm glad now it's going to be all in one app. I wanted to see your guys' perspective, if you think this could be the thing that makes jobs obsolete.
My perspective is in order for AI to work, I think about it from an enterprise perspective. In order for AI to work, there has to be a reduction in employment. I don't see any other way. Perhaps we get a productivity miracle after the fact that new industries spawn up. If you actually look at the statistics over the last 15 years, the majority of those jobs have come from healthcare, which come from government money, which comes from deficits, which makes it work. I actually think that there is going to be job destruction. That's my base case. It'll be slower than people think, but it will be there. Then we have to figure out as a society, what do we do with that? That's a very difficult question.
Sir.
Thank you.
When you think about systemic risks in the market, how do you think about AI just enabling faster and cheaper cyber attacks? If that's going to blow open the market, where would that be, and how do you just think about that risk?
I'll take a quick stab at that, and I think maybe you have time for one or two more. If you look at the cybersecurity names, Palo Alto, Zscaler, which is lagged but bouncing now, CrowdStrike, there's a reason why those names trade at the valuation that they do. The fact that their name like Palo Alto is making an all-time high speaks to, I think, the concerns that you have. Jensen spoke about it the other day. There is a real need to get your arms around that. If you're looking just for a strict trade, which I know is not the intent of your question, but I still continue to go back to those names. You have to be somewhat valuation agnostic because they are very expensive. Last question right here, sir.
I feel like I see all of you guys on my television every day.
Is that a good thing or a bad thing?
No, it's good. One thing I've noticed in my line of work is that AI is really impacting treatment for strange, difficult diseases. Companies like Tempus and Amgen and Lilly are just, this is the way that things are going to change. Where do you guys see that? Because AI is really impacting medical care.
I think the answer is yes. It's a supercomputer. I use it for some strange question that I don't have the answer to, or recently I got blood work done. I put all my blood work into Gemini. What does this mean? Because my doctor sure is not going to call me.
Yeah.
Right? I think tools like this are super helpful, right? It can be helpful and scary at the same time, which is okay. We all have two thoughts, opposing thoughts in our brains at all time. Right? I try to embrace what I can, and I think it will be a super impactful technology on almost every industry.
Can I just add briefly to that? I think one of the reasons why I'm so bullish on healthcare with AI is because one of the things I hate about going to the doctor is that I don't have curious doctors. The doctors I see are all specialists, so if you have this problem with this, you go see that specialist, and they're not thinking about the seven other things that it could be and vice versa. But AI, I think, can put together the research that comes within the specialties and connect them and actually come up with new things. You've seen it in mathematics too, where there's math specialists, and it connects things and unlocks solutions that haven't been solved. Or solutions to problems that haven't been solved. So I think that's actually why it's so powerful.
I just see the shitload of Cheerios. We're out of time here, folks. Thanks so much. Enjoy the rest of your day.
Thank you.
I'm sure you'll see some of us floating around. Thanks, everybody. Helping us make sense of a market that is not really an easy one to figure out. One more round of applause for the RiskReversal crew. Interesting note for those guys. Other than hoodies and sponsors, I believe they're the only group to have joined us for all three HOOD Summits. True veterans, we love working with them. Don't forget, you can follow them at RiskReversal Media on YouTube. For Porter, Vinny, and Danny Moses, they have a Substack called "What Are We Doing?" Fantastic read. Definitely check those out. You'll be seeing them throughout the day. Market Call goes live at 9:45 A.M. on the Pod Stage. We'll see Porter and Vinny at, I think, noonish in the Trading Lab, talking about trading from the short side.
Now, we're going to shift to what's happening in the markets to what you guys were just talking about, AI. How do we use the tools that we talked about last night to understand how our trading process might be changing? As you saw in the keynote, we announced our Robinhood Agents and Agent Apps. This morning we're going to put them to work. We're going to put these tools in the hands of some experienced market professionals and the builders behind the companies that you saw as part of those App Store partners. We're going to do some live trading workflows. Please welcome to the stage Robinhood's VP of Product, Abhishek Fatehpuria. He's going to moderate a conversation with the founder of Moontower. Yes, Moontower from "Dazed and Confused", that's where he got the name of his company.
Professional options trader, Kris Abdelmessih. He will be joined as well by Brent Kochuba, the founder of SpotGamma, and James Kardatzke, the CEO of Quiver Quantitative. Let's go from prompt to portfolio, and let's put our agents to work.
How are you guys doing?
Good.
How's everyone doing today?
Loving it. Great.
Well, good morning, and thanks for being up so early. Who is excited about Robinhood Agents? How many of you opened an account already? A few less of you. Last night, as you guys saw, we introduced Robinhood Agents and Agent Apps, opening up Robinhood to specialized tools and data to become part of our experience. This morning, we wanted to make it a little bit more real. We demoed one thing last night, but we thought it would be cool to show it off a little bit more with some of the people that have made this possible. The goal of the session is pretty simple. We are going to take some real market ideas, we are going to use some real data, and then we are going to work through a couple of workflows that these guys have actually cooked up live.
In each case, we are going to see what happens when traders start with a very simple question, then they call on their agent with specialized tools, and then they follow the information wherever it leads, and ultimately, they can then decide how they want to express that view in the markets. I have got three people here. Obi already introduced them, but Kris is the founder of Moontower and a professional options trader. He is also our resident trader today. He is going to bring the market questions and challenges what the tools give him. Brent is the founder of SpotGamma, which is one of our Agent Apps, which specializes in options positioning, volatility, and market structure. I highly encourage you guys to check it out. I have been using it. It is pretty fun.
Brent is going to help us understand what the options market may be telling us underneath the surface. This is James, CEO of Quiver Quantitative, which brings together alternative data sets. I think this one is my favorite, actually. It is the most fun. From congressional and insider activity to you can see who is lobbying, you can see who is getting government contracts, and a lot more. James is going to show us how you can use some of this information to look at research when you are thinking about investing. We will have time to take some questions. In fact, when the agent thinks, we will just open it up to questions, so feel free to walk up to the mics, and I will call on you. But before we get into it, maybe I will let these three introduce themselves. Do you want to get it started, Kris?
Sure. My name is Kris Abdelmessih. I have been an options trader for over 20 years. I started at Susquehanna and worked there for almost a decade, and then I ran a volatility trading strategy at a hedge fund for about a decade. Today, I run an options analytics company, and I talk about, and I try to teach people about options trading and how to use it for whatever their investing goals are.
My name is Brent Kochuba. I am founder of SpotGamma. I started SpotGamma in 2020. Before that, I had about 20 years of institutional trading experience at a couple of banks, an options market maker, and then I was at the family office before starting SpotGamma. Our goal is to tell you how the options flows may be moving the stocks that you and I are trading every day.
James, go ahead.
My name is James Kardatzke. I am the CEO of Quiver Quantitative. We started Quiver back in 2020 with the goal of bridging the information gap between retail investors and Wall Street. Our purpose has always been to just find really high-quality data, find ways to scrape it, and then present it to retail investors in a way where they can use it to make smarter trading decisions. Yeah, really excited to bring some of our government data sets here to Robinhood. Looking at a lot of things, there is kind of countless ways that government and public companies intersect, whether it is public companies trying to influence legislation through lobbying, or receiving revenue from the government through government contracts, or even members of Congress buying stock themselves with their own funds.
We brought a lot of those data sets into Robinhood, and super excited to see what you guys are able to do with it.
Cool. Chris, before we touch a tool, where does a trade idea actually come from?
Yeah. The way I think about the origin of trade ideas is from two sources. One of them is what I would just call is your senses. You have the things that you read, whether you are reading a book, whether you are reading Substack, whether you are reading Twitter, whether you are reading Robinhood Social. It could be something that you have heard, conversations that you have had with people. There is a number of ideas that are just stirring in the original LLM up here, right? Your gray matter and white matter. The way you move through the world is going to create inspiration and ideas. That is one set of, again, what I call your senses. The other place you get ideas is from the dashboards and the instrument panels that you have created that look at market data, right?
What is happening here, I think the beauty of what Robinhood is building with these partners is they have not only shortened the bridge between these two parts of information, but they have widened the bridge. You are now able to have more throughput, is the way I think of it, two-way traffic between, I have got an idea, let me look at the data. How do I take the ideas that I get and formulate them into a research question? How do I turn this into something that I can actually make a financial statement about in the form of a trade?
Today we are going to start with two different disturbances, one from Washington and then one from the options market. The first example we are going to use is we are going to start with Quiver Quantitative. James, why do not we ask Quiver what is a stock where Congress is doing something unusual right now?
Yeah. So one company we have seen recently a lot in our data is Bloom Energy, both from Congress and from within the White House, there has been trading within that stock. I would love to show a quick demo here of how you can actually use the Robinhood app to find that information and then kind of walk through Quiver's data.
Oh, yeah. Perfect.
Got a phone.
We have a little demo device here.
We're going to get back to Neptune from last night.
Cool. So yeah, directly within Neptune here, you can just ask directly as if you were talking directly to another human. You can say, "Using Quiver, which politicians have been trading Bloom recently?" And then that'll get to work starting to query the agent, starting to query Quiver's data to pull that from our dataset. As part of this partnership, we've brought in our entire Congress trading data feed. Basically, every single Congress trade that's ever been reported since Congress was first required to start disclosing that back in 2014. And then alongside that, we've also been tracking the presidential trading disclosures as well. So whenever Trump releases new trades, we have that included within the data feed as well. So you'll see here that Bloom Energy, the big headliner for the last year was Nancy Pelosi purchased back in early 2026.
So you see here, look through all the trades and found that Pelosi, and it gives you the trade date, gives you the amount. So in this case-
That's a big position.
Yeah. $105 million, especially for Congress trading. I feel like you have very rich members of Congress, but it is not on hedge fund scale typically. So with this, you can put in any stock, you can do queries like, what stocks have been most purchased by members of Congress recently? If you want to see across everyone in Congress what has been being bought the most. But just sticking with Bloom here, within that same theme, let us look a little bit more into how Bloom might in turn be attempting to influence Congress. So, one thing you can do is say, let us see, what issues has Bloom been lobbying on recently?
And by the way, if you guys want to follow along in your own phones, you can do that if you want.
Our lobbying data set is also pulling from all the disclosures that have been reported over the last few years. So basically, anytime a public company does lobbying of specific government offices, they are required to disclose that and list off which issues and which bills they might be doing that lobbying on. So what we find is that it is a really, really interesting data set to look at if you are trying to figure out how companies might be affected by the government, and also what their team internally is really thinking about going forward. A lot of times in advance of new R&D initiatives, or in advance of new product lines, companies might start doing some lobbying to kind of figure out how they can shape the legislative path to kind of be more beneficial towards them.
Have you ever used lobbying data when you have traded before, Kris?
I didn't because I mostly traded commodity options.
Okay.
It wasn't super relevant to what I did.
Yeah. Here you can kind of see it gives a listing of some of the recent areas where Bloom has been lobbying. They've been doing lobbying on energy tax credits, electricity supply for data centers. As you can imagine, this is a company that's going to be really heavily affected by everything going on within the data center space going forward. Then we have another data set that lets you really dig even deeper into this same vein, because one of the things we track is what legislation is actually being proposed within Congress. Every time there's a new bill that's being proposed at all within Congress, we scrape the details of that bill, kind of scrape a summary of it, and have that included in this agent as well.
If you even wanted to ask what recently proposed legislation could impact Bloom, it'll look at all of the recent bills that have been proposed on Capitol Hill and kind of parse through them to see which of them could impact a specific stock. Again, this is a really good way of being aware about what's going on within the political landscape, making sure if there are any risk factors you aren't aware of in terms of new legislation that could impact your portfolio. This is a great way of staying on top of that and making sure that you're not blindsided by anything.
I think this one's really cool because when new tax bills come out, it can completely change
the P&L of various companies.
Here, for example, you can see H.R. 9340, Ratepayer Protection Act, was placed on the Senate calendar on September 17th. Each of the bills, it will list off the name of the bill, list off the current status of them, so you can see whether they are currently in committee or whether they were just proposed, or whether they are being brought to a vote. It tells you a little summary of what the bill is proposing. So here, for example, large data centers would pay the incremental cost of a new generation and grid upgrades needed to serve them. And then it can also tell you why this matters to the company in question. So again, if you did not have this tool available, you would have to spend probably hours and hours poring over these bills. They are not easy to read. They are legalese. They are often very long and very complicated.
This just gives you a really quick distillation of why it is important and what you can do with it. So, we think this is a great new way just for everyday people to stay on top of this data. And also, in the past, I think this is the sort of thing that only hedge funds would have really had the time and resource to pore into this data, whereas now it is kind of available to anybody.
I think we have a question. Why don't we take a question in between?
Yeah.
Thank you for a wonderful presentation. I opened a MCP account a while ago and connected my own agent, but it's not really giving me the option to do what you guys are doing right now.
When will that be resolved?
This is the new Robinhood agents that we should have rolled out to all of you last night here. If you find me afterwards, I can help you get set up. Because this is not available in whatever agent you're using, probably.
Yeah. I just connected it, and I was trying to find a way to get to where you are.
Okay.
I would love to follow along on all this
Okay
wonderful journey and
Cool
I'm kind of finding myself at odds.
Yeah. Why don't you find me afterwards and we'll get you set up. Chris,
Yeah
just because a politician bought it, does that mean we should buy it?
Well, first of all, when it comes to data, one of the things we are looking for are what we call disturbances. What's an anomaly? Buying is always a bit more interesting than selling when you're looking at insider transactions. The reason, of course, is because insiders sell stock all the time. On a 10b5-1, they're on a regular selling schedule. They're just raising liquidity. The chance that selling has any signal in it is a lot harder to know because it is such a regular event. But buying is a lot more of an interesting signal because you're thinking about you have an executive who is already. Well, in this case, it's Pelosi, but if you have an executive that's buying, they're already long that asset, right? They're really adding quite a lot of concentration to what they're doing.
You want to pay attention to that a bit more, but I would like to see a little bit more information to think about Bloom Energy in this case. Let me turn to Brent here.
Brent, we have Bloom on our radar now, so why don't we figure out what the options market says about it?
Yeah, I think as I have the opportunity to walk you through how you can actually add our app to the agent here. Hopefully, I do this right. If we notice here, we go into the marketplace, and we scroll down to the Options Edge, which is our offering here. Any of you that do this now, you get this free for a month, so you can add on and try this out for free. The nice thing about this as we load it up is that the options market and prices in the options market or the volatility surface, as someone like Kris might say, gives us a lot of interesting information about the expectation of the price distribution of stock. Are people still bullish on Bloom? You'd see that reflected in call prices or put prices.
That gives us an extra opportunity to see, hey, Nancy Pelosi bought it. What does everyone else think about this thing? In this case, what we can do is we could say using SpotGamma. I should spell SpotGamma correctly. It would help.
It is your company.
I can ask about the IV rank and skew rank. The IV rank is going to tell us how expensive options are on a relative basis. This is for one-month options. What skew rank tells us is what is the price of calls versus puts, and Kris Abdelmessih can kind of tie in why this might be interesting for us now. I think about the prices that we're going to get returned here is important because as a retail options trader myself, I'm looking for disturbances as well as a primary signal for what I want to trade. Are options cheap? Are they rich? What kind of structures can I set up around this?
I've found that this app has been incredible to help me use that kind of top-of-funnel idea for what high-level prices are, and then drill down into the trades that I want to make. Kris, as you can see here, the IV rank is an 8. This is based on one year of data, so this is telling me that the options prices now are cheaper than they've been basically the 90% of the last year. The skew rank is 93. That tells me that calls for one-month options are more expensive than puts, more expensive than 90% over the last year, essentially. A lot of people like the Pelosi position here of leaning long into this stock.
Yeah. This data is interesting because if you have a bullish view, let's say you want to take the view of the insiders that are buying. You have a bullish view. One thing is part of this view is likely baked into the stock price already. Bloom Energy's tripled this year. It's not exactly new information that there was this insider buying. We look at the option surface and we can consider, well, if I have a bullish posture, if I have a momentum sort of view on this stock, then what I can do here is I can structure what I can. I like to look at the option surface to say, "Let me take what it gives me." What the market here is giving me is it's saying option premiums are relatively low right now.
The IV rank is under 10%, so less than 10% of the time balls get this cheap. The other thing that's happening is the call skew is very elevated. With the combination of these two forces, what it will do is it will reduce straddle prices relatively, but it will raise call prices relative to the straddle price. What is that doing? It is creating a very cheap vertical spread. If you buy an at the money option, like a 50 delta option, and you sell a 25 delta call, you are sort of exploiting the way the curve looks in the options market. You're buying the thing that's relatively cheap and selling the thing that's relatively expensive, and you're doing it in a directional way to sort of take the posture of momentum.
Now, an interesting thing about Bloom is, when I had looked this up, it's also a very expensive stock, so being a very expensive stock, I think it says like a PE of over 300. We know that there's been buying. So there's other questions here that you're going to be able to research. For example, when insiders buy, how long do they typically hold for? Because when I think of Bloom, I'm sort of torn between, is this a short-term trade that I want to go into, or what do I think about this long-term? I always think back to I teach an investing class to some kids, and I use Zoom's stock as a case study. Zoom's stock was 300 PE, kind of like Bloom is today, 5, 6 years ago, like during COVID.
What happened with Zoom was that the price, the anticipation of great earnings like we have in Bloom, was correct. Zoom's stock has multiplied 4x, 5x its profits in the last 5 years. But you've lost 70% of the value of your investment in the last 5 years because, of course, the wrong price will ruin any investment. So what's happening here is you have these questions that you can ask. How long do these people tend to hold their positions? So maybe I want to be bullish because maybe if I find out, I do research with Quiver and say, "Oh, they typically hold their positions for 3 years or longer," then maybe we're still early. But if they tend to trade their position a bit more, then maybe I actually want to have a bearish posture.
The options market will tell you what you can do to execute the trade. Here what it's saying is balls are cheap, calls are expensive. Maybe I can buy the at the monies, sell the 25 delta to be long, or if I'm long already, I can buy protection because my puts are relatively cheap. I can buy 10% out-of-the-money put relatively cheap, and I can collar it by selling a call.
That's right. We can do some other queries here to pull up key levels and things like that around Bloom as well to see where the biggest positions are in terms of the biggest call strikes, where the most gamma is, and different queries like that. So this tool does a great job of letting you filter down through finding the key names on something like Quiver Quant and then dialing in and getting more granular on that type of data. Now, one of the other data sets we want to show were the biggest options position changes, and to me, this is one of the best aspects of our data set because a lot of times you hear on CNBC or on Twitter, "Hey, somebody just bought 50,000 of these calls." The truth is, you don't know who somebody is.
That could be a market maker to a market maker. It could be offering less information than you think. What we do here is we can say, "Show me where the biggest position changes are," and we are showing you what we believe the buy side is doing. The buy side is hedge funds and/or large retail traders. That, to me, can offer more information in terms of prices. So I can say, "Show me the biggest options position changes for Intel." We had to prepare for this, so we are using some data from Monday because these were very interesting options position. I believe that was the 28th, 26th. What we are going to get here, or we should get here, is a list of the biggest Buy-side options position changes. What options did they buy and sell?
Because as we all know, not all calls are purchased long, and not all calls or puts are bought long, where you can buy and sell options. What is going to come up here is a list of the biggest options trades for Intel on the 28th. Now, you can ask for today as well if you would like, and you can also do a bunch of interesting things like show me the biggest options positions in the semiconductor space or in the energy space, or say, "Hey, what are the congressmen trading? What options positions do they have open?" We highlighted this because it is a really fascinating discussion topic here. The two biggest trades from the 28th are just these monster positions, $14 million of premium each.
What this trader appears to do is they sold the April 2027 105 puts, and they used those funds to purchase the October 16th 130 calls. So we would call this a diagonal, something like a combo diagonal, Kris Abdelmessih, I guess you would call that. This gives us a really interesting position because as Intel stock was coming off, somebody stepped up selling longer-dated puts to buy shorter-dated calls. Clearly, they are looking for some type of a rally in this situation.
You were saying that once you use. This is interesting because in the previous example, we looked at the government data first, and then we started looking at the options data. In this example, we are starting with the options data first, and then you were saying we can then track it down to the politicians' data. Do you think it would be cool then to bridge this with what are politicians doing with semiconductors?
Yeah. That is one of the things that I found to be most fascinating about the app is that it understands the prices. One of the things I was able to do, for example, is show me options that have a high IV rank and are near the 52-week high because the agent understands what a 52-week high is. Then it can pull, for example, the stocks that also have a high IV rank. A stock-up, vol-up situation oftentimes can create rich premium, for example. We could do something like that here. Chris, back to the Intel example. When you see a large buy-side trade like that, does that generally cue you off to? There are 13,000 hedge funds in the world, and they oftentimes have unlimited resources. Their large trades, I think, oftentimes can create the disturbances we were referencing.
Yeah, absolutely. This one was. I kind of looked at Intel because I had seen something online talking about large call buying in Intel, and that was what made me want to think, "Hey, let us look this up in SpotGamma." Then we saw those calls. The interesting thing is, if you look back, those. Yeah, they are Oc 16th. The interesting thing is this is a big bet on Oc 16th calls, and they were opening. Oc 16th is before Intel's earnings. Intel's earnings are on October 23rd. Somebody is buying these calls, but it is ahead of earnings. I thought that was a little bit strange. You are placing this big bet, but it is before earnings. What is happening tonight? We have Micron earnings today. Is somebody doing the sympathy trade in Intel and buying the calls there, capturing Micron earnings?
You can be a little, maybe the seller of those calls are a little off guard because they are like, "Whatever, these are not capturing earnings. They do not deserve a good premium." Micron is today. To me, this is potentially somebody making that kind of bet. I would like to know, are Micron earnings expected to be important? Brent, can we look up what Micron earnings are going to be like?
Yeah, absolutely. I am going to punch that up. The query I brought here combines the Quiver Quantitative data.
Yeah
and SpotGamma data here in this case. I searched for stocks that have an IV rank above 50 and that has recent congressional buying. It turns out that Apple, I guess they're very excited about the flip phone with the Robinhood app.
Yeah.
Here you go. You got Apple IV rank, and looks like Ed Case here bought some of that stock. You're seeing, again, the combination of the options data and the Quiver Quantitative data set, which is just really-
Chris, what would you do as a next step to this? You know that IV rank on Apple is high, and there's been some recent congressional activity. How would you think about that?
Sorry, this is in Apple?
Oh, that's-
This happens to be in Apple, this example-
Yeah
because it combines the Quiver Quantitative data with-
Got you
the options data, yeah.
If we stick with the Intel example, can we look at what's going on in Micron?
Yeah.
Because my thinking is related to the Micron, just because I think that expiration choice is a bit strange for Intel. It is a pretty short-dated bet, and it is a lot of premium.
We will look at the Intel first.
It doesn't like the word IV.
It's my nervous fingers there.
I don't know. I think IV just keeps getting auto-corrected to in. Why don't we take another question while you type?
There we go.
Do you want to take a question?
Yeah. Thank you. Particularly on agentic trading for Legend.
Is this going to be available in terms of the data feeds you're talking about? I got a follow-up to that if we can get a direct answer to the first one.
I think long-term, yes.
Oh.
Not immediately, no.
Okay. Love the MCP availability. Can we get an API? Because for the majority of people that are doing anything algorithmic or with locally hosted AI or anything that's a stack of agents, I want an API. Anybody on Interactive or on TradeStation or on any of the competitors, they will move to Robinhood if you give them an API.
I've been scratching my head on how to do that with the MCP.
Yeah
You're wrapping something that's not designed to do the same thing.
Yeah. We have been looking into it.
Okay, thank you.
Yeah. Are you ready, or it is still going?
It is still going. It is getting-
All right, let's take one more.
Hey, thanks for arranging this session. I just had a question about congressional buying, because mostly their disclosures come weeks or months after the actual trade has taken place. How do you think AI can help us bridge this gap?
Yeah. So within our data set, we publish both when the trade was made and then when it was published. You are spot on that there is often a gap of several weeks between when politicians make the trade and when they actually report it. In some cases, more than several weeks. Some of them wait years before they report old trades. But yeah, so we have that data all included within this data set, so you can see when it was made and when it was reported. One of the things we find is that often, these politicians, while they may have access to inside information, they might not necessarily be day traders.
Even if they make a trade several weeks ago, it might be based on more of a long-term thesis that they have about how different things within the government or within the geopolitical space is going to be impacting companies. So a lot of times, in the research we have done, we see there is still a lot of important insights that can be gained from tracking it, even though there is this gap between when a trade is made and when it is disclosed.
I think unfortunately, we're probably going to need a law change to bring that time down.
Yeah, all right. Thank you.
You guys ready?
Yeah, as you can see here, back to that Intel trade we were just discussing, you can see here that the IV rank is a 46 and the skew rank is a 63. So that upside call distribution, or that call skew, is a lot less than in Bloom, but the overall implied vol is quite a bit higher as the stock has been moving quite a bit. It's been mentioned by Trump and a lot of the other politicians quite a bit recently as well. So that volatility is much higher, or that implied volatility is much higher, which tells me that the options are more expensive. So as an options trader, I want to think about spread trading or ways to potentially offset some of that richer IV, which again is part of your idea funnel and trade idea generation.
This helps me to put this thing into context.
Yeah. This is going back to the possibility that it's a Micron sympathy trade. If Micron earnings are priced relatively low, meaning that the straddle, meaning that it's not expected to move very much, this actually sets up an an interesting possibility that the person that's betting on Intel here, maybe you actually want to be a seller of these calls or a seller of the volatility because if Micron's own earnings straddle doesn't expect Micron to move very much, then the sympathy trade loses a lot of its appeal. If we know that the options here are elevated, the call skew's a little bit elevated, and the thesis for the trade is kind of broken if Micron's not supposed to move very much, then there's this opportunity to possibly either sell straddles in Intel or sell covered call.
If you're an Intel holder, you could sell a call against it. But one thing I want to also just remind you is that if somebody comes in and they buy, let's say Intel's 120 and somebody buys the 130 call, it affects the whole vol surface. It causes the vol in that expiry to rise, which means that you don't have to go and sell the 130 call. You can sell elevated vol on a different strike. If you sell the straddle, you are still sort of taking the other side, is how I think of it, of this buyer. You're just not doing it in the same strike. But all the strikes are deeply related when they're fairly close to each other.
If you see buying in the 130 call, you don't have to anchor too much to, "I need to be out there selling the 130 call to take the other side of this." I can just sell the straddle, or I can pick the structure that suits what you want your portfolio to look like.
Cool. James, should we ask Quiver about what it has been learning about Intel and what Washington has to say about Intel?
Yeah, definitely. Yeah, so I guess we have already given some examples here of congressional purchases. Intel is an interesting one because there has been a lot of congressional trading in the stock. So one of the things that we can do here is, instead of listing trade by trade, actually do some aggregations. So you can ask, "Has Congress been doing more purchasing or more selling?
Your typing is much more impressive than mine, by the way.
Oh. Got the texting hands here, I guess. In 2026-
Why don't we take another question while this thing cooks. Do you want to go ahead?
Oh, I'm so sorry. Oh my gosh.
No.
My name is Colin. Thank you guys so much. I love your guys' agentic trading. I opened an agentic account as soon as you guys rolled it out, but my question is, it looks like there's only one agent. I built probably about a half dozen on Claude, and I have a Grok bot scanner that goes overnight. Will it be able to feed this agent and then have this agent execute trades?
Our plan is to have a couple of different things. We're going to leave the external accounts and MCP open so that if you want to continue to use that, you can continue to use that. With this is all going to be inside the Robinhood ecosystem, and the plan is for you to be able to have multiple of these as well inside of the Robinhood app. At first, you'll just be able to have one per account. But over time, we want to be able to do more.
Thank you. I was just getting scared that I was going to have to try to have
12 agents shoved into one dude in the app, and he was just going to take a thousand years to make an actual trade. Thank you.
No, no. And you can keep doing what you are doing, too.
That is awesome. That is what I was afraid of because it took me a long time to get it working, and then Cowork felt like not doing it anymore, so I had to learn how to code. I am a hairstylist. I do not know how to do any of this. So I used my microphone. I have never used a keyboard because obviously I talk well, but I cannot type to save my life. So as long as I can keep using that, I am really excited for this. Thank you for bringing it forward.
Cool. So, turning back to Intel here, you can see that the agent successfully pulled the trades that have happened so far in 2026. Did a quick summary here showing that there has been nine separate purchases for $4 million and ten sales for an estimated $250,000. So, queries like this are very easy for the agent. I really like some of the queries you guys were showing earlier that combined in data from multiple agents or multiple different data sources. I think that that is definitely one of the coolest things I have found in my own testing of this, is just how easy it is to bring in a lot of very diverse data sets and come up with really interesting, unique investment theses based off of that.
I think in general, anytime you combine unique sources of information, it often gives you insights that maybe other people are not clued in on yet, which I think often gives you very investable insights. So, I definitely would highly recommend trying to use some of these data sets in combination with one another to try to find a unique angle that other people may not have really considered yet.
So, we only have four minutes left. I guess before we open it up to the rest of the questions, I wanted to ask each of you guys, so this thing lets you combine all these external data sources that might have signal. What would be the dream data source that you want in this thing to be able to analyze?
The dream data source. Well, stock trading is relatively new to me compared to commodity trading.
On the stock trading side, I would really just want to dig into. I've had a lot of questions for James because the congressional stuff and the insider trading stuff is all interesting. What I would want to know, for example, we just pulled up the Intel data set. I would like to know, what is considered significant? Because I see these buys and I see these sells, but I do not really have a frame of reference or a sense of proportion around what is a large quantity. What is a disturbance in buying and selling? What is abnormal? For me, I would probably just for now be diving into what Quiver has to offer because
I think the combination of that plus some options data like SpotGamma and my knowledge of options, the combination together is what would be compelling to me.
How about you?
I am excited not necessarily for having more data, but it is the synthesis of the data that is being offered here that really, to me, is helpful. Because I have the workflows that I like, and I spend a lot of time filtering through the data myself, looking at the options chains myself, trying to find IV ranks, and just something to trigger a trade idea like a congressional trade. It is the ability to combine all this and very just quickly give me the answer that I want that is really exciting for me. So that sort of, again, synthesize that data and just give me what I want is something that is very exciting here.
How about you?
Yeah. I would definitely say just within the world of alternative data, there are so many unique things that you can touch on that you would not necessarily think have an impact on the stock market. But if you really dig deep into it, you can find ways that you can kind of figure out what might be happening in the future with the company based on the data. So, if I am playing fair here and not saying something that we are already bringing here that Quiver already has, I feel like data on satellite imagery is one of the examples I always look at, where it is like there are really, really cool things that you can do with that data to see how things are happening in the commodity space. Even looking at parking lots to see how many cars are going in and out of different companies, like retail locations.
Yeah.
Yeah. We do not provide that ourselves, but that is the sort of thing that I think is really cool that retail investors might one day have access to.
We actually do have a satellite data provider in the agent apps that are going to be there. It is called SkyFi, and I have been talking to those guys about giving each of you guys the ability to deploy your own satellite wherever you want. So maybe one day. All right. We will wrap it up with a few more questions. Do you want to go ahead?
Yeah. Thank you. I'm just curious, after seeing real usage on the platform, what are users doing that's surprising to you or made you rethink the product in some way?
Yeah. It's been a little bit hard so far because when people are using MCPs and connecting outside agents, we actually don't see what you're doing aside from your trades. It's actually difficult. We don't see what you're talking a Claude about or Cortex about. We've only heard stories. I think the coolest ones I've seen personally, and are sort of the origin story for some of what we've built, is some people we saw were getting these Mac minis. They were running long-running agents on their Mac minis. Then they were buying a bunch of data sources, providing credentials, connecting their Robinhood account, then connecting Telegram to it, and they were basically just talking to their Robinhood account and bridging together five different data sources. Then we asked ourselves, what if we could do that in six clicks in the app?
That's basically how we got to Robinhood Agents. Yeah.
Thank you.
Cool. We will take one more, and then we will wrap it.
Hey Abhishek Fatehpuria, my name is Samir. Thank you for giving power to the retail investors by building the tools that give access to do so many things on Robinhood app. The demo that we got to see today is cool, but I wanted to know what is our strategy to take it to the next level, wherein finding information is good, but automating it to place trades automatically, like copy trading when it is coming to Robinhood?
You can do that. Each of these examples we showed here, you could set it up. We have not rolled out loops yet, so once we have loops, we showed that last night. I think the example where he showed look for stocks with an IV rank of over 50 and recent congressional activity, you will be able to set up a loop which just says, "Run this every day, and if it is true, do these things" and it can just trade for you. So we just did not show that right now, but it should let you do that.
Yeah, you could take it directly from the chat and say, "Let us go trade this" and it is a very smooth transition.
That would be great. Wonderful. Thank you.
Yeah, of course. Cool. Well, thank you guys. Hopefully, you enjoy the product. Please give lots of feedback. If you cannot figure out how to access it, go to that dome-looking thing in the middle of the booth and they will help you out. Cool.
Thanks so much.
All right.
The new Agent Apps. With that, everyone, we've earned our first break of the day. Go grab some coffee. If someone wants to get me one, that'd be great. Check out the booths. We'll see you back here at 10:00 A.M. sharp for ETF State of the Union with Guy Adami and State Street's Matt Bartolini. Everyone watching on YouTube, don't go far. Livestream stays live. We'll see you in 10 minutes.
Free misconduct.
Please welcome back to the stage Michael Obucina.
All right. Welcome back. That was quick, but we are back. Before we get started, quick check on the markets. Looks like markets are green today. S&P's up 40 points, NASDAQ up 232, Dow up 7 points. Small caps, up about a third of a percent. VIX hanging out around 15, so not like we're really missing too much today. Nothing like hosting a conference where half the audience could be looking at their phones, and that's technically being engaged. All right. Well, we are shifting gears now, and we are talking ETFs. How many people out here trade ETFs, use ETFs? Yeah, I'm sure everyone, right? We all do.
Well, this market has evolved tremendously from what it started as the sort of traditional index funds from many decades ago, and our next conversation really focuses on that, where the ETF market is today, where the innovation is happening, how these products are creating new ways to think about income, exposure, portfolio construction. To help us understand that, we are going to bring back a guy we just saw, Guy Adami, and he will be joined by the managing director and global head of research strategist at State Street Investment Management, Matt Bartolini. This is the ETF State of the Union, sponsored by State Street.
Back. Not too difficult to get people smarter than I am, but clearly, I have one in Matt. Matt, welcome aboard. How are you?
Good. How are you?
We are going to talk ETFs, and Fast Money, we spend a lot of time, obviously, talking about ETFs. We will break this down into sort of three segments and the proliferation, number 1. By the way, again, questions, we have mics set up, so in about 20 minutes or so, if you want to make your way to the mics if you have questions. Let's talk about ETFs, and we are here sort of on a historic day. I think globally, there are 14,000 ETFs now, 5,000 in the U.S. I mean, just think about the magnitude of that. But talk about inflows, and we were talking about it earlier before we came on. Something pretty significant is taking place right now.
Yeah. So it's oddly enough today where we're talking about the ETF State of the Union is the fact that as of today, in 2026, ETFs in the U.S. have now taken in $1.53 trillion for the year, and that actually breaks the full-year record from last year of $1.52 trillion, and we're only nine months into the year. And we've been putting out projections all year that we would hit $2.3 trillion here just in the U.S., and we think that we're going to be definitely in that realm because we are on that trajectory where we're at $1.53 trillion just through nine months, and only in the fourth quarter we typically do see a seasonal bump.
It's a staggering number. So the obvious question is 14,000 ETFs globally, 5,000 United States, how do you rise above? How do you become the go-to ETFs? How do you differentiate yourself?
Yeah, I mean, from our lineup, we always try to build different strategies with specific solutions in mind and specific outcomes in mind. And I think for this audience, when you're trying to screen through all those 14,000 globally, 5,000 in the U.S., I would think about it from that lens, too, like, "What outcome am I trying to solve for?" Because ETFs have definitely shifted from just pure access vehicles and are now definitive outcome vehicles. If you want to target a specific outcome in your portfolio for income or risk management or even, again, on the access side, targeting some sort of thematic sector, and you need to screen through 5,000 different ETFs, start with that outcome first.
If you're looking for the Federal Reserve is raising rates and you want to manage your duration profile and you want to have something that can mitigate the impact on rising rates and sit maybe in the shorter end of the curve, well, you're really looking for a broad macro beta exposure. So looking in that term structure and then maybe prioritizing on fees because there's not a lot of differentiation between one-to-three-year government bonds from one issuer from another to another. You're getting that macro exposure. But then maybe if you're looking at income, you want to maybe sort on yield first on that outcome and then look on the sustainability. So there's different criteria for different areas and different outcomes. So for us, when we're trying to build solutions, we're building for different outcomes.
I think for investors, try to dissect the ETF industry by your outcome-driven nature first.
Talk about. In my prior conversation, we talked about process, and I think I'm always sort of drawn to that because I'm fascinated as to how do people get to certain places. Again, with 14,000 ETFs globally, you'd say to yourself, "We've attacked every possible angle," but clearly that's not the case. So the process of, and you brought some sort of slides to illustrate this.
Yeah. So from a process perspective, it does start with what are we trying to achieve? What solution are we trying to deliver? And we always try to deliver specific solutions to an end investor's client concerns. Now, one of the interesting things that has happened over the last few years, we've seen regulation unlock a good period of innovation in terms of different SEC rules, whether it's these are the 6011 and 18f-4. It's basically the allowance of creating more active funds and more active funds, or even index ones, with derivatives. So the chart here showcases this. We've seen significantly more active funds and active funds utilizing derivatives. So now we have more tools at our disposal to create differentiated strategies.
One that we've done in the last two years is bringing a hedge fund strategy into an ETF structure, and it really allowed us to do this because of those regulation changes, where we can now use bits of leverage of uncorrelated assets. Previously, you only had a 2x leverage cap. Now you have a VAR test that actually allows you to create more leverage within an underlying portfolio, utilizing prudent measures of capital efficiency, combining equities, bonds, and commodities together, and harnessing the sort of covariance matrix and correlation, and getting something about 180%-200% gross notional leverage. So our process really starts of what are we trying to achieve? What are our tools at our disposal that can achieve that? And with this regulation changes, we have more tools at our disposal, but it does increase a lot of the complexity in the overall ETF industry.
How do you determine success? Is it as simple as inflows and usage? Because, again, I don't know the numbers you do, but it would appear to me that there are ETFs that are going to fail for a myriad of different reasons. So success.
Yeah. Last year in 2025, there was 1,000 ETFs launched. We're already at 1,000 now in 2026, and we're likely to outpace that. And what success looks like, from an issuer's perspective, you would obviously say a successful ETF is a large one that generates a lot of revenue. And commercially, that is 100% correct. But another level of success is does it appeal to a lot of broad swath of investors? Are there more organic investors utilizing it? Can it appeal to an individual investor, a wealth advisor, institutional investor?
And for me, that is a greater measure of success when you look at a 13F profile, and you see more clients in it because that means that one fund is hitting on an outcome or a need, and we've been able to deliver a successful solution that has more durability and consistency, but applicability beyond just, say, one or two key clients. Now, although two key clients, that's great that it works for them, but having something that is really democratized across a lot of different investors to meet their needs, I think is extremely successful from my lens.
What is the correlation between complexity and usage, if that makes sense?
There is a low correlation, I think, in some sense. There is a high correlation between complexity and launches.
More launches recently have anchored into the more complex, utilizing derivatives and utilizing different forms of leverage and more esoteric type of strategies where you have derivatives on top of derivatives. I think the correlation between complexity and success, though, is low because still, we see a lot of usage in your core essential building block exposures. So low-cost core exposures, general active exposures as well. I will say, though, when you combine complexity with a specific portfolio outcome, derivative income ETFs have been driving growth in the active landscape, and I talked about this yesterday on a podcast. They are complex. We are utilizing options to create a specific income stream. It is much different than just buying high dividend yield and equities. There is a level of complexity because there is also different tax rules associated with it.
In there, that is a high correlation between actually delivering on a key portfolio outcome and having success. The other one would be within defined outcome ETFs. Those are quite complex. You are utilizing different tranches of equity options, but you have actually created a more novel risk management tool, and I think it has really eaten the lunch of your traditional low volatility equity exposures or your minimum volatility factor exposures as well because those prove to not be that helpful during systematic drawdowns like we had during COVID and during 2022, where they still embody that native risk of equities, and they drew down significantly, while defined outcome ETFs are offering a complex vehicle utilizing options. Sometimes in the wealth space, you have to take a suitability test just to actually utilize them.
There is some level of complexity, but they have been massively successful, and I think the runway for those is pretty far.
As I mentioned, if we make it to January, Fast Money is 20 years old, which is remarkable. For a long period of time, fixed income was not something we talked about, and there was really no reason to talk about it. The last year, obviously, that has changed. There seems to be this proliferation of fixed income ETFs. Can you speak about the sort of the growth there?
Yeah. It is really interesting. Fixed income ETFs, if you look at it from a markets perspective and you see in the ETF space, you do see a lot of return chasing and trend following, which is valid and a great use of ETFs to sort of position where you think the market is going. If you look at bonds as an asset class, they are kind of in a lost decade right now. Bonds are in a lost decade where you have had significantly negative returns or returns below the rate of cash. You should, as an asset, be returning above cash because you are departing with that liquidity of cash. Even though the bond market has been challenged from a return space, fixed income ETFs continue to just break records every single year.
They have already broken full year records so far this year with over $450 billion of inflows. If you look at it from a market share perspective, they are taking more market share of what their AUM would indicate from a flow perspective. They are gaining market share relative to equities, and you continuously see greater adoption and usage. It is not just these low-cost vehicles. You see actively managed fixed income exposures growing in the number of launches, in the number that are actually producing strong results in terms of excess return or excess yield, but also in terms of flows. Fixed income ETFs are a growth engine for ETF usage and assets for the next 10, 15, 20 years, and you are seeing it in light of outflows within the mutual fund space.
ETFs are becoming the de facto default option to put into portfolios, whether it is in equities, fixed income, or alternatives as well. I think you will continue to see more flows into the fixed income ETF market.
Which speaks to innovation and complexity trends. We have a chart here, but speak to that because innovation, like in any other industry, innovation is critical, and you continue to innovate.
Yeah. So one of the charts here, this is something we have been talking a lot about, and there is a QR code here that links to the research that we have done as well around the need for income. It is a pure essential portfolio outcome. There are three of them. It is capital appreciation, income, and risk management, and the income potential from traditional assets is at all-time lows. So the ETF that we launched in 1993 is a good example of this. It is S&P 500. Its dividend yield went below 1% for the first time this past year because the index itself went to about 1.05% in an all-time low. So how do you actually get income in this type of market environment? One way is through innovation.
Those derivative income exposures, utilizing options because of the way regulation has allowed for a greater use of derivatives, has unlocked this potential to create a differentiated return stream that can actually seek higher levels of income, and you can do it in many different ways. You can do it on broad markets. You can do it on sectors, as you can see out there at our booth. You can do it across single stocks as well.
You have all these things at your disposal now to create really differentiated return streams and income streams because as I walked through yesterday on that podcast, their reaction function to market environments is very different than the reaction function of high dividend yielding equities because if the market draws down, well, those companies, if their profits go down, they will probably cut their dividend, and now you have less of an income stream. In fixed income, if yields rise, you are not actually getting that yield right away. It is just the yield out on offer. You have to continuously reinvest it, and the income stream will have a longer latency to catch up to it. With a derivative income, if the market falls and volatility rises, you have a quicker reaction to harness that volatility premium because you are consistently selling it.
I think innovation has helped unlock new use cases for ETFs that were probably just within more separately managed accounts or towards institutional investors.
Alternative invest. There are conferences that I go to about alternative investments, which 10 years ago was not something we were probably talking about, but obviously, again, on that curve of growth, you have to be on top of what's going on in the alt space. Speak to that.
I think it's essential. Portfolio diversification is really being challenged by the historical norms that bonds are your only true diversifier to equities. I think it would probably be fascinating to everyone in the audience here that in 13 of the last equity drawdowns, bonds actually fell in nine of them, too. They're not really a reliable source or only the reliable source of diversification, and this is something we continuously talk about from a markets perspective. In my seat, we talk about this new macro environment of more fragmentation, where inflation has become a more durable risk driver. If we look at the reaction function of equities and fixed income together, equities, they don't really like rising inflation. Bonds, nominal bonds, don't really like rising inflation.
If you have a period where inflation's a more durable risk driver, something that we have had not to deal with for really a long time. In the era of the 2010s, basically inflation was about 1.2%. Now we're at more durably around 3%, and that's something new. Having these discussions about alternatives, you don't have to get too crazy in the alt space to pick up some form of diversification. You don't have to buy equity long, short, market neutral, relative value or arbitrage, more complex, sophisticated strategies. Add in some commodities, real assets, gold, inflation-linked bonds, other things that will have a different macro relationship. I think from a flow perspective, we have seen that because we can see these flows on a daily basis in these more tactical thematic spaces, and we do see inflation-linked bonds.
They've had inflows in 19 out of the last 20 months. Broad-based commodity ETFs are at records. Gold flows were records last year, and they've rebounded this year. And we see all of these flows going into something to build more reliable, durable diversification. And from a category perspective, those more, I would say, true alternatives, the esoteric alternatives, the ones that do fit in that melting pot, they are at record inflows as well because investors are realizing that bonds are not the only diversifier to your equity book, and it's because of the way they have different macro relationships that really haven't been tested up until now.
In 2008 and 2009, leverage became sort of this four-letter word, maybe for good reasons. I'm not going to sort of debate that, but levered ETFs are obviously a thing. Let's drill down a little bit there because I'm sure there's some mixed feelings about that.
There are. One of the interesting things is I read an article from a while ago. It said leverage is one of the true last market arbitrages. And it's not a leverage in the sense of going 2x a single stock every day and then having to deal with the volatility drag of that. I think there's some concerns there that you're not getting 2x the return of something over a one-year time rise, and it's not a single day, and there can be volatility drag, and you're actually underperform as a result of that. But prudent use of leverage, capital efficiency, the ability to have to take a part of your portfolio and stack different macro factors upon each other. That's what that Rule 18f-4 from the SEC helped unlock.
That is one of, I think, the true last arbitrages out in the marketplace, the ability to combine prudently uncorrelated return streams so your portfolio is not so directionally associated with what goes on in the S&P 500 or what happens from an interest rate perspective. I think that and the prudent use of it, of capital efficiency, of blending two assets together with low correlations to each other to create more durable and resilient portfolios, I think that is something where ETFs are going to continue to grow into. And we've made inroads in the last, say, 18 months of thinking through and trying to solve that problem of what assets, where do you use leverage, how do you use it? And the big one that no one really ever understands, or not understands, but ever talks about is what's the outcome in the taxable investor space?
Because if you utilize all this leverage and you use swaps, futures, options contracts, get all this leverage, but at the end of the day, you saddle the end investor with a large capital gain, that is a poor investor experience. So we think very diligently of when we're carefully constructing portfolios and utilizing derivatives and leverage, what is the worst possible outcome that could happen for that taxable investor?
How do you view levered ETFs as trading vehicles? How should somebody like me think about it, and how should the people in the audience think about them as just sort of an arrow in their quiver?
Yeah. So within our suite, we don't really have any pure levered ETFs that take the 2x, 3x mechanism. But what I'll say is they should be used as intended, as trading vehicles to take a directional market view to give you an extra oomph or extra volatility for that directional bet. And I would say levered ETFs, they were making headlines because the headlines said that AUM hit an all-time high. And while that was true, it really wasn't driven by a massive amount of inflows. They actually, levered ETFs had basically middling amount of inflows. It was because of the directionality of the leverage. It was on semiconductors, on single stock semis. It was on the AI-related ecosystem, and that exploded, as we all know.
In that case, if you had that directional view that you think that AI was going to just have this sort of J-curve boom to it, and you are looking at the range of solutions out there to invest in it, you have different levels of volatility in which you could do it. You could do it in sort of a traditional semiconductor ETF, or if you're willing to sort of take on that levered bet, do it that way. It's not for a long-term investment, I think is the big punchline of my answer, though.
Tactical trends, obviously, again, that speaks to innovation, but you have to sort of see where the world is going, and I think you do an extraordinary job of that, and we have a chart. What are you seeing in the tactical trends?
One of the things that happened this year was the awakening of sector investing. If we look at sector flows here on the chart, they kind of have been middling around for a little bit. Have been in outflows for some years. But this year, you're at records, and there's some things driving that. One is the AI ecosystem. Everyone started to gravitate towards anything tangential to AI and the ecosystem supporting it, whether it's the capital expenditures, semiconductors, cloud computing. Technology-related ETFs have about, I think, $50 billion of inflows. That's an all-time record because investors started to position for this productivity miracle that's out on the horizon. But you also saw as a result of the macro landscape with the war in Iran, the impact on supply chains, the impact on energy infrastructure around Venezuela as well.
We saw a massive amount of sector dispersion that hadn't been there because it had been such a tech heliocentric market where it was just basically tech or bust. But now you have the energy sector up 40% this year. You have the industrial sector led by aerospace and defense companies up quite significantly as well. You have materials companies as a result of the impacts on the commodity complex doing well. We started to see more cyclical exposures doing well as well. If you look at industrials, they have $10 billion. Materials have about $11 billion. Then one thing that's come up of late, as the AI trade has extended beyond the sort of first-order magnitude of semis and cloud into the ecosystem that could benefit from it in terms of healthcare stocks and biotech.
Healthcare and biotech stocks are areas that have had really strong flows over the last three months, and more so in that biotech industry where they are at record inflows and are finally, after years of being impacted because of high interest rates and maybe some weak profitability, where if you started from 2023, there were net outflows. They've actually, on a cumulative basis, have just turned into inflows. We are seeing more usage of sectors to position tactically because it is a more dispersed return environment where you have both macro factors impacting it, but also the AI trade really creating an expansive opportunity set to position because the range of outcomes in terms of AI is insanely wide, and so you're seeing investors position based on their thesis.
And again, if anybody has any questions, I will ask you to go to the mics in the final few minutes. I always look at the world sort of it is somewhat binary in terms of there are only so many investment dollars to go around, and obviously, we talk about it, semis, AI dominates the landscape, sometimes to the detriment of other sectors. You just brought up biotech, but is it that binary, or do you see things around the edges that are starting to emerge sort of outside biotech and those types of things?
Well, within sectors, you do see a good deal of rotation. So you will see buying in one and selling the other, too. There is a lot of sector rotation strategies out there. We definitely have seen areas where there is out of favor, so not everything in the ETF has an arrow pointing up. You see outflows in consumer stocks, consumer discretionary, consumer staples. Those areas of the marketplace have been hit hard as a result of rising consumer prices, even though consumption is quite strong. We do see margin compression in those spaces, and the underlying stock performance has been quite low, and we have seen a limited amount of investment. I think on the same token, when looking at it, even within the fixed income space, given how tight credit spreads are, even though there is a thirst and a demand for yield, we have seen outflows into high yield.
A lot of that just has to do with, there is not much spread compression left, and we have seen more rotations into ultra-short government bond funds because you can get roughly about a 4% yield without taking on as much volatility. So it is not just ETFs are hitting records and everything is arrow pointing up. There are some areas that are witnessing outflows, and a lot of it has to do with some of the tactical positioning based on market trends.
Artificial intelligence, again, topic we talk about. How is it impacting your life, your job, States, all those different things, the industry?
Yeah, there's a lot to that, and I only have five and a half minutes left to go through it. I think one thing for me is I do fear that the ETF due diligence will be offloaded to AI, where you just ask a prompt of, "Tell me the best ETF for clean energy." The AI model, and I don't know how every one of them is trained, but will go and look through marketing material. Larger firms, and I'm a larger firm, so maybe I shouldn't be saying this, but larger firms have more marketing material.
So you might not actually get what would be the best, and it still requires a lot of work. So we might become just too reliant on AI to serve us up our best investment offering because it's being trained on marketing material and other language and news articles, and you actually might miss the signal through a lot of that noise. So that's one thing I do fear of AI and the use of it. We just become too used of just typing in our prompt and getting our answer back and taking it as gospel. I'm susceptible to that as well. I think from an investment management perspective, we're using AI within our walls to manage some of the portfolios in terms of understanding trade rationales, understanding what is the inventory out on offer for some of our bond portfolios.
So that's helped from a capacity perspective, no doubt.
You have to be excited about what you do, otherwise you shouldn't be doing it. We had a conversation prior to this. We've had a couple calls. You're clearly excited about it. What do you see, like, the continued innovation we talked about, but what sort of gets you jazzed about your role in the industry right now?
Yeah. So I think it's a little bit of. I'll use a reference that I probably shouldn't, and everyone would just say I shouldn't use this, but in the movie, There Will Be Blood, Daniel Plainview goes and tells Elijah that, "I drink your milkshake." I want to have that moment for. Again, I have friends in the industry. We have our own mutual funds, but we're going to do that to mutual funds. ETFs will drink mutual funds' milkshake. What I mean by that is, right now, globally, mutual funds are around $40 trillion. Where we are from a trajectory perspective in our growth, we have $2.3 trillion on target for this year. That's my projection. We have had $7 trillion of inflows over the last 10 years. Mutual funds have had outflows.
You can only compound from a market return perspective, the equity risk premium for so long and build your assets. You need to have investment as well. Investors are using the ETF to build portfolios. Our projection's by 2035, the global ETF industry will be bigger than the global mutual fund industry, and we will then solidify as the default de facto primary tool to build portfolios, not just for index exposures or tactical trading, but also for active building outcomes, asset allocation, and just be that sort of one-stop shop. That is what I'm excited for because I love to make predictions. I like putting out forecasts. I like being wrong. I like being directionally correct. But I want to sort of put that out there and be like, "Yeah, we called that a good 10 years ago, and we nailed it.
I can't speak intelligently about the genesis of ETFs. My instinct suggests they were built as, again, for investment portfolios. But they become, you just said, for tactical traders, it's a critical part of what he or she does on a daily basis. Does that surprise you, or is that sort of the evolution?
No, it doesn't surprise me at all. If anyone, we can go chapter and verse on the creation of ETFs, because we launched the first one in the U.S., and a lot of it has to do with the SEC reading regulatory review books and policies out of the flash crash from 1987 and trying to solve for basically a physically listed futures contract to stop programmatic trading from having massive amounts of drawdowns in the broader equity market, so having physical collateral to back a futures contract. That's sort of the 20-second version. If you think about it from that perspective, it was a trading vehicle. It was an access vehicle. It was to help traders position in severe periods of market turmoil, and that 100% remains today. We see a strong correlation between the average VIX level and ETF trading volumes.
We see it within our suite because we have just so many liquid products across our sectors, our gold franchise, S&P franchise, all of these different things. We see a very strong correlation. When markets fall, volatility spikes, investors rush into the ETF ecosystem to transfer risk in real-time between willing buyers and sellers with transparent vehicles, with trading costs of about a basis point, and reposition portfolios based on their current market view. We have seen that through many, many, many different market environments. Years ago, if we had this conference maybe 10 years ago, we would've had probably a whole panel of, like, do ETFs cause market draw-downs? Can they actually withstand systemic market risk? We would've gone up here, and we would've showed how that claim or that narrative would be wrong.
Now we don't have to do that because we've lived through so many of these, and ETFs have passed the test time and time and time again. We definitely see them utilized as trading vehicles, as wealth accumulation vehicles, income generation vehicles. They really are sort of that army knife in terms of building portfolios, structuring portfolios, and helping position for whatever the market brings next.
It's always good to be on set with a fellow paisan. Ladies and gentlemen, Matt Bartolini. Thanks, folks. We'll see you a little bit later. Thank you, Matt.
Yeah. Thank you.
How about another round for Guy Adami and Matt Bartolini? All right. We just spent some time looking at how investment products are evolv ing. But now we are going to talk about something even more fundamental to the market, when you can actually trade. This is obviously we launched 24/5 a couple of years ago, and everyone is talking about how do we get more access to the markets, how do we expand trading opportunities? Talked about the keynote last night, how news and everything that happens over the weekend overnight. How do you actually build an always-on market? We are going to talk with the CEO of Bruce Markets, Jason Warnick, and he is going to sit down with our very own Robinhood Chief Brokerage Officer, Steve Quirk, and we are going to discuss how markets never sleep, the evolution of market access with Robinhood and Bruce Markets.
We are big, but our names are little.
Q!
Yes. How are we doing?
Good.
Did you guys sleep?
Yes
last night?
Yeah. Got some.
Some sleep? Okay.
Yes.
The markets didn't, but we did. I'm Steve Quirk, Chief Brokerage Officer here at Robinhood. Been here for about five years. With me is Jason. I'm going to let him tell you about his journey and let him introduce himself.
Thanks, Q. Thanks for having me here as well. I am Jason Warnick. I am the CEO at Bruce Markets. We are an equity ATS that operates during the overnight trading session. We run five sessions a week. They start at 8:00 P.M. Eastern on Sunday night, running through 4:00 A.M. Friday morning. As you heard last night, that is evolving over the next few months as we begin our journey with Robinhood as our partner to support Robinhood to fill the gap and offer a 24/7 trading week. It is really exciting. I have spent most of my career on the electronic trading side, mostly with equities, but have focused a lot of my time on innovative opportunities to continue to propel our market structure forward, enhancing things like execution quality, access, and addressing growing demand really across the globe for products, access, and evolving opportunity.
Yeah, I think this is going to be a fun session because Jason can describe a lot of what people just have an assumption that, of course, everybody wants to be able to act on news that happens in the after hours or on weekends, but there is a lot that goes into providing that capability. We can lean on him to dig into that a little bit. I think just setting the table, we have always known that there is a gap that exists for people who want to be able to take advantage of opportunities that are happening on weekends. There are a lot of market-moving headlines, you saw some last night, that are happening on the weekend. We covered the 24/5 session. The weekend has been the gap.
In terms of our volumes, I will let Jason talk about volumes overall, the volumes have continued to grow from retail customers, both here in the U.S. but also globally, that have interest in many of the names that are most popularly traded across the globe. I think what we have noticed is from a behavior standpoint, there are a lot of event-driven volume spikes. If you said, "What is the busiest day of the overnight session that currently exists?" It is Sunday night. We can all figure out why, because you have two days of news bunched up. Right away at 8:00 P.M., when that market opens, there is a lot of activity based on what is happening. That itself paints a picture of why the weekend is so important. I think the other areas where we see real big spikes in volume in the overnight session are earnings.
When Nvidia has earnings, huge numbers, because of course you get the results, you get the guidance, but then there is the reaction to the guidance that sometimes moves that stock in ways that people did not assume it was going to move it in. Then when there is events, any of the events that have been happening that are geopolitical events or other events just spike volume like crazy. Jason and I were talking about this a little bit last night. The skepticism around round-the-clock trading has always been, "Oh, who needs to be trading at 2:30 A.M.?" "Is the liquidity there?" The liquidity question has been answered. There is liquidity there.
But as far as who needs to be trading at those hours, if you think about it through the lens of a Robinhood customer who's newer to investing, we have 28 million customers, half of them are brand new to brokerage. They're actually kind of puzzled by a model where this market isn't open all the time. Many of the asset classes already are, crypto and others. Amazon doesn't close. Why would they? It's an electronic marketplace, right? In their mind, if I do my research and stock ABC, I think, is a great buying opportunity at $10, and I set a limit price to buy it at $10, I really don't care if I buy it at 3:00 A.M. or at 2:00 P.M. It just doesn't matter to me.
Where I think the narrative kind of went for a while with people was, "Oh, people are going to be day trading at 3:00 A.M. back and forth." That's not really what we see happening. So I'll let you expand on that a little bit.
Yeah, I think you hit the nail on the head. The market-moving news does not stop. It is a 24/7 business, right? It is delivered faster than ever and more broadly than ever, right? This is a global world that we're operating in. You also have global corporations listed in the U.S. that are trading on our markets, and the news breaking during their normal business hours. But I think one of the pieces you talked about really was the access, the element, the convenience, the optionality, right? In the U.S., you've got investors that may want to come home from work and be with their families, cook dinner, put the children to bed, and ultimately, by the time they have the opportunity to actually sit down, evaluate their portfolio, evaluate market news, and react, it's past what have been traditional market hours, right?
To be able to have that convenience and that flexibility to do it according to one's schedule, it's proven itself, and you've seen it with the volume. The overnight trading volume across three ATSs that we track, Bruce included, year-over-year from August to August has gone from 22 million shares a night to roughly 109 million shares a night across those three ATSs. From a notional perspective, we're looking at $1.2 billion in executed notional to $5 billion in executed notional. So that's nearly a 400% increase from a volume perspective. So the demand is there, it's growing. It's largely thanks to the resiliency that has been provided to the market, but also the reduction in the barriers of entry from firms like Robinhood that have promoted this and really provided the access to the customers.
The other piece I would say is, you talk about why would somebody want to trade at 2:00 A.M., right? When we think about that question, we like to use a metaphor about driving. I am going to ask you a few questions here. Hugh and I share a home state of Wisconsin.
We are Packer fans.
There we go.
Packer fans.
Yeah.
Not a very good year, but hey, we're going to fix that.
There we go.
Hopefully.
Indeed. I take it you still have family in Wisconsin.
I have many family in Wisconsin. Yeah.
You drive back to Wisconsin from time to time.
I do.
How often do you drive at 2:00 in the morning back to Wisconsin?
I try to avoid it.
I would think so.
If I can.
In the event of something similar to what you mentioned, a corporate event, let's say the death of a CEO, a disruption to production.
A family event where ultimately you wanted to drive back at 2:00 in the morning, you would.
And at the time, you would be happy to know that your vehicle is there, insured, fueled up, safe, reliable, resilient, ready to go.
Yep.
Correct?
Yep.
Well, the same thing holds true for an investor, right? Whether that is retail or institutional.
Right? Just because the market is 24/7 does not mean you need to trade every second of the day. But to have these opportunities available because news has turned into such a 24/7 quickly distributed product, right, these opportunities are there. So the confidence that you gain being able to drive back at 2:00 A.M. with that reliable vehicle is the same confidence that we want to instill to investors with the platform we are offering, the partnership with Robinhood, to make sure that access is available as news breaks, and investors can feel confident in their ability to manage that portfolio.
Yeah, first thing I would say is our customers, we know this, 60% of them do their homework, education, research when the market is not open. So they are a little puzzled that they cannot make that trade or investment when they are doing that research. So this is kind of their sweet spot. But I would also say, if you think about it, the news cycle, the technology, everything has moved here, and the hours have not caught up to it, right? I have a phone that gives me information 24/7. I have the ability to act on that 24/7, but I need to be able to do it in a liquid marketplace that is open. So it is just playing catch-up, and we are going to close that gap.
I thought what would be a really fun thing to do, because Jason is a student of history, is to do a little quiz before I let him unleash his historical knowledge on us. Here's the question. By the way, there's going to be a prize. I think it's a T-shirt or a hat from the store. Has there been equity trading on weekends? I see a couple. Here it is. I see a couple people from exchanges in here, so no cheating. We're not going to call on you. Has there been equity trading on weekends previously, and if so, what year did that start? Closest to the pin here. Anybody? There's mics up here, or you can just yell out or stick your hand up. By the way, there's no harm in taking a guess.
You get a hat and a shirt.
Yes, 2006.
Sorry?
Yes, 2006.
I couldn't hear you.
2006.
2006.
2006? Okay.
Another one here.
Any other guesses?
2004.
2004? Let me guide you.
2012.
I would go the other way.
1863.
We're getting close. These "Price is Right" rules are, what-
I think you're winning. Go ahead, Jason.
Let's go there. Yes, we're going back to the 1800s here.
This is yours.
I think it's really interesting. We're going to talk a lot about the development of technology and to support growing demand. If you look at the history of our markets, that's exactly the story that's told. So you go back to 1792. 1792, you've got the Buttonwood Agreement, right? Essentially the birth of the New York Stock Exchange. At the time, and for the next almost 80 years, markets don't trade on a continuous basis. There is no ability, even during set market hours, to trade throughout that session. There's one or two call auctions a day. Everything concentrated to those two events. It's not until 1871 that you actually see the introduction of continuous trading, and that was five hours a day. A few years later in 1887, a Saturday session was launched, two hours, 10:00 A.M. to 12:00 P.M. on Saturday. This continued, until 1952, right?
Saturday session was over. We started to see the birth of an actual five-day trading week as we know it now. Come into the '60s. This is where the popularity of trading begins to pick up. Now, remember at the time, all of this is a manual process, including not only the trading side, but the back office side as well. So significant amounts of manual processing, significant amounts of paperwork. In the '60s, the trading gets so popular, we see 10 million to 13 million shares a day trading. Just to put things in perspective, in September, I think we're averaging roughly 17 billion shares a day.
Things have come a long way. At the time, with that manual processing, that was a lot. What happens? 1968, Wednesdays get shut down. We go to a four-day trading week. Really interesting, and that was really known as the paperwork crisis. They needed Wednesdays to actually catch up on the back office. Fast-forward, a little later in the '60s, we start to see the introduction of extended hours trading. Ultimately, it is really an institutional space, and this is after hours where large asset managers are matching trades to find natural counterparties. 1985, we see the establishment of the 9:30 to 4:00 trading day as we knew it, I should say.
Things get really interesting in the '90s and the 2000s.
He is looking at me because I may have been around during that period. That is what that look was.
In the '90s and 2000s, you have the online brokerage platforms addressing retail demand and having a major influence on our actual market structure. We start to see the pre-market and the post-market expand. Over those years, we end up with what was the 4:00 A.M. to 8:00 P.M. trading day. Obviously, we are in a world where we have 24/5, and in a few months we will have 24/7, thanks to Robinhood here.
It is really interesting as you look back on this history and you see how technology has been forced to keep up with the demand, how the markets have really committed themselves to doing so, and it speaks to really what our mission is here with Bruce, which is a commitment to make sure that our equity markets really stay in front of what is this global opportunity, this multi-asset ecosystem where all of these assets, whether we are talking about perps or futures or crypto or equities, I am sure eventually options and fix. These coexist, and that coexistence creates opportunities. It is not about whether one asset class is better than the other or this or that. They coexist, and there are opportunities and there are tools for investors to really manage their portfolio.
Using that technology, we are determined to make sure that our equity markets really stay up top.
Yeah, but I think you brought it up, even if you want option trading to follow suit, the basis for that is having the equities because you need reference.
Absolutely.
That is going to be important. But, in terms of the rollout, the way that we are going to proceed will be with a limited number of symbols and then quickly ramping up as we become more comfortable with the liquidity. But this is the same way we rolled out 24/5, so we will follow a similar model, but you should anticipate that the goal is to get to the full suite of tradable assets that exist in the normal session, the day session, if you will. But Jason, I know we talked a little bit last night after the announcement, and I know you had a lot of interest from a lot of entities, and I do not know how much you want to go into there, both in the U.S., but also globally.
Yes. Well, your news from last night has made its way across the globe. I woke up this morning to inbound interest from several firms in the APAC region, especially South Korea, which I think has made the news several times as a large participant in our equity markets. We now have historical high levels of interest globally to invest in our markets. That is, again, as I said, part to the opportunities at the market level, but also the reduced barrier of entry that brokers have offered today.
It is growing, but it puts on us really a mandate to make sure that we are delivering a solution that can be trusted globally as well, right?
Yeah.
Not only by your customers, but all of these investors around the globe that help create a healthy market ecosystem, right? The more liquidity, the more participation you get, the more competitive you get at the market level. That is ultimately what drives compression of spreads, right? Better prices for investors. It forces firms like Bruce to be innovative, right? To bring opportunities just like this, weekend trading for the first time, and that is coming as a result of the demand that is coming from retail. When we think about change in our marketplace, it really comes from two things. One would be a regulatory mandate, right? Regulators change a rule, we react, we have to build, we deliver, everyone has to be compliant by an effective date. The other is a market-based solution, right? 24/5 trading and now 24/7 trading, that is exactly what that is.
It is addressing demand and delivering to the market a solution that we as market participants know is in the greater interest. In order to do that, you really have to continue to build, to deliver institutional-grade technology, right? To deliver a customer experience that has that confidence and forces them to adopt. Look at what the retail investor community has done with 24/5 so far. We have exchanges reacting. Exchanges will be live during the overnight trading session in the next few months. You have the institutional community reacting to this news, preparing to participate. So the overall market is just going to continue to get bigger and create more opportunity for the participants.
Yeah. I think what could be interesting for the audience here is how does this happen? What has to happen just from a background standpoint for this to be facilitated? Because obviously there are counterparties with respect to market, all these things that are important to make sure it is a robust and liquid market. It doesn't just happen. We can't just will it to happen.
Right.
Just, not too wonky, but you know.
Yeah. There's a lot more than just keeping the lights on for two days.
Yeah
Is really the way to think about it. It starts with the technology, right, for the matching engine itself. Bruce ATS, what we do is essentially accept orders from brokers such as Robinhood. We put out our market data so that brokers like market data, and their customers can see the bids and the offers that sit in our book. When opportunities arrive for orders to cross, that's essentially what we do. We serve as the marketplace for effecting those transactions, and we complete all of the required reporting to the tape, so you can see all of the last sale information. We require reports to regulators, to back-office services, so on and so forth. So, at its core, we are the marketplace. Now, in order to make that happen, there's more than just, as I said, keeping the lights on, right? There's a clearing side of things.
We have to work closely on the clearing side to make sure that the back office process, the risk associated with that, interacting with the central clearing party, all of that is available. We are working closely with regulators to make sure that what we are delivering is, one, compliant, but also recognizes in the interest of a progressing and modernizing equity market. Also, as you mentioned, liquidity, right? The more liquidity, the better that is for all of the investors involved. We are working closely with large liquidity providers to ensure that there is a concentrated and healthy book of liquidity available for participants when this launches later this year.
Mm-hmm. I think that is the one thing that we have had experience with is the liquidity providers, the market makers that are going to be there to provide that essential liquidity. When you think about it, they actually have to take a little bit of a leap of faith because you do not know what that volume is going to look like. But I think in talking to many of them, and we have for years, they have been very pleasantly surprised by how much growth there has been and how robust that trading, at least as demand is, and we can only say from a retail side because we are not institution, but I think from the institution side, you are having the same conversations and demand, right?
It has taken a little longer to get there.
Yeah
Certainly, this was a retail phenomenon.
Yeah.
This was driven by demand at the retail side, both internationally and domestically.
We have seen that in the growth. The institutional side is responding, and I think it is really interesting that retail has become such a force representing 20%-30% of our traded volume every day in our markets coming from retail. There is an opportunity to truly affect the future of our market structure here, and we are seeing that in real-time with 24/7 trading. We are excited to be part of that. We are excited to welcome the institutional community in, and there is budding interest there. As I mentioned, the exchanges will be here soon. Yes, we are watching a maturing market ecosystem that has really been driven by retail investors.
I find that fascinating to think. When you think about asset classes and capabilities, many of them start with institutions, and retail is kicking the door saying, "I want in." Traditional futures, those were really not designed for retail customers initially. Retail customers now are a decent participant there. Then you have other asset classes which are completely retail, and institutions are adopting those. Think of event contracts and some of those things, which now 100% retail, and now institutions are working their way in. It is always fascinating to see which way this goes, which is the starting point. I think to your point, with retail continuing to be a bigger and bigger percentage of volumes in every asset class, my anticipation is it is going to be driven by retail more so. Basically, everybody here. We only have a couple minutes left.
We have three microphones that are in each aisle. Curious if anybody has questions on any facet of this trading that they would like to ask. I would give you another T-shirt, but I do not have one. I can get one. For the first question. Here we go.
Sorry. This is a very specific question. I trade at all hours, and I noticed that sometimes when I do orders, it is only market orders. You cannot trade limit orders. Is that going to be changed or different when we have the 24 or 25, when the first markets open?
I think it is only limit orders, not market orders, right?
Oh, I am sorry.
Yeah.
It is a great question. If you look at our broader market structure, the concept of a market order, the availability of it, really does not exist outside of the core session. That is one of the protections that has been in place for investors for many years. It has not changed. That is not part of our current launch plan. Whether that changes in the future, we will see. The reason I really like the question, though, is that, as I mentioned, we have this growing level of competition amongst this overnight ecosystem with the exchanges coming on board. It is a question that could be asked as we see this evolve, and we see this continuous trading day continue to develop. We may see changes of that nature. But for the moment, we are going to remain limit orders only.
Yeah, I think the rationale was when it starts, it is not going to be as robust as the day session. So those protections are in place so that you do not gap a stock. But I would anticipate that if we get to a place where the volumes are similar to what they are in the day, then the capabilities would be similar as they are in a day as well.
Thank you.
Of course. What are you trading all night?
Individual stocks that I already own.
Oh, that is very cool. Is it based on news or just that is your-
News, after-hours sometimes.
Yep.
When futures start-
Yep
It is very volatile.
I find that sometimes I can get out of positions before opening.
Got it. Okay. Very cool. Thanks for the question.
Hello.
Hi.
Yeah, so for the timing of the market, has that been mostly driven by regulation or just back office reconciling, that kind of thing?
The timing of this capability being launched, right? Yeah. I'll let
Yeah. Part of it was regulation historically, but right now, obviously everything we're doing is pending regulatory review. But from a technology perspective, there's no reason the market should be closed. We've seen that with other asset classes, equity, certainly, where we've been at the forefront of this for years and years in the U.S. Continues to be there, should be there. The technology can support it. From a regulatory perspective, there's actually nothing preventing us from putting a trade up on a Saturday today, but we do work closely to make sure that the solution we bring to market, again, is in line with expectations, there's clear understandings, and also investor protections and market integrity always being top of mind.
So globally, are you guys working with other markets globally to also enable this or?
What we've seen, I think as the U.S. has really set a model here, we've set a standard. And Bruce came out of the gate when we launched in 2025. Our goal was to deliver a new standard in overnight trading with the institutional-grade technology, with our consortium of strategic partners, Robinhood, PEAK6, firms that have stood behind our business and brought solutions to their clients, making sure that it is something that they feel confident in and shows the resiliency that the market deserves. What we've now seen is we've seen the first levels of interest coming out of markets such as London and Korea, where we're hearing of interest in developing 24/5 solutions in those jurisdictions. I think the news from last night of the U.S. starting to go towards 24/7 really will get further interest, but yes, I expect developments in these other jurisdictions as well. Thanks.
Thank you for the question.
Yeah, good one.
You have one more?
You said trading revenue went up 400%. Who is the majority of that increase?
The stat I spoke to was the increase in trading volume overnight. We track three ATSs that operate during the overnight trading session, of course, Bruce Markets being one of them. It is the executed volume on those three ATSs from August to August was up 389%, to be very specific.
Yeah, but you are saying who is the composition of it?
Yeah.
The c-
Who is the main culprit?
Yeah, the-
Is that institutions, retail?
Oh. It's primarily a retail market at this point plus, we'll call it liquidity providers and market makers. We're beginning to see the introduction of the institutional community, as I mentioned. One of the stats we find really interesting is that the overnight market is an anomaly in that retail is actually trading with retail.
Yeah.
As we look at our stats, we see retail versus retail on, what we estimate is about 25% of the shares traded. Which is a really interesting factor of the overnight. That will change over time as institutions come on board and the market expands, but it's a very retail-driven market at the moment.
Thank you.
Cool. I think that wraps it up. I want to thank Jason for being here. Appreciate it, and look forward to doing a lot more.
Likewise.
Yeah. Thank you, and thanks for coming.
Thanks, everybody.
Appreciate it. Thank you, Jason. Thanks, everyone. We're almost at lunch, but we have one more really great session coming up here. We just went behind the scenes on the always on equity market, but for our next session, we're staying behind the scenes but moving over to my favorite market, the futures market. This is easily my favorite transition of the day because apparently I don't have to go anywhere. So we're bringing one of trading's leading podcasts, "Chat With Traders." Anyone listen to, hear of "Chat With Traders"? Highly recommend it. They talk to some fantastic old school traders that have been very successful, a lot of the market wizards, a lot of former professional traders.
And so we're taking that, and we're bottling up into a fun discussion here where we take the point of view of a retail trader, the point of view of a market maker, and the point of view of the exchange in between. So joining me are Kevin Avery, host of "Chat With Traders", Rob Creamer, President and CEO of Geneva Trading, and Craig Bewick, Senior Director and Global Head of Retail Education at CME Group. And we're going inside the futures market from your screen to the exchange to the market maker on the other side. This is "Chat With Traders: One Trade, Three Perspectives," sponsored by our friends at CME Group.
Welcome, Houston. How are we doing? How many here have heard of "Chat With Traders"? Show of hands. Yes. Let's go. Well, hey, I'm Kevin Avery, host of "Chat With Traders," and the theme of this year's summit, Engines of Creation. And it's very fitting when you look at how Robinhood keeps innovating and creating. One reason Robinhood keeps innovating is that its people are also its customers. You guys saw firsthand Steve Quirk. Q was on just a second ago. I love Q. In fact, we learned last night he invented the QR code. He's great. So he was on "Chat With Traders," amazing insight. And Robinhood started by serving a generation of first-time investors. That's you. The 1,500 people that showed up here today, that's the reason we exist, and we're able to do this. So give yourselves a round of applause.
Robinhood, they introduced, it was mobile first, and then commission-free access, their increasingly sophisticated tools, and they continue to push and democratize markets for more people. As Q put it, the playing field has been leveled. Well, today, we're taking one futures trade, and we're looking at it from three different perspectives. We have Obi, the retail trader, Rob, the professional market maker, and then Craig, the exchange perspective at CME Group. So let's meet the panel. Obi, I want to start with you. You're Robinhood's education lead, but you're also a trader and a Robinhood customer yourself. So give us a little background on your path into the markets and what your role looks like today.
Yeah, Kevin. I will now be, next year, 20 years in the retail brokerage industry. I started in 2007 at a firm in Chicago that focused on options trading, and found my way to a futures desk around 2010. Speaking of markets never sleep, I worked 2 years on an overnight trading desk, so I literally didn't sleep for 2 years. That's where I got involved in the futures market and helping customers, whether it was placing orders, monitoring the order routing, working with customer service teams overnight. But during that time, I got interested in trading futures. Going through the same path as you guys, I've never been on Rob's side of the desk.
I've gone through the same journey and fits and starts. I tried this indicator, then I changed to this strategy and went from this product to that, has helped me as an education lead, hopefully create good content, engaging content that helps get you guys from A to Z and to a point where hopefully you can be a successful trader.
Excellent. Rob, you joined Geneva Trading as a trader yourself in 2001, and eventually you became President and CEO. For someone who may not know Geneva, what does the firm do, and how did you get into this role?
The firm has evolved, as you would expect, over the years. We've been at this for 27 years now. The firm is a principal trading firm, so we trade our own capital. We're not managing money for anyone else. At the core of what we do is to identify and develop professional trading talent, and we support them with our capital and professional trading technologies to allow them to become successful. The firm is a diversified organization, so we have groups that are focused purely on market making. We have those that are doing systematic trading or algorithmic trading, and those that are also discretionary trading. We're involved in all aspects of it. As for your question about how I got into it was almost a fluke. I spent the first part of my career in the tech space.
I was a tech entrepreneur. A friend of mine, one of the co-founders of Geneva, gave me the opportunity or encouraged me to come over and see what he wanted to do and how he wanted to build an electronic trading firm. I went over, and I was taught to trade by him. First went over in late 2000 and started in 2001, and the journey just kind of evolved from there.
Excellent. Now, Craig, you are the global head of retail education at CME Group. Give us a little background on your career, and at a high level, what does CME play in the futures ecosystem?
Yeah. I started in futures and options right out of college, so I have been in it my entire adult life, going back to the mid-90s, as it were. In fact, I have known Rob, and it is a small community back in Chicago. We have known each other for probably 25 years. Most recently, I spent about nine years at one of the market-making firms in Chicago, and then joined CME in 2016 in this retail role. I think what is kind of interesting about that story is that in 2016, the role was kind of sold to me as retail is a high priority at CME.
Yeah.
We see it as a growth area at CME. That was true, but we could not have possibly predicted what was going to happen in the last five or six years-
Yeah
with the explosion in retail trading. It has really been a fun ride. As far as CME Group itself goes, by many measures, we are the largest futures and options exchange in the world, by volume, I think by market cap. I think more important to maybe this crowd, I think we also offer arguably the most diverse set of products among any futures exchange in the world. You can trade equity indexes, you can trade single stock futures, interest rates, foreign currencies, things with feet like pigs and cows, metals, energies, cryptocurrency futures. There is really a lot of different options for people that want exposure to all these different things.
Excellent. We are going to get into why futures too, but Obi, let us go back to you on, how does not only leading education at Robinhood, but you are also a customer. I learned that with Steve Quirk in my interview with him. Robinhood is so customer-centric, and they focus on the customers, but they are the trader themselves, and that is how they know how to bring that product to the market. So how does that change the way you think about educating traders and then building out these future products?
Yeah. First off, I want to get a sense. How many people here trade futures? How many people are curious about futures? Then how many people are like, "I have no idea what a future is." Okay. That is a good mix. I like to use analogies, so I apologize. There will be a lot of analogies over the next 51 minutes, but this reminds me of when a golf equipment company, like a TaylorMade or Callaway or something, are building clubs for golfers, right?
Safe product placement.
They work with the Rory McIlroys and the Scottie Schefflers.
Yeah
They hit clubs, and they hit them and hit them. The feedback from the golfer to the builder creates this wonderful cycle.
Yeah
Hopefully puts a fantastic product in someone's hand to execute a job. When I think of Robinhood's trading products, that's what we're trying to do. We're trying to build the best trading platform so that you can execute a job or a task as a trader. The product itself does not make you a good trader, but a bad product basically stops you from being a good trader. We're trying to make the best experience possible. When I sit down with the product teams, they come to me and other people within the firm that trade futures, and we're like a focus group for them. The same things you guys want, OCOs, and these indicators, and custom charting, and all of that, we are advocating for that from the inside on top of your guys' feedback.
I think it's just, once again, having someone who understands the product as a trader, but then also being on the other side of the role in terms of working with the product teams and engineers, it's just a great development cycle.
Perfect. And Craig, you were speaking about how this market has just exploded, the future space. Why do you think retail participation, you said over the last 5 years. Why do you think it has grown tremendously? What makes these products attractive to the individual trader today?
Yeah, I think that's a great question, particularly for this panel, because I think what makes futures attractive to individuals is the same thing that makes them attractive to the institutional players, right? We've got to start with the capital efficiency of futures. So it's this idea that you can make your money go further. And I think whether you're Obi, whether you're a proprietary trading firm like Geneva, whether you're an international bank or hedge fund, we're all capital constrained at some point. And futures have that capital efficient nature to them. Now, again, we never talk about that. And another way to say that, quite frankly, is leverage. We never talk about that without also talking about the other side, right? Which means that you have to be a very strict, disciplined trader when you're trading with these products.
That's, I think, the main reason that people are attracted to futures. Beyond that is the 24-hour access. Then I think in the last 5 to 10 years, the access in general, right? We have firms like Robinhood that are now providing the technology and the access to these products that make it just easier and more approachable for individual traders. I think we're going to get into the sizing that we've done, in a little bit.
Yeah, and a follow-up question to that, Craig. You say futures are very capital efficient. We can control more notional exposure with less capital. But is that also what can get some people in trouble is having that amount of leverage?
Sure. We never sugarcoat that. We think it is an attribute that does attract a lot of people to futures. For example, let us say you wanted exposure to the S&P, and you were looking at the SPDR ETF or the E-mini. If you are trading on margin, as they say in the stock market, you are required to put up at least 50% of that exposure that you get. If you are looking at that same exposure in the futures market, that is more like 5% or 6%. So in order to hold the same amount of exposure, you put up less money. That means that you are also risking that money. So again, you do have to be a very strict risk manager when you are trading these more sophisticated products.
Absolutely. Now, Rob, I want to come to you. You have developed and hired traders who have achieved eight-figure results, you were telling us. What is the role of a market maker in this industry? Are you simply making the market, or is there more involved in it? Do you actually take directional trades and have bias there?
Our organization now is quite complex. So we have market-making groups and directional trading groups. A market maker, if you really think about it, there are times when individuals, farmers, oil companies, want to come to a market and they need to hedge, and there is not liquidity there for them. We provide that liquidity. We provide two-sided markets in the products that we trade. We try to provide fast, fair prices for everyone. But of course, we do have, in doing that and doing it well, perhaps a directional bias. It might be shaped by our own risk and inventory we have on what we are seeing in the market, and it could be informed by a lot of correlated or other markets that we are observing. So our approach is very complex.
Okay. Now, Obi, I want to come back to you because now we just heard the professional side. Let us get the retail angle on this. What do you think a key difference is between a trader like you, a trader like Rob?
Yeah. You just think about the concept of a professional versus retailer. Let's just use sports again, like a professional versus an amateur. If I was playing a round of golf with the world number one, Scottie Scheffler, and we went to a tee box, right? We both have a club, a ball, and we're playing the same hole. I may look down the fairway and say, "Man, I just want to hit the ball straight and far, and hopefully, it goes where I'm hoping it goes." Scottie might get on the tee box and say, "All right. The wind's coming out of the right. I've got water left. I've got a bunker at 280.
I'm going to pull a three wood, land it on the right side of the fairway because the tee is back left on the green." The amount of times that a professional does something, it creates a habit and a routine and a process where it's like breathing for them. I think for newer traders and retail traders, there's a mix of still learning the fundamentals while putting on risk and understanding the craziness of the market. Our brains are just not as adept to make all those decisions. Plus, the amount of resources that a professional firm has, which I think with the launch of all the agents and everything that we're doing, is starting to narrow that gap. At the end of the day, Kevin, it's really about if this is going to be your full-time job, there's just such an advantage to that versus-
Yeah
Hey, I'm going to trade one hour a day" as sort of like a side of the plate task, or even using the word hobby. Trading futures really isn't a hobby. You really have to approach it with some discipline and rigor.
Excellent. Love that. Hey, I just want a quick note for the audience. We have three microphones here, so while we're in discussion, go ahead and think of some questions you may have, and towards the end, we'll do a Q&A. So you'll line up at these mics and just go ahead and line up towards the end in about 20, 30 minutes, and I'll point you out. Now, Rob, I want to go back to you. So retail traders sometimes think market makers, maybe they're just providing liquidity by capturing that bid-ask spread. Is that really all market makers are doing? What risks come to you for providing liquidity?
I can't speak to everyone in the industry, but I would say based on my observation and discussions, most of the larger trading firms like ours are multidimensional. We've got groups that do provide market making, providing liquidity in the various contracts, primarily in futures. They are also developing directional biases. They may have strategies that are directional in nature. It is complex. I think if you were looking at it, and I've heard stats about people quoting, and I can't confirm whether they're true or not, maybe Craig could. But somebody once said like 80% of the revenue or P&L that's generated in markets is from liquidity taking or directional trading, not necessarily from the market making. I would guess that could probably be right.
Yeah. We don't necessarily comment on the customer mix like that, but certainly, the ecosystem doesn't work without the market maker, without the end user, and that end user is so varied. Like I said, it could be a multinational hedge fund, it could be a bank, it could be an individual like Obi. And really, it all comes together to make that market work, that market efficient and liquid.
Okay. Yeah, I want to debunk some myths here, too, if we can, because a lot of traders think that people are after their orders. By show of hands, how many of you have been bottom or top ticked on a trade? Some of you have never traded before. Well, some traders, they think that the market's out for them. Craig, coming to you, is this a myth? Can you debunk that?
Yeah. I think for this question, I'd probably actually draw on my past experience when I worked for a firm similar to Rob's, and obviously, I'm not going to give out any trade secrets here, but I would say, at least in my experience, and again, like Rob said, we can't speak for every firm out there, it's a resounding no. Right? And our job was simply, and that literally is the job of a market maker, is to provide bids and offers so that the end user can transact on them. We want the end user to transact on our bids and offers-
Yeah
but we have absolutely no idea who's hitting our bids and offers. I am saying "our," this is a past life of mine. But it is something I hear a lot. What I say to people is, if you are an individual trader, those are the markets you want to be in. You want to be in the market where there is 100 firms like Rob's that are competing for that trade. And believe me, it is as competitive a space as it gets. So they are competing with each other for your trade, and again, that is the market you want to be in, because if it is good enough for those hedge funds that I just mentioned, if that market is good enough to deal on for them, I would suggest it is good enough, and with all due respect, Obi, for Obi.
Yeah. It is funny, back in the day, I had a trader who used to. This is a professional trader, so people are feeling like the world is watching them. He used to say, "Do they have cameras on me?" He would be in a trade, he would feel like somebody must have seen something.
Yeah.
The markets are like that in some ways.
Yeah. We feel like they are watching us, they are after us. So, I want to come back to you, Rob, because you were actually speaking on this a little bit earlier, how orders are kind of anonymous these days. I spoke to a trader recently on "Chat With Traders." They said back in the day that there used to be kind of like an order ID, and you would kind of know who is on the other side of it, but these days, you do not know. If you are providing liquidity, adding, removing it, you do not know, because the orders could be broken up, right? It is all anonymous.
We have no idea who's on the other side of any trade that comes at us, and sophisticated players are slicing and dicing up their orders. It's really hard to decipher who you're getting your fills from and what's happening. You ultimately are just managing your strategies and your risk, and you should be accepting them and wanting them at the prices that you're quoting.
You're right. I grew up with Globex over the last 25 years, and in early days, the exchanges, and I think this was common amongst all exchanges, did display that counterparty. And you would hear things like, if this bank ABC was on the other side of my trade, I knew I had a 30-second wick on that trade. Those days are long, long gone.
Long gone. Well, Rob, how do large professional traders, they have bigger size, how do they manage their orders? Do they break them up? Do they hide their size? Do they approach liquidity in a different way?
Well, the answer is yes. There's no one way that is a correct approach. There are a lot of firms that will try to manage out of positions and kind of manage their portfolios with larger blocks or executions over longer periods of time. Others just have the philosophy of, "Once I'm ready to get out, I'm just going to go to market, and I'm going to get out of my position." So, really, there's no right way, wrong way. But to the point of they do, and as we do, we do not want to signal to the market our intention, and we will try to get out of our positions in ways that won't create a market impact.
Excellent.
As much as we can.
Yeah. Great answer. I appreciate that. Craig, back to you. We are seeing a lot of new traders enter this market. You have been around for a while. You just gave us some examples from back in the day. So what gives a trader longevity? What separates the trader that is still here five, 10, 20 years from now?
I do appreciate you saying I have been around a long time, rather than calling me old, thank you for that. But I have.
Okay.
I think it is very simple. A good trader is synonymous with a good risk manager. I think we all have, whether it is with myself, whether it is Obi, whether it is a firm like Geneva, we all have indicators, we all have strategy, methodologies, whatever it is that makes someone decide to put risk on, to put a trade on.
Yeah.
None of us know if the market's going to go up or down. What makes the good trader is that we know that not all of those trades are going to go the direction that we thought they were. So it comes down to knowing when it's not, being able to sort of cut those losses, and live to see another day and another trade. We used to tell prospective traders that would interview us, a good trader is confident enough to put on the trade when they think there's an edge, but humble enough to take it off when they're wrong. And those can be juxtaposed sometimes. Sometimes that's not the easiest thing to sort of learn, and it's not in terms of self-discipline and mental discipline, you've kind of got to learn that skill.
I've heard it put another way. I had an interview with Peter Brandt recently. Did anybody watch that one on "Chat With Traders?" Got one fan, yeah.
Yeah.
Strong opinions weakly held. It rings true. Obi, you've seen some newer traders' mistakes in real-time. Tell us about what are some common ways that traders get into big trouble.
Yeah. Like I said, I've been in the industry almost 20 years, and I've always been on the retail side, so having the ability to take phone calls from customers, and when we do that, obviously, we bring up your account, see what you're doing, answer your questions. I'm going to share a personal story here.
Okay
because I want you guys to. I'm not anyone special. I'm just like you guys. My first trade on the S&P E-mini. I started on the overnight trade desk in January of 2010. I spent six to eight months learning. I got my Series 3. I started paper trading. I discovered our Lesson from a Legend in Miami, Mark Fisher. I learned his trading methodology. I set up my charts. I had all my levels, my opening range, my pivot points, and I decided, okay, today's the day. I've got some capital. I funded my account. I think it was like $8,000, and at the time, Craig, the margin was like $4,000. Now it's like six times.
A little bit more.
This was the day. I get home from my overnight shift. Market's open 8:30 Chicago time. It's an opening range strategy. If it breaks below the pivot point, you get short. It breaks above the pivot point, you get long. Your stop gets placed on the other side of the opening range. Mistake number one, you lose the forest for the trees. Too many times I see retail traders staring at their charts with blinders, and I did this on this day because we broke below the pivot point. I got short one E-mini. I put my stop above the opening range, just like I was supposed to. Then all of a sudden, oh, I'm up. It's going down. I'm like, oh, I'm up a couple of hundred bucks. I'm feeling great.
Then all of a sudden, just the biggest green candle just went broop, right to the top of the opening range. I was stopped out in five minutes. I lost $1,600, which is about 20% of my capital in one trade. Mistake number two, trading too big. The moral of the story was I was so focused on my charts and my indicators I failed to realize on TV at that moment, former Fed Chair Ben Bernanke was testifying in front of Congress announcing QE2. That was the last time. I think I was short 1168. I remember that level. That was the last time the S&P ever traded at 1168. I bottom ticked the S&P in 2011 because I wasn't paying attention.
You bottom ticked. I didn't see your hand up earlier, Obi. Well, hey, love at first sight, right? Look at where you are today
Yeah
after that. Rob, let's come over to you. From the professional side, what separates the trader to survive and adapt from the ones who don't?
Well, I'll go to Obi's golf analogy.
Yeah.
The basics of the game are all the same. It doesn't matter if you're managing an enormous capital base and trading in bigger size or a more complex portfolio with more sophisticated technologies or approaches to trading. The reality is a great trader, and Craig mentioned this earlier, is a great risk manager. You have to be disciplined, focused every day when you get into the office. You've got to be prepared for what's coming for that day. You've got to do your homework, you've got to have a game plan, and you've got to execute it, and it does not change. If you're going to be a trader.
Risk management is really the number one theme. Some of you maybe have heard of the great Jack Schwager. He was on "Chat with Traders," had a conversation with him. Guess what? The common theme amongst all the wizards, over 100 years, risk management. Well, enough of talking about trading. Who is ready to see a trade live?
Yeah
Obi, let's bring it up. Let's bring up a trade, and then let's do a thesis, a bullish thesis on the S&P 500. Craig, if we have this thesis, how can we put it together?
Yeah. So I am wearing a shirt that says CME Group on it. So when we think about S&P exposure, I might be a little biased, but I am going to go naturally to the S&P futures market. Beyond my own personal bias, though, more practically, the S&P futures markets are the most liquid S&P markets in the world. If you were to compare the amount of notional trade that goes through the E-mini or Micro E-mini S&Ps in a given day versus something like the SPDR, the futures dwarf what is going through on the security side on that ETF. So I would start with saying I want to be in the most liquid market that I can be in for the reasons I mentioned before. I want to be where those institutions are, deep, liquid, transparent markets. So I am going to start with the S&P futures.
Then beyond that, it becomes more of a sizing issue. Do I want the size of an E-mini S&P, which I think is somewhere around $380,000 these days?
Yeah.
Or do I want to start somewhere smaller with like a micro, which is one-tenth that size, 38,000? We even have a smaller size more recently called an E-nano. Then I think it starts to come down to sizes. Maybe we are going to let Obi talk a little bit about that sizing aspect.
Yeah. So what I have got up here, this is not too far off from kind of what I am staring at every day on my Robinhood Legend. I do not have my personal indicator set. The only thing I have on here for just simplicity of the demo is the daily pivot point. Just looking at yesterday's high, low, close, divided by 3, it kind of sets a-
No excuses, Obi. Put a green trade on. Who wants to see a green trade?
The idea here is long above the pivot, short below the pivot, identify an area. Just looking at the tape today, we are up. I mentioned I am an opening range trader, so kind of looking at that 8:30 to Actually, this is going to be Yeah, right here. Here is the 8:30 candle. Let us just draw that so we can see where the opening range has been today. Where are you at? There we go. Here we go.
While you're doing that, Craig, I have a follow-up question for you. Because these products were once just for institutional traders. How did we get to a market now where everyday-
Yeah
traders have access to this?
Yeah, I think that's, again, what I mentioned at the onset. That's one of the things that's invited so many more individual traders into these markets. The evolution's kind of interesting. If you go all the way back to 1997, the only S&P product that the CME offered was what we call the standard S&P. It's no longer around, but that was a product that was worth 500 times what the level of the S&P was, which, when you consider the S&P at that time was only 900 points, it was a manageable product size for institutions. But even at that time, 500 had become a big product, a big futures contract. So in 1997, we introduced the E-mini. Fast-forward to 2019, that E-mini was a mini in name only, right?
Because of the appreciation of the S&P index itself, what was a mini-sized contract in 1997 was now an institutional, for the most part, sized product, just simply because the S&P had increased by so much. So in 2019, we introduced the micros. We heard demand from the customers, "The mini's too big, we need something smaller," so we introduced the micro size contract in the four major indices, the S&P, Nasdaq, Dow, and Russell. I'll put you on the spot actually, Kevin, and this kind of speaks to why we've now released an even smaller product called the E-nano. I just mentioned we launched the micros in 2019. Kevin, what do you think the Nasdaq 100 was trading just six or seven years ago when we launched that?
Oh, goodness. $1, Bob.
What's that?
$1, Bob. Oh, tell me.
I did this on purpose.
Yeah.
Just in 2019 alone, the Nasdaq was trading at 7,700. Today, the Nasdaq's trading at over 30,000, I think. What was-
Wow
a micro size contract, what was worth about $15,000 just in 2019, is now a $60,000 contract. That's still-
Wow
approachable for a lot of individual traders, but it has been the genesis for us to launch the even smaller product that we have now called the E-nano.
Perfect. Hey, we actually have a question from an audience member. I want to go ahead and direct our attention over here. If we can get that mic hot.
Is he on?
Yeah, go ahead.
Thank you. I have a question. You mentioned leverage is one of the benefits of futures, right? For individual stocks, why don't we have futures for individual stocks?
That's a great question.
That's a great question. We, in fact, do have futures on individual stocks. In fact, it's one of the newer products that we've launched this year, about 6 weeks ago. About 6 years ago, we announced single stock futures on 55 different names. 22 of those names have micro size contracts. We do, and we're working with Robinhood. They're not available on Robinhood's platform yet, but we are working with them.
Yeah.
Hey, that was a great question. Hey, Obi, where are we at?
Yeah. If we're going to approach this and put this on, the first thing Craig mentioned is, what product are we trading? This is a demo account, but we are trading with house money, so $29,000 in this account. If we were going to go to the ES, which is the S&P E-mini, under the contract specs, we can see the margin requirement, $28,700. If we put this trade on using the ES, we would be basically using our entire capital, and doing the math, that's about, we'll call it $1,000 of wiggle room. On one E-mini, that's 20 points. That can happen in the blink of an eye, where we would go from being in a position to being in a margin call and have to bring up funds into our account or close our position.
This contract would be too big for our account size. What we'll do, as Craig mentioned, is let's go down to the micro, which is /MES. That's going to put you on the active contract. Typically, futures traders, retail, 99% of the time, we're trading the front-month active contract. It's not like options where we're picking an expiration. This is where all the liquidity is, and this is essentially where we have the best entrance point as a retail trader, is that front-month active contract. Notice the margin requirement on this one is $2,871, so one tenth the size of the ES. With our $30,000 account, as I mentioned earlier, I like to do kind of like whatever half of my account size is, that would be my max risk.
And this is where futures, you do not have to understand the crazy math of options and understand theoretical pricing models in Greeks. You have to be really good at what we call cashier math, quick, simple math. In this case, the margin requirement is $2,871. We have a $29,000 account. If we had a position size of 5 micros here, it would be roughly $15,000 in capital we are deploying. So that would probably be my max position size. So if we have an A-plus trade setup, maybe that is when I am going in on the larger size. A sort of maybe B-plus, B-minus setup, we go to 2 to 3. If I am just maybe doing 1, like a feeler trade, just want to be involved for the day, maybe we do 1. But for this, my inner contrarian is telling me, maybe we fade this rally from this morning, right?
The market since 6:00 A.M. kind of hit a bottom at 7,720, has rallied up to 7,782, is now trading 65. If we go back to the ES chart, you can see that is kind of sitting near the top of the opening range. So if I am an opening range trader, I realistically would not be putting a position on here, Kevin, because to me, the opening range is no man's land. I want to be long above it, short below it. But for the purposes of this demo, I do not know, anyone want to get short? Got some hands. Who wants to get long here? Eh. All right, so let us do this. We are going to get short here. Let us define our trade. If we get short at 7,765, let us sell-
Yeah, explain how you are going to the ladder. Explain the ladder there and how traders can utilize that.
Yeah. If you are a futures trader and you are not using the trading ladder, you are kind of doing it wrong. Unless you are a longer position. If you are an active trader, actively getting in and out of the market throughout the day, there is no more efficient way to trade than through the ladder. You can set your orders. If we want to put a buy limit below, there we go. We have got an order working with 1 click. If we want to change that order, we slide it up and down the ladder. We have cancel and replace. We want to cancel an order, we are out. Very quick and efficient way to get in and out of a position. For this, let us get short, and I am just going to sell 2 at the market. So we are going to risk Oh, we are in the big boys here. Where is my risk manager? Sorry.
Here we go, MES. We are going to put roughly a little bit less than $6,000 on margin requirement, and I will change my quantity, sell 2, and we are filled. You can see this line here, we are filled at 66 half. Every tick this goes down, if you click the P&L button here, it is going to tell you how much we are making or losing. This is where knowing this stuff cold is one of those mistakes retail traders make, is they are still learning this contract spec area before they move to the ladder. I know a contract size of 2 on this, every point we are making or losing, what is it, $10? $5, thank you. I am just-
Well, how important, Obi, is it to predefine all of this before entering the trade? Where do you see a lot of traders messing up?
Yeah. First things first, we put in an order here, but we have not put in a stop or a target. Let us just say we are going to put our stop back at the top of the opening range today, and that would be 79 and a half. First things first, we are going to put a buy order in at 7,780. You can see where the volume is sitting on these price levels. There is some liquidity up there, which would make sense. We are going to put a buy stop at 80 and a quarter. If we go to our P&L, we are now risking 137 and a half, right? If we get stopped out here, that is what we are going to take.
Know where the stop is prior to even the entry, because a lot of traders will focus on that green lever first before ever. Then perhaps even adjust them risk parameters mid-trade, which is what a lot of amateurs do. You have to focus on the risk that we discussed, less the money. Now that we are in the trade, Obi, you got the stop in, you got the target in as well. Where do you go from here? Where do a lot of traders mess up when they are in, let us say, whether green or red on the trade? Where do traders go wrong at that point?
Obi, I'm going to jump in just one second.
Yeah
to clarify that $5 question that you just had.
We're two.
What's that?
We are short 2.
Short 2, so $10.
Yeah.
Because there were some people that were not familiar with futures, and this is just one of the basic tenets of futures that I just tell people you simply have to learn. You do not have to split the atom, but futures trade in what is called a multiplier. So they do not trade in a number of shares. Like if you are used to trading stocks and you trade 100 shares of stock, and that stock goes up by a dollar, well, that is a $100 impact to your P&L. Futures have what is called a multiplier, and that is what changes among these things like E-minis, micros, and nanos, is that multiplier. So if he has 2 of these micros on, the multiplier on a micro is 5, which means every time that the S&P moves by one full point, that is a $10, that is 2 times 5, $10 impact to your P&L.
Again, it is not rocket science, but it is just one of those things that you have to get used to if you are making a transition from stocks to futures.
Yeah, and this is where the cashier math comes in. Notice the price levels on this future go in quarters. It is not like trading stocks where everything moves in pennies. Every tick in the market is a quarter point. There are four quarters to a dollar, and we have, once again, 2 contracts on, the multiplier 5. So now our multiplier is 10. That is $10 a risk or profit every full point, and every tick we are sitting at is $2.50 of profit or loss. Kevin, you had mentioned, what happens now that we have a position on that maybe a trader gets in their own way? Well, it is real easy to start seeing negative numbers and your brain starts playing tricks on you. This is one of the reasons we have a trading psychologist coming at the end of the day.
Now, $25 is not going to get our heart racing, but imagine if we had 10 ES on, or in Rob's case, maybe one of his traders has a 100 lot or a 500 lot. You are making or losing a lot of money really quick, and your brain is trying to protect you from loss. A first mistake might be someone takes this stop and drags it down and tries to say, "You know what? I do not want any more of the pain." The other option, if this turned into a profitable trade, is instead of letting the trade work, they move that stop into a break even too fast or even at a profit, they get stopped out, take a small profit, and then the market moves the way they wanted. That almost feels worse because you are like, "I was right, and yet I was wrong.
Yeah, absolutely.
If we were looking at this, I would keep an eye on this and maybe we are looking to get out if it tests the daily pivot point. Once again, this is just sort of a generic example. I think we would have a little more nuance to this if we were trading for real. I see, is that Bob Iaccino at the mic?
It is.
Yeah, we have a question from the audience. Hey, go ahead. Go for it.
I have two questions, so I will just ask them and I will sit down. One is for Rob, and that is, do the traders that are market makers for you? I remember being in the pit, we had slow days, and when we had slow days, we would put on longer-term speculative positions. Do your market makers have the freedom to do that in your firm? The second question is for both Craig and Obi. As we speed toward 24/7 trading in absolutely everything, do things like the opening range still exist, and for how long? I know every trade that I do is entered on the close of the day. I mean, charting patterns have to mark a close, but if we are 24/7, are there any closes anymore? Are there any opening ranges? Whatever order. Thanks, guys. I will take the first question.
Do our market makers have latitude to trade size on a slower day? The answer is yes. The trading groups and every trader in the firm has a very active dialogue and relationship with our risk desk, who assigns VAR and risk parameters around everything they have. Once those are assigned to the trading desk and the person that is responsible for the risk, it is up to them to do it. I would not advise people to trade bigger size because it is a slow day or it is boring or whatever going on. But the answer is yes. They have full latitude to trade size, and a lot of them have capacity to do a lot.
I'll start, Obi, and I would just say that CME Group has been offering, we'll call it 23 by 5 trading for decades. Right? I think in terms of is there an opening range, I think that's already been answered, right? Because I'm not sure that the extension to the weekend really impacts that opening range that much. Now, I think there'll be a different liquidity profile for weekend trading versus the Sunday night through Friday afternoon trading. But certainly, as you well know, the liquidity or the volume that happens when the cash stock market opens in the morning tends to be greater than it was the couple of hours preceding it and things like that. I'm not sure that the extension to the weekend really changes it that much.
Yeah, I would just add, I was chatting with Jason from Bruce about this a week ago when we were prepping for his panel. To be determined, but whatever you do as a trader, whether it's opening range or something different, typically, you need volume and volatility for that stuff to work. And right now as an S&P futures trader, having a VIX at a 15 or 16 really makes it hard to trade intraday compared to when VIX is above 20. When VIX gets above 20, I perk up and all of a sudden I'm like, all right, the indicators and pivot point levels and the intraday expected range implied by the options market tends to come to fruition more. And as a futures trader, what we're seeing now is pretty boring. It's like watching paint dry.
We want something to hit a level and then boom, drop, go up. That's where as a futures trader, if we're in the right side of the position, we can get in and out of a position quickly. Where today, it's just kind of chopping around, and it may be a day that I would probably not put a trade on. And you can see we're just sort of floating here down 35 bucks. But, yeah, I think it's a good question, Bob, and as a trader, you have to evolve with the markets.
Yeah, these are great questions. And again, this whole event's for you guys. So continue to step up to the mic and ask questions. We actually have another one, center aisle here. Go ahead with your question.
Yes. My question is, institution investors have research teams, sophisticated models, better technology, and more resources than the average retail investor. So what, if any, sustainable edge does a retail investor actually have?
I would love to take that one. It's what you just saw. We get to decide when we get in and out of the market, what our size is, what product we trade. A market maker, they're obligated to make bids and offers. They take the other side of our trade. They don't have the discretion and directional opinion that we have. Now, there's trade-offs with that, there's benefits to that, but as a retail trader, you get to define your risk. You get to pick what you do, when you do it, how you do it. I think the mistakes that a retail trader makes is they may go into a product that's a little less liquid. They may not understand the fundamentals of something. They may trade too large. They may focus too much on their charts and not on the bigger market picture.
I think that's a valuable edge to be able to sort of choose your own path, where Rob, maybe a market maker doesn't have that freedom.
I think another dimension there is that you've got to think about the markets in kind of a fractal nature, right? A large institutional investor is not looking for a short price movement. They're not scalping the market, right? They're looking to execute typically larger size, take a position. That fundamental research has to be justified with enough gain out of it to warrant the research and work that goes into that trade. Very good, well-disciplined traders can operate a lot more dynamically and nimbly in the market than someone that has the burden of having to manage an enormous amount of capital.
Excellent. All right. Hey, we have 10 minutes left, so these will be the last two questions here. We will start with you, sir. Right here.
Hi there. I have been playing around with the ladder in the app, and I was wondering if there is any feature coming for a trailing stop order. I have been moving the stop, and sometimes it-
Yeah
the market price flies past me while I am doing that. I think it cancels one and places another order.
Yeah, I am with you. I am on Grace and the rest of the futures team on that. We announced OCOs last night for equities, and I will be the biggest advocate for getting that over to the futures side, along with trail stops. I think there is a trade-off with that. It is nice to have your hands off, but sometimes it is nice to have that precision of where and how you place your stop, where you move it, when you move it, where a trail stop is a little less precise. I think OCOs, for example, this would be a perfect time to buy stop above the opening range, put a buy limit order below, go to lunch, and not worry necessarily what happens with our position.
We've defined our risk, and we're trading a liquid product, so a stop order's not going to rip through in the middle of the day unless something crazy happens.
Quick follow-up.
Are there plans for those order types in Robinhood?
Say that again?
Are there future plans for those order types in Robinhood?
Yes. All that stuff is on the roadmap. If you go to the booth, find Grace, find Adam from the futures team, they could probably give you more information.
Great. Thank you.
All right. Hey, last question here. This gentleman here.
Hi. Yeah. Futures options give us great way to play around with futures, at least for beginners, or even when I'm in a position, how to manage it. Is CME working with Robinhood to launch futures options anytime?
We are indeed. That's a great point, because when you talked about how do you get exposure to the S&P, we went straight to futures. We'd be remiss not to talk about the fact that you can also get similar options exposure to the S&P through futures options that you can with options like SPX or SPDR, and we are in fact working with Robinhood to try to get those on the platform as well. It's a great question.
Awesome. Thank you.
Yeah.
Can we expect any timelines?
It's on the roadmap. Hopefully, sometime next year. But once again, Grace and team can provide more information, but I'm almost positive probably sometime next year is likely.
Thank you.
The one thing I'll say, though, is options versus futures is an important distinction. If you're out there trying to scalp intraday movements on the S&P, the efficiency and, what's the right word, precision you get with a futures contract relative to buying a call or buying a put, when you buy an option to scalp a short-term price move on an underlying stock or industry, you're bringing some additional factors into the picture, especially on the shorter-dated options. The time premium's going to come out of that really quick if you're wrong. Where with futures, whether it's S&P, oil, gold, you're directly trading that without some of those exogenous factors that options bring in. I think futures options allow some really cool ways to define and create specific payoff diagrams combined with trading volatility and other things, where this is much more of a directional approach.
Thank you.
All right. Great. Hey, got a couple questions left as we're wrapping up, and as we're wrapping up that trade. Rob, I want to jump to you with, as a professional liquidity provider, when you're on the other side of this trade, are you making a directional bet that Obi's wrong on this, or are you perhaps just maybe even hedging a position?
Well, it's a great question, and I think there are misconceptions around what are you seeing on the screen? Is that the market maker right there? The reality is that the order book is comprised of so many competing parties with a lot of different ways that they're trying to make money. If I look at an offer in the S&P 500, I don't know whether that person is going to be trying to hedge in a basket of stocks, trading against the ETF. Maybe they're an options firm who's gotten risk on the options side. All of the markets are so integrated. That contract there represents 500 companies. There's an enormous amount of data and complexity that goes into that. We are making markets actively day in and day out. We don't win on every trade.
There's a lot of people that, I think it's public, like a lot of firms that have consistent P&L with only 51% or 52% success rate. A lot of people are making money as the market maker loses on trades, and they still are able to profit due to the volume that they do. It really depends on the market. In some markets, it's different than others.
There's a lot of depth there it sounds like. Well, hey, Obi, where are we at with the trade right now?
Yeah, we're kind of treading water or slightly down. We'll call it break even. For sake of time, we got five minutes left. This is another concept that I learned that I think is valuable that retail doesn't think about. We have a physical price stop in, but there's also a concept of a time stop. Something I learned from Mark Fisher as well. We've been in this position, what, maybe 10, 15 minutes. If a position doesn't go your way in a certain amount of time, sometimes that's a sign, like, you know what, just get out of the position, move on to the next one. Now as we turn profitable, it's like, okay, if we think we're just going to sit around here, maybe our initial thesis was wrong, which was very short and quick.
But in this case, we may want to just cover the position and go to lunch-
Yeah
without risk on the table.
We're going to jump to the closing question, so if you want to leave it up and running or take it off and come take a seat.
Yeah, let's buy them back. We're filled. We made a half a point. Cancel your stop, and we're out.
All right. Excellent. Obi, the closing question to you is going to be, what's one mistake you'd want every retail futures trader to avoid?
I think it's the size. I think that's the biggest thing I see retail is they, and let's imagine you had that $29,000 account. They would put as much risk on as they can afford and give themselves no margin to be wrong. I've seen that over and over, and our customer service teams deal with that a lot. When you're in that position, you're stressed, you can get angry, but at the end of the day, as I pointed out earlier, you can avoid that. You can avoid that by sizing properly, understand the math, so if you're wrong on a position, is it going to draw down 25 basis points to your account, a half a percent, 1%? Too many times I see retail where they put on a trade, and if they're wrong, their capital's cut in half.
At the end of the day, your trading capital is your lifeblood. If you don't have it, you can't trade. Trying to hit the home run when a single will do.
Singles add up indeed. Well, Craig, closing question to you. What's one thing that every new futures trader should understand about the marketplace they're participating in?
Yeah, and I think Obi covered sort of the practical answer to that question, which is size and make sure you're not over-trading. I will get a little bit more, I guess, philosophical with my answer. And I think regardless of what market it is, I think new traders need to understand that the market's probably not wrong. When you consider all of the different market participants, all of the different liquidity providers, institutions, retail traders that make up that bid offer, and I know Tom Sosnoff is here today, and he's doing a keynote at 3:00. I was lucky enough to be on the road with Tom for 10 years, and one of my favorite things that he used to say is, "When I look at the screen and I see a bid offer, that's probably the right price," because of all of the things I just described.
When you get long the S&P and the market goes down, it's probably not because you're right and everyone else is wrong. And I think that's one early lesson that traders need to learn. And then that goes back to that humility, being able to admit that I'm wrong, cut the losses, and live to see another trade.
100%. And Rob, to you, what's one misconception about the person on the other side of the trade you'd like to eliminate?
Well, I think one misconception that is really unhealthy is thinking market makers are singling out a particular market participant like retail. We have been in this business for a long time. There was not any retail that we really saw in our markets in the early days. It was more of an institutional market. But I think it is more of, to Craig's point of like, it is a highly competitive market, and I want to echo something that was said earlier for people that are looking to get into the game. It takes, even for professional trading firms, a long time to develop successful traders. You need to focus on developing a pattern of success and a track record in your trading that gives you the confidence and the data to allow you to know how to scale.
I would not even jump into really trying to press what you are trying to do until, to the analogy of the golf swing, get a predictable golf swing, get your swing right, and then you get out on the course.
Yeah. To echo what he said, to use the golf analogy full circle, really bad golfers go out and they play swing. The whole day they are trying to figure out their swing. A really good golfer goes out and plays golf, and they can put the ball where they want it. They can avoid the water. They can have fun. Trading is the same thing, especially futures. You have to know those contract specs. You have to know the basics of my buy limit goes down here, my buy stop goes above, my sell limit, sell stop. I see simple mistakes like that, and then at the end of the day, try to make 10 points a day, whether it is on one nano future, which I think is a great tool. It is like a practice tool.
It is so small that you can trade real money with very little risk as opposed to going to a simulator and then graduate to a micro, graduate to 2, 3, 4. Make 10 points a day before you start saying, "Well, I am the best trader in the world, and I am going to go to the big boys and trade 5 or 10 ES," and then all of a sudden the market will come for you.
It does indeed. Well, hey, we're out of time. I wish we could sit and chat for another hour, but hey, we started, guys, with one simple trade, a bullish view on the S&P 500. For Obi, it was about the thesis, the position size, execution, and risk. For Rob, it was about liquidity, inventory, hedging, timeframe, and managing exposure. For Craig and CME, it was about the marketplace where all those different participants and objectives come together. It was the same trade, three different perspectives. Houston, this is Chat With Traders. Thank you so much. Please give them a round of applause.
Once again, I get to stay up here and do my answers. Rob, pleasure.
Craig.
Good to see you. Kevin, thank you. Thank you. Thank you, guys. This was a fun one. Appreciate you letting me sit in on this one. With that, we made it to lunch. Don't forget, before you head out, we've got a stacked afternoon. Starting at 1:00 P.M. sharp, we're back here with the midterm elections panel. Then Robinhood Ventures takes the side private markets and disruptive innovation. Cathie Wood is on that. Then we have Jared Tendler and The Mental Game of Trading, and of course, we'll close out our programming with Tom Sosnoff and J.J. Kinahan for Lessons From a Legend, and then me, Vlad, and Q will officially put a close to this summit. For everyone watching online, don't forget the stream stays live through lunch. Set yourself an alarm for 1:00 P.M. Central Time, and we'll come back with the big afternoon ahead.
Everyone here in Houston, grab some lunch, check out the booths, enjoy the break. We'll see you back here at 1:00 P.M. sharp.
Please welcome back to the stage Michael Obucina.
All right. Welcome back, everyone. Did we have a good lunch?
Yeah.
Anything good out there? Food's pretty good.
Yeah
This year, right? Well, I hope you had a good lunch. Everyone from the live stream, welcome back. Take yourself off of whatever you're doing, and welcome back to the live stream. As I tee up this next session, I want to just preface a few things. When we came up with this idea, we were like, "Will this work? Can this play?" Because yes, this is about the 2026 midterms. This does involve politics. But, and I want to make this clear for you guys here in the live stream, this is not about left versus right. This is not a session about political punditry. It's not going to be a segment from cable news. We're not here to debate the individual candidates or the issues at play. As everything we do, this is about trading.
Unlike the presidential cycle, where we actually launched our prediction markets product for the race between President Trump and Vice President Kamala, this cycle is a midterm cycle. So there are hundreds of potential events that you guys could look at and trade across. House, Senate, gubernatorial, down-ballot. This is like approaching the S&P 500. How do we narrow that universe down and find tradable opportunities? Which ones do we lean into? Which ones do we avoid? Or do we just use this as information to help us trade our normal financial portfolio? So, what we put together here are three experts from three different perspectives. We have a campaign strategist, we have a pollster, and we have a trader. We are going to try to build a methodology for approaching the midterms like we would with anything else.
Please welcome to the stage Walter Hickey, who is the executive editor of our media brand, Sherwood News. Danny Moses, who if you guys were at the trading lab just now, veteran investor featured in "The Big Short," he is going to be our trader. Matt Rhoades is a veteran political strategist, former campaign manager for Mitt Romney. Patrick Ruffini, founding partner of Echelon Insights and one of the country's leading pollsters and data strategists. Without further ado, welcome to Prediction Markets: The 2026 Midterms, Building Your Trading Plan for Election Season.
Hello. Thank you so much all the folks for coming out. Hope you had a good lunch. Thank you for coming out to this session. Today, we are going to be doing something pretty specific. We are trying to build a game plan for trading the 2026 midterms. We have three very exciting, very different lenses on stage. Matt, from the political campaign space, Patrick from the polling space, Danny from the trading space. As we kick this off, I want to just go a little around the horn, and behind me, you are going to see the Robinhood Midterms Election Hub as we get going and dive in on each of these individual races. Let us start from the very top. We have a very big outcome on the board. We have just fewer than five weeks until election day, and I am interested in how you are viewing the race.
Danny, do you want to kick us off?
Sure. Thanks for having me. Great to be here. Over the last several weeks, we have seen the chance for Democrats to take the Senate, which was the only one that was really in play at this point. House, I think, is up to 93% probability from a 50/50 to roughly 63% or 65% chance, which inversely would be 35% or 37% chance for Republicans to take the Senate. What does that mean? I try to trade policy, not politics. How I would think about that would be what industries in the stock market is it potentially good for, who is it bad for, and what does it mean to basically future policy legislation as to go so far as to say, will the government shut down on December 12th? I do not think enough people are talking about, which is another event that is trading out there.
I try to take it all in, and then to your point, what is priced in and what is not priced in. I do not think the Dems taking both houses in Congress is priced in yet. That is just my personal feel, even though the prediction markets are telling us. It is something I am watching.
Matt, what are you thinking about right now?
Yeah. Well, look, it is great to be here. I know you guys are an educated bunch because you are investing in all these races. I feel like the media, no offense, Walt, is just kind of waking up, and now they are paying attention, and they are starting to write about some trends that you guys probably saw coming about six months ago, some of these trends a year ago. In our country, and I am always looking at trends, whether it is looking at polling data that is coming in from a public standpoint, historic trends in any given state. But in 11 out of the last 13 elections we have had, presidential and midterm, there has been a change in either the House, the Senate, or the White House. What does that tell you? That tells you the American voter is in a mood to reject. They are rejecting people left and right.
If you read the media reports right now, if this is a date, we have had rejections where they do not call you back. The way the media is going in some of these public polls, this is a throw a drink in your face kind of rejection. There are still opportunities, and Danny just hinted at that. The House is the House. It is the smallest majority anyone has had going back, I think, to 1932. So the margins are very small for Mike Johnson. But in the Senate, the map is a good thing, and I think even some of the media outlets that are covering this, and they are always going to do the horse race. That is part of the trends that you guys got to think about and know about, and Patrick will get into that a little bit more. But they want the horse race.
It is closing, but the map is such an ally. We are in some very red places, including the state that we are sitting in now, which is a huge pickup need, and I say need for the Democrats to become the majority party in the Senate. So I agree with Danny. There is still a lot of, I do not want to say a lot of time. There is still time in the Senate. There are a lot of competitive races, and the map is not the Democrats' friend.
Patrick, I want to talk a little bit about some of your work. What are the polls saying right now? Are they saying a similar story to what we are seeing in the markets? Are there any meaningful differences that you are picking up?
Well, if anything, I think the polls should be telling, or the market should be telling a more different story than the polls. I do not think what we have seen, and I looked at this coming into today, that you see in most of these states that the probabilities, at least on the VoteHub forecast, and looking at Kalshi, they are within a point or 2, and then there is one glaring exception where there is about a 20-point disagreement in Kansas between the polls and, or at least the fundamentals and the forecasts, right? The Nate Silvers of the world, and the markets. And those are all polling-based markets, right? So, I think if anything, I think markets can add a lot more, because as a pollster, I would be the first to say that you should be taking a lot of the polls you are seeing with a grain of salt.
We've seen a historic trend of the polls not capturing. In particularly some of these Midwest states, the white non-college population, which is a majority of the electorate, this was the reason Donald Trump was able to surprise everyone in 2016. We've seen states like Ohio, Iowa consistently miss on, and Republicans not pull ahead in those states until mid-October, while Democrats were always favored. I think are we seeing a repeat of that, or is the wave, or is the fundamentals of this particular election cycle enough to keep Democrats rolling all the way through election day? I think that's the fundamental question right now. But I think the markets play a useful role in correcting, I think, some of these historic mistakes that even as a pollster, I would tell you
Yeah
those are things you really need to be concerned about and watch out for.
I want to back out a little bit. Matt, I want you to take this because I want to talk a little bit about just midterms 101. We've got a lot of folks in the audience who are very experienced with markets. We have a lot of folks in the audience who might not be as familiar with what makes a midterm election particularly new or interesting or unique outside of a presidential. Could you just give us a framework for what makes a midterm a unique and kind of difficult to predict election compared to maybe some other national races?
Well, again, another historic trend, midterm elections, much smaller turnout. With all the transformation that's happened in politics and the emergence of President Trump and the MAGA movement, back in the day when Patrick Ruffini and I were working together on campaigns in the Bush-Cheney world, in a midterm, we'd want low turnout. But now, President Trump, Republican Party, they want higher turnout. As an investor, if I'm looking out there and I'm looking for opportunities to invest in, look at a place like Texas, which the horse race theory is totally in play when you look at some of the public polls and some of the media coverage. But there's a saying we have on campaigns in the political side, it's not scientific, but when we're looking at vote goals and vote totals, we talk about ducks on the pond.
How many votes are out there that we can get? With Attorney General Ken Paxton, talking to some of the folks that know him well and work in his orbit, one of the reasons why in some of the public polling data, he is underperforming a little bit and is lower in the polls, at least from a public standpoint, than Governor Abbott, the Republican governor of Texas, is right now he seems like he is underperforming in rural parts of the state. While you guys are sitting in your hotel rooms tonight and you start to look at some of the political ads, I am going to take the over that you are going to see a Talarico or a Paxton ad on TV.
The ad you are going to see on TV, and I noticed this last night watching the Yankees destroy the Boston Red Sox, is that it is focused on a rural voter, not a college-educated suburban voter in Houston, or the suburbs of Houston. That tells me he has got room to grow. There are still ducks on the pond for Attorney General Ken Paxton, meaning there are voters he can pick up. If a Republican, a conservative MAGA Republican like Ken Paxton cannot pick up and find some more rural voters in the state of Texas, then, well, then he has got a problem, but I think he can.
Yeah. This is, again, to your point, this is a race with, there are hundreds of races around the country.
Yeah.
It is not all down-ballot from one at the top. Patrick, I want to actually go to you real quick and we have lots of polls at the state level. We have lots of polls at the national level. How do you recommend folks kind of make sense of this on a race-by-race basis?
Yeah, there are more polls than ever before. I would say there is more incentive for, you have a lot of lower quality polls coming in. There were a couple fake polls earlier this cycle. I think it is part of the media ecosystem that we are in. There are more and more people, there are rooms like this, people who never would be interested in elections before, would never really play in elections and are now playing in elections. So, to feed that interest, you have lots and lots of polls. Not necessarily always the highest quality polls, not necessarily the polls that we as campaigns are really, in the way we conduct polls, we are very careful to look at voter registration, look at every single, if we have 3 million voters in a state, we have the voter file on all 3 million voters in a state.
So we know what that electorate within a few points or 2 is going to look like. We are conducting polls on that basis, and not everyone is doing that. So, what you get sometimes are polls that can look like extreme outliers or do not weight on things like education, do not weight on, are really not in the ballpark of how this state has ever voted in the past. But what I like to do is take, you have your polls in an individual state, but I like to combine all the polls in all the states at the state level and just look at what is the shift from the last presidential election to this current election, because that is going to tell you, right? The reality in this midterm, I like to say it is like a big wave, but a high wall.
Yeah.
The wall for Republicans is the fact that the state that you need to take control of the United States Senate is a state that voted for Donald Trump by about 12 points. So, that is a pretty big home field advantage, right? Sometimes, the Chicago White Sox can come to Houston and beat the home field advantage. But there is a home field advantage that you have to take into account as a trader and thinking about, because political fundamentals, the sort of we would call political fundamentals, the basic partisanship of a state, how many Trump voters, how many Harris voters, matters a lot more than it ever has. The variation, the spread between these races used to be a lot bigger when Matt and I were starting in politics, and now it is just a few points.
Democrats really, I still think, have their work cut out for them in the Senate.
That is so interesting. Again, I love the line of a big wave and a big wall. That is really interesting in terms of how to view this race. Matt, I want to go with you as well. Just still talking about the Senate a little bit. Behind me, again, you will see on the midterm sub the Senate map. What are we missing for those of us who are not plugged into the decisions that are being made right now on the Senate level? You have had insights and access to lots of really interesting rooms over the course of your career and how party decision-makers, money decision-makers, are investing and deciding where to kind of go. What are we not privy to necessarily that is going on now, Matt?
Well, at the national level, whether it is national super PACs or the national campaign committees, they are making decisions. Just like you all are investing in these races, they are making the decision on where should they invest their resources. Many of these decisions, quite honestly, should have been made and could have been made over the summer. But where can we find our path to victory? We keep going back to the Senate. As you guys look at races to invest in, you should follow where the money is going to go. There are races that have been discussed in the last week or 2 where Republican national campaign organizations are not going to invest in. But where the action is going to be, again, if Republicans lose 3 seats, they are still in the majority. It is a 50/50 tie, and there is a plausible chance that that could happen.
Follow the races, follow where the money is going to go. You are going to see a lot of action. There are 3 seats that Republicans need to at least keep 2 of the 3. Alaska, Texas, which we talked about, and Maine, where Senator Susan Collins is the only human being on the face of the earth that could run statewide in Maine as a Republican and still be competitive and win. There is no other human being that could do it. So if Republicans win 2 out of those 3 races and then pick up a race, 2 of the races that are going to still be looked at and people are going to think about investing in are Michigan with Mike Rogers, and another pickup opportunity in New Hampshire with former Senator John.
The Sununus up in New Hampshire are kind of like the Republican version of the Kennedys, but not as good-looking. But they are a great family, and we will see how it all turns out. That is a plausible pathway, and that is where the money is going to go on the Republican side. As you guys think about your decisions, you should follow those races and see what decisions are made because it will start to come out. All these media buys, especially broadcast TV, if people start polling and plugging in different places, you know that there are polls, internal data, and vote goals, especially when they start adding in the early absentee voting, which is going to be starting next week. Is it October 6th where a lot of it starts?
Where smart people like Patrick Ruffini can overlay data on some of the returns and kind of have a good indicator of how bad or how good we're doing as a Republican campaign.
I want to jump from the Senate to the House real quick. Danny, I want to go to you because a lot of what you've been talking about here is not just the actual races themselves investing in, but also the ramifications about it, the data center trade, the AI trade, the regulatory policy. The House is going to be very instrumental in all of these, right? Even how is a potentially split House or a deadlocked legislature going to handle a Republican president? What are you looking forward to when it comes to. How are you factoring in the House, I should say, when it comes to your overall investing decisions and your overall portfolio?
Let me just say, this conference is about the stock market. A lot of people invest in the stock market. Historically, the stock market is the economy and vice versa. Never have we been in a period of time where that was this separated, so much different. You have X amount of stock supporting the stock market, and you have X amount of consumers supporting the economy. So it's really bifurcated when you think about the breakout of the economy, and that's kind of what you're seeing within this election outcome. I think banks would not do well historically in a highly regulated environment. That might happen if Dems get both houses in Congress, right? That's one thing. As far as the CapEx and AI, we're at an inflection point anyway, I believe, on AI. Forget safety for a second. Let's leave that to the side.
There is a mismatch of supply and demand going on in the AI trade. You can use it as an excuse that if the Dems win, "Oh, they're going to halt it. That's why." I don't think that's why these stocks are kind of booing right now. I don't think that'll be a reason. I think that it's too important to the economy on both sides to have this build out in a very smart way. I think that is a little bit of a misnomer but could be used as an excuse. Like I said at the opening, I don't think the market's trading in, and you bring up crypto and Bitcoin. A lot of people here own that as well. If Dems take both sides of Congress, maybe it's a negative thing because there will be less CLARITY Act chances and things like that.
There's a lot of moving pieces. It will be interesting how it plays out, and I know we're going to get into some of the specific maybe how to trade it and what to look for. With Matt, in terms of you're going to get surprises.
Yeah.
I think there's a lot more volume to come into these prediction markets over the next 5 weeks, and there's going to be a lot of ups and downs, I think, here coming.
I'm skipping ahead a little bit, but actually on that point, I'm super interested in what your thoughts are on some gubernatorial races, particularly as it relates to the data center issue and how it reflects the data center trade. Are you looking at these? What's on your mind?
I haven't done enough work on. I know the states where a lot of these centers are being built. I know that it's going to be an important part of how people vote, potentially. You're already getting complaints of energy prices up in an area, noise complaints, obviously for data centers. But again, I also think that it's actually not a negative for the AI sector if things were to slow down a little bit. That's a whole other podcast segment, obviously, what it means. I haven't paid enough attention, but it's definitely going to be a focus for sure on some of those races.
I want to talk about some close races here. I am interested in kind of where you folks are looking on the map. I mean, Matt, you have been at the RNC before. You know how people assess this large national map. You can kind of identify folks who are outperforming, potentially. What has your eye, what has your attention? What is a close race that you have been looking at?
Yeah. On the House side, I think there is a couple of races you should really look at to make a decision from a broader standpoint of how the night is going to go for Republicans in general. One is Pennsylvania, which is a Republican seat, but it is in the Scranton/Wilkes-Barre market, which is a very, no offense to Scranton and Wilkes-Barre, a very cheap investment from a financial standpoint to buy TV and media up there. The Democrats, wisely, are spending a lot of money in that market, in Pennsylvania 8. So that is a race to watch. If Republicans were to hold that and Pennsylvania came in early, that means that a lot of these public polls were showing more of a surge or wall than was expected.
Another race that I always go back to, and I feel like I go back to it every cycle, and he is a buddy of mine, and I love to pitch him, too. Unlike Danny, I have a heart on some of this politics. That is why I like listening to him. He has no heart. He just wants you guys to make the right investment. Lawler, Mike Lawler, New York 17, that is Rockland County, just north of the city. Where I am from, we call that downstate New York. It is a true swing district. Mike Lawler though is one of those guys that you constantly see out there. You might not agree with him, but no offense to a lot of members of Congress and the U.S. House, a lot of them do not do much.
Mike is out there, even when he disagrees with the president, he does it in a way that the president actually listens to him and pays attention to him, and you saw that on SALT tax policy back in the state of New York. If he can hold on there, then it is not going to be as bad of a night for Republicans either. He has some things going for him. One, dynamic personality that actually does things. People know him. They actually hear about him. Constantly out in the news media. There is some voting blocks there. There is a huge Jewish vote in Rockland County that I think is going to come home for Mike Lawler.
When you are looking at investments and you are looking for ducks on the pond, there is a lot of ducks on the pond that I think Mike Lawler can bring home on election day and put him over the top in New York 17. I would watch that. That is a very expensive race, too.
Yeah.
The president just invested out of his own super PACs, I think $8.8 million. That is another encouraging sign for Mike, and it shows that you can have a public disagreement with the president, and he still can love you and give you a big $8.8 million hug, and the president did that. Keep an eye on New York 17.
It is so interesting because, again, that is a very expensive media market.
Very.
It is a reminder that inasmuch as politics have become nationalized, all politics still is pretty local. In that race, in particular, candidate quality really does matter. Patrick, I want to ask you, is there any part of the map that, especially in the House, that we are not paying that close attention to? Obviously, there was a lot of redistricting this past cycle that took a lot of races off the board, put some on the board. Where are you looking for interesting races?
Yeah. I mean, on both sides of the redistricting equation are, you have seats where, here in Texas, Republicans tried to draw themselves 5 extra seats, and they may be lucky if they get 3 of them. Because in this environment, you can't, even if a Trump +10 seat is not safe for maybe next cycle, it may be safe, but for now, it's not a safe seat. You also have, particularly with these districts along the border, where you saw a huge surge to Trump in both 2020 and 2024, but it seems like a lot of those voters might be moving back, and Democrats have done a good job of candidate recruitment in some of those districts where some of these Hispanic-heavy districts in Texas, even beyond those districts on the border, Texas 35, even Texas 15, it's one of those border districts.
Trump won it by 18 points, but Democrats have put up a very strong candidate. With the Hispanic vote, you can't predict because they vote differently down ballot than you do at the presidential level. But I think we're also seeing an interesting divergence. It's not between some of the blue states, but we're seeing it in some of the blue states and the red states. I'm always a little cautious about this when people start talking about, "Oh, there's a bunch of states that are going to vote completely differently." So I take that with a little bit of a grain of salt. But you're seeing polls out of Minnesota, very close race. It's a pretty blue state. Not massively blue, but Democrats reliably win there. You see polls out of the Oregon governor's race where Republicans
Yeah
have a shot. I think in particular, where they may be alpha, but I think it requires really knowledge of those states, knowledge of the environment, is in gubernatorial elections. We're talking a lot about congressional elections. We don't talk as much about gubernatorial elections because we don't have the scoreboard
Yeah
of who's going to, a party's in control. Nobody keeps track of that. But that's where you see a lot more openness of voters kind of switching sides because it's less about what's happening in Washington, more about what's happening in their state. I look at a state like New York, I don't think Republicans are favored in the state of New York, but the governor of New York, we saw it the last time, and she's trying to run for a third term. She's very unpopular. She's, I think, underwater by 15 points favorability wise. So some of those states, you're seeing a little bit of signs of a split environment, and particularly in some of these statewide and gubernatorial elections, where people aren't happy with governance in those states either.
If this is an anti-incumbent wave, it may hit some of those Democratic incumbents in blue states too.
It's been so interesting at the gubernatorial level, as you said. You see states like Nevada as well, where you've got, again, states that are very much in the mix at this point. You've got also, I guess, Phil Scott in Vermont, who's a Republican who's really running very well in a traditionally blue state. It really seems like those tend to defy some of the conventional wisdom.
Yeah, that's the thing. My thesis of this election, the wave meets the wall, but that really applies to Washington. It doesn't apply as much to the state level. You've seen some pretty idiosyncratic, you have a Republican governor in Vermont, and you have a Democratic governor in Kentucky. That's where politics really gets interesting. As much as there are a lot of races on the board, and a lot more maybe offensive opportunities for Democrats this cycle, you really have seen a real decline in the number of districts, particularly with redistricting and particularly with this hyper-efficient or hyper-optimized redistricting cycles that we now have, where you're really talking about 2 dozen seats in the House that are really competitive, that are going to attract tens of millions or multiple millions of dollars in outside spending.
Yeah. There's just a lot of, going back to the beginning, rejection, and it's not good to be an incumbent, whether you're a Republican or a Democrat. I was fascinated on the rejection theory, looking at the state of Rhode Island, obviously not a bastion of conservatism. But they had 2 primaries, governor and the mayor of Providence, and they threw out both Democrat incumbents. Then you're like, well, let's look into it. Partisans would want to look and say, oh, it must be AOC Democratic socialist candidates that just stormed the gates and beat back these Democrat moderates. That wasn't the case. At the gubernatorial level, the incumbent Democratic governor was beaten on the right, and then in Providence it did happen.
The candidate was beaten on the left, and these were primaries on the same day, and it just shows you the power of rejection out there. So when you're in the majority and you have the White House, the Senate and the House, there's an opportunity for the other side to try to run up some scores.
Danny, I want to talk a little bit about trading mechanics. Earlier, Matt was telling us all about New York 17. Behind me on the board, I'm going to pull that up, and I would love for you to talk a little bit about what you look for in these races, how it compares to, again, are you looking for volume? Are you looking for various different? Where do you want to see these asymmetries? Do you want to see a race that has a lot of interest? Do you want to see a race that has a little? I'm just pulling up behind us in terms of how this actually looks. But can you walk us through how you build a strategy with the trading mechanics on this?
Sure. I think this is an interesting race because it's East Coast, and again, I don't know the timing. Everything comes in, polls are closing and so forth, but when you get an upset early, if Lawler, for instance, was to actually win or he was projected to win, it would swing things rather dramatically in terms of what people would predict, I think, moving forward from there, because maybe affordability wasn't as big of issue as people thought, whatever it might be. So that's one thing, I think, a race you would look at, and Key and I would totally defer to Matt on which races he would look at on the East Coast that might be a bigger signal for what's happened in the rest. But in something like this, trading one of these markets, there's two ways.
Obviously, Dems getting the House is already trading at $0.93, so I would never really own anything at $0.93 to make $0.07. That's just not a great risk reward. But in something like this, maybe down ballot or in a local House race, if you think Lawler's going to lose, I can't see exactly where it's trading, but the risk reward, you say to yourself, is there really a 65% probability that Lawler's going to lose? Maybe. And I would watch it during the course of the evening. And so, again, I would put limits in to sell things, because things get, obviously, may get over at SKUs early, so maybe have something in at $0.90.
Maybe the first 10% reports in that precinct, and Lawler's losing by a lot in a particular area of the district where he was supposed to do well, then you'll go to 90%. I don't want to be around for that last $0.10. Use limit orders, be smart, and look for liquidity. I would screen on this app by volume, which you can do.
Anything below, in terms of volume and open interest total, such little money could move those markets that it can send a false signal. You got to be really careful with the volume and use limit orders is what I would say.
Yeah. Let's also talk again about maybe a close race too. Behind me, I've got New York 11, the Staten Island race, between the incumbent Nicole Malliotakis, and you're seeing here that these limit prices are, rather these prices are adding up to over $1. As in, it seems like there's a big skew between what you're asking and what you're bidding on this.
That comes down to market makers' willingness to basically provide liquidity into a market. All event contracts should add up to $1 in a perfect world. Maybe with the bid to offer, maybe $1.02, since things are supposed to realize either at $0 or at $1. Those should add up to be the same. When they don't, that tells you there's lack of liquidity and there's not a lot of market depth. To me, it's a signal that I would stay away from the market, potentially, because obviously these market makers aren't providing enough liquidity, and it could move, and you could get taken out of your position and/or get scared out of your position rather quickly. Something else, you bring up a good point, something I look for as well there.
That is really interesting. Anything else that you would add on some of the trading mechanics element of it? How are these similar to more traditional assets, and what kind of strategies work just as well on this versus elsewhere?
Well, this is a 24/7 market, obviously. I know Robinhood had introduced pretty much 24/7 trading last night, so you could trade stocks with it. So they are very different in that regard. Again, there could pockets of liquidity moving on a headline that may be misunderstood in the media, that gets picked up by an algorithm. So again, you have got to be very careful on what is moving it, and certainly not for the faint of heart. But it is nice. I use these prediction markets a lot in general as a news source to help me in other things that I am doing, not just with elections or whatever it might be, and the implications of it. But it makes you think about, I did not even realize that that was even an event to be concerned about or that might be occurring in the next few days, outside of elections, obviously.
So I kind of use it as part of Wall Street Journal, the FT, bottom-up research, reading 8-Ks, and then looking at event contracts to tell me what is happening.
I want to talk a little bit about what makes these unique and why elections might be. There is some unforeseen elements of this, right? Patrick, I want to talk to you a little bit about what we can expect on election night, election week, couple days after, the idiosyncratic ways that these states might tabulate their votes. What might be new for traders who are more accustomed to a more specific settlements time than elections might offer?
Yeah, I studied this during the primaries. I don't trade on prediction markets because I consider it, as a pollster, I don't trade on anything I might be polling, which could be anything at any given point. I just don't trade. But I do follow it closely, I do, as an alternative source of information. And, I was looking at the primaries, and there was very clear biases in terms of how these markets behaving oddly on election nights in these primary elections, where it seemed like there was maybe almost an overreaction to these early ballot drops that, in particular, when they favored these more progressive candidates. Early in the night, Abdul El-Sayed was up to, I think, 99.9% on one of the markets. And the race ended up within one point, right?
I think there's a lot of emotion still in politics that there isn't in other markets, that you can take advantage of as a trader if you have a majority. If you know that, and you can tell that a majority of traders on a particular contract want one outcome to happen, then taking the other side of that is probably a good bet because they're going to believe any bit of good news, right? And even if it's legitimately or seems outwardly to be a piece of good news that favors their preferred candidate, they're going to tend to believe that faster than they'll believe the good news on the other side of the equation. And it's really complicated, right?
Coming in, you really have to know on election night the order that ballots come in, which counties are reporting early votes, which counties are reporting Election Day votes. There's a dramatic difference between mail ballots and Election Day ballots. So there's all this complicated thing, and it changes from just because a state did it one way the last time-
Yeah
they don't necessarily do it one way the next time. There are aggregators, great accounts to follow that do help keep track of this. But at the same time, I think, the markets, I think, in some ways were overreacting to some of those accounts. But there were pretty clear biases in the primaries that I think light the path for-
I pulled up California behind us just because they have a, shall we say, unique strategy of counting ballots that can kind of have some of those mirages as we saw during the primary.
Yeah, in California specifically, obviously it's a very blue state, but in particular, that's something that's going to come in late in the night. I think you want to be paying attention to maybe what are some early bellwethers early in the night, like Kentucky 6. It's not necessarily considered a competitive district, but it's kind of a suburban-ish district that didn't vote for Trump by a huge number, and it's going to report very early. It's going to have full reporting very early, and it could give us a good indicator of how the rest of the night is going to go.
But in California, remember during the primary, I was polling for one of the candidates in California, and Tom Steyer was up to 50% based on the way, I think, one of these accounts was characterizing the ballot drops, the late ballot drops in California, which obviously, as we know, California counts, takes forever to count. Based on how they were characterizing it, the markets went up to 50%, and I was pretty sure that there was no more than a 10% chance of Tom Steyer. But I think there happened to be just a lot of Steyer bros. There happened to be a lot of Hong supporters. There happened to be a lot of Abdul El-Sayed supporters on these markets. So if you can really pick up on that, I think that's an opportunity.
Patrick, can I just say something?
Of course.
Patrick and Matt bring up great points, and they're much more in tune with what's The idea to buy a contract at $0.03 or $0.05 does make sense if you believe that it's 20 to one, which the payout would be, is way mispriced. It's not for me to decide because I'm not in the weeds like these guys are, but I'm sure if you screen them, then you could look at them and say, "Okay, he might lose, or she might lose, but no way is it 20 to one. It's probably two to one," and then you can have opportunity. But I think it's key to point out that on the night of the election, the market's going to be very wide.
Yeah.
You talk about adding to a dollar, they might add to $1.80 because the market makers won't be able to get the information that they're going to have or whatever sources they're using in time to get caught off guard. Just wanted to add that.
On the note of interesting data drops and things like that, Matt, can you tell me a little bit about Alaska? This is going to be a race that's going to trip some people up. Ranked choice, I know you've got some strong feelings on, but what can we look forward to in that kind of specific environment?
Yeah. First off, Alaska is 6 hours behind, and I've been on the receiving end on Super Tuesday needing to win Alaska and not getting any credit in the media after you have because everyone went to bed. If it comes down to the 50/50, and it's all rank, it's all about Alaska. It's going to be a long night, and the cable stations are going to go nuts in large part because it's a competitive race, but also because they have ranked choice voting up there, which is a variable that I just think our system, not just when it comes to you guys investing, but our system as a whole, as a country, just can't handle. There's too many conspiracy theorists on both sides in this party, in this country, and people just can't handle it.
When you're ranking out who's first and second, and you have all these in a place like Alaska, Patrick made the point in California, you're going to have so many early votes, absentee votes, people in the military. It's going to be a long night, and it's going to create a lot of heartburn. So if you're looking to invest in that overnight, I'd be careful. Because I think that there's going to be some chaos there if that's as competitive as it seems to be right now. The other thing I would say, the Democrat Mary Peltola has gotten the horse race factor. She's gotten some good public data.
There actually was a vote there because they have ranked choice primaries, and so they had their primary vote in August, and she ended up beating or leading Senator Sullivan in the ranked choice primary by 7 points. Honestly, I like Senator Sullivan. I wish he trailed by 1 or 2 points. That would make me feel better. Unfortunately for Senator Sullivan, we've got ranked choice, and then this is the state where the Democrats went out and recruited a second Dan Sullivan to vote, who I think received 2% of the vote. So a lot of chaos up there in Alaska. But I've done referendums as recently as 2020, and I keep going back, where for a Republican are there pockets of voters that can still turn out?
I can tell you, we did an oil and gas referendum up there in 2020 that I was a part of, and we did our last big poll statewide in late August to make our final decisions about spends and media and everything else. It was right about the time where they just had their primary vote and, excuse my French, we were getting our asses kicked. President Trump, this was President Trump versus Joe race, and at that point in time, President Trump ended up winning Alaska easily. But what was going on is Republicans hadn't come home. They hadn't come home for President Trump yet, and they certainly hadn't come home, and they were a key part of our voter pool that we needed to win. We were able to win, and Republicans did come home. So I've seen it happen.
That's one to keep an eye on. Will Republicans come home for Senator Sullivan? I think even if they do, it's going to be a close race, a long night, and I worry about chaos up in the great state of Alaska.
Before we do our final whip around and ask what we got to be looking out for over the next five weeks, Danny, I want to go to you and just ask essentially, what are the down-ballot races? What are the outside races? What companies do you think you have an eye on heading into this final stretch? Obviously, there are some companies that you alluded to earlier that have a lot of exposure to Congress and the regulatory infrastructure. What is on your mind as we finish out these last five weeks?
AI and data centers, obviously, within each of the states where they're being constructed, certainly. That's one of them. Solar panels and green energy, alternative sources of energy is a whole another sector that potentially is going to get impacted in various areas. You have, as much as the stocks in the dump, gambling companies, online gambling companies. There's certain states maybe voting for that as well. Cannabis in various states, legalization, things like that. There's a lot of them, and I think people aren't paying enough attention to them, and I think over the next month, a lot of analysts will start to write about it. But in general, I think people are focusing on the bigger picture, the bigger ones, governor races, which are probably AI data center related and potentially halting construction and so forth. So, one of the things I'm looking at.
Matt, you want to trust that?
Yeah. There was two things that have happened over the last two years that really surprised me from a polling, political, and policy standpoint. One is how quickly President Trump completely owned the economy and was no longer able to blame President Joe for everything, which really worked well for us in the last election, and it was a great tactic. Because in the past, I have been on the receiving end of this. President Obama was able to blame our former boss, President George W. Bush, for everything for almost eight years. But there is changes in the environment and how we consume information. Fortunately for Republicans and President Trump, blaming Joe, people washed their hands of him. His own party did. We should have learned from the Democrat Party itself during the campaign.
And then the second thing, and Danny Moses keeps talking about it, data centers and the impact that they are having, especially with incumbents. Incumbent governors who it seemed like brilliant politics, brilliant economics to recruit and get data centers to come to their state to create economic growth in communities, and I have never seen an issue like data centers plummet as quickly as it did over two years. And I have some theories behind it. I think in the beginning, in places like NoVA, outside of Washington, D.C., there was some people playing with matches out in the woods and sparking some what felt at the time organic opposition in places like Loudoun County. But now it is full organic. It is spread everywhere. And to think that the numbers would drop as quickly as they did over a two-year period, and you could see it coming.
It is just I feel like, again, it was the media is late to the ballgame, no offense, and everyone is starting to pay attention to it. But it is shocking, and that it is impacting in a negative way-
Yeah
especially governor's races. I never would have saw that coming two years ago.
It's been wild to see that even in NoVA, where they've been jamming data centers in there since dotcom. It's been fascinating to watch. That's a great point. Patrick, I'll finish with you. What's something heading into November that we haven't chatted about that's on your mind that you're interested that you think might be a good last note for traders to think about?
Well, I think the 2026s over 2028s going to start. I think I'm always fascinated by this period right after the midterms in terms of what lessons the parties learn, whether or not somebody like JD Vance will be weakened or strengthened by the midterm results, and which Democrats are going to potentially emerge. We're not going to be taking very much of a break after this election's over.
That's amazing. All right. I want to thank our panel so much. Danny Moses, Matt Rhoades, and Patrick Ruffini. Let's give them a big hand. Thank you very much, folks.
Thank you very much.
Thanks, guys. Thank you. Just setting this up for the next panel. How's everyone doing? Did you enjoy that? Was that pretty good? Yeah, I thought so too. To get that much mental brainpower on the midterm elections on one panel, then you throw in Danny Moses, I think that was fantastic. I learned a ton. We just spent the last session taking a huge universe and narrowing it down to some opportunities. This next one takes the same idea but applies it to private markets and private companies. Asking questions like, how do you identify business and technologies that could shape the future? How do you evaluate them before they reach the public markets? How do you broaden the access to those opportunities? That is the purpose behind Robinhood Ventures. How many people have heard of Robinhood Ventures? Excellent.
We put together a panel, once again, to help us understand it all from the ground level on up. Please, let us welcome Robinhood CFO, Shiv Verma, head of Robinhood Ventures, Sara Pinto, and ARK Invest founder, CEO, and CIO, Cathie Wood, and your moderator, co-founder of RiskReversal Media and co-host of CNBC's "Fast Money," Dan Nathan. This is Inside Robinhood Ventures: Private Markets, Innovation, and the Future of Investing. Enjoy.
Hello, everyone. Really excited to be here. As far as all the content we have had today and yesterday, absolutely amazing. But I am super excited about this conversation because, for me, as somebody who has been in the markets nearly 30 years, I have spent so much time staring at screens, like a lot of you guys do, and having at the tips of my fingers ways to transact. But I think some of the most interesting things going on in the markets are going on in the private markets. We have been talking a little bit about this in the lead-up to this conversation. I cannot remember a time where so much of what was going on in the public markets is being driven by what is going on in the private markets.
These folks right here are giving access to private markets in a manner with a level of diligence from an investing standpoint in the private markets as you have become accustomed to in the public markets. All right, enough of that. I want to start here because people know of ARK and they know of Robinhood, and you guys obviously all know them pretty well, for having access and tools to the public markets. Why, I will start with you, Shiv. What was the inspiration for offering this to your customers? Because I think knowing your company and being involved as a partner for the last 3 years, there has been this evolution of aspirational products, and we learned about a lot of them last night, or were refreshed with them during the keynote.
But what is it about access to private markets that is really interesting for this cohort here?
Yeah, great question. When we talk to customers, one of their main pain points was they didn't have access to these great private companies. We started thinking about this in 2021, and a couple things all came together last year. First, new administration, they put out great guidance. They actually said the best way to hold private assets for retail is in these 40 Act funds. The second thing that happened was a lot of these great companies were staying private for longer. No surprise there. Then third, we like to launch products when we have a push, not pull, meaning our customers were asking for these.
We go through, and the number one thing I kept hearing from customers is, "How do I invest in OpenAI or Databricks and Stripe?" We looked at the way to do this, and the vision statement was, can we do for private markets what we did for public markets? We came up with four tenets. The first was best-in-class names. If you do it, you want to have really, really great companies for customers to invest in. The second was daily liquidity. We heard from all of our customers. They're used to trading. They're used to getting in and out. How can you have a vehicle where they can actually get liquidity? The third one was no accreditation. 85% to 90% of Americans are not accredited. It was a huge pain for customers. They couldn't invest in accredited funds.
The fourth is they wanted competitive fees and a way to do it. That's how we came about it. We launched our first fund, which was late stage growth, awesome portfolio, Databricks, OpenAI, Stripe, some of the largest names. We then heard from customers they want to do early stage. Our second fund was focused with YC and early stage customers. People love that. Now we're getting a lot of new inbound demand, and Sara and the team are cooking some other new funds. We took a lot of inspiration from Cathie because she's actually the one who pioneered this with private public market funds and how to do this. We love the vision, and we're going to keep innovating for customers.
Yeah, Cathie, I think a lot of these folks know you as someone who is a prolific innovation, a tech investor. I think it is not just if you are not invested in Cathie's funds, you probably use a lot of what she has to say about markets, about individual names, about themes, to work into your own processes. I am just curious, because you have seen lots of cycles, and you have seen how innovation can really transform different industries and the like. This obviously sounds like a logical sort of evolution for you. What was it that you at ARK decided to create these sorts of vehicles so regular investors, unaccredited here and there, can invest either solely in private, but also public private?
Yes. So we got the idea from our clients. We had a lot of young clients working in the tech industry who were saying, "How is it that we who work in this industry and understand these companies, understand the technologies better than institutions, better than family offices, why can't we have access to them? Because we do not make enough money? Our net worth is not high enough? Well, that is just unfair." I agreed. I said, "That is un-American, so let us try and figure this out." We have done it in a little bit of a different way from Robinhood, and they both have their pluses and minuses. I think 100% liquidity, which is your hallmark at Robinhood, very important. In our case, we have quarterly redemptions, so daily inflows, quarterly redemptions, up to 5% of NAV.
Now, what that means is that our portfolio is always selling at NAV, whereas of course, Robinhood's portfolios can go to premium or discount. When I first saw, and we were talking about this earlier, when I first saw that Robinhood was going to put private into a closed-end fund like that, I thought, "My goodness, the only example we have out there is Destiny Tech100," which at the time was at something like 600 premium to NAV. I think what Robinhood has done beautifully is educate. So before you buy one of their funds, you know exactly where it stands relative to NAV. Right now, I think you are in the 10%-15% range on both.
Yeah. Shiv, just really quickly, tell us what were some of your considerations with that structure?
Yeah. We debated a lot. Cathie pioneered the interval fund, and we started closed-end funds. There are pros and cons of them. The main thing was customers wanted daily liquidity, or our customer base did. The only way to do that was in these closed-end fund formats. The converse is, as Cathie said, the fund can trade at a premium or a discount to a NAV. I think a sweet spot is if you are plus or minus 10% on either side. When we talked to customers, we said, "That is a known risk. You can trade at a premium to discount, but you can get daily liquidity." That is why we chose to do that. The converse is, in Cathie's funds you know you are always going to get in or out at NAV, which is great, but you might have quarterly illiquidity.
I think the best thing for customers is you choose where you want to be in the spectrum. If you want daily liquidity, great, we have a product to do that. If you want something with less liquidity but you know you are going to trade at NAV, you can go to Cathie's funds. Then it is your own choice for where you want to be on the risk spectrum.
I will just say, I think both of us have started with a direct to cap table psychology. We are not invested, either one of us, in SPVs and layered SPVs, which include fees upon fees upon fees that are kind of hidden in other products. I think both of ours direct to cap table is one of our calling cards.
Yeah, absolutely. The other thing we did, as we were talking about this before, is every investment we made, we went through the front door. Meaning we talked to the company. You take OpenAI, you take Databricks, you take Stripe, we spent a lot of time working with them. We even had some things in the press where initially they were not so sure if they wanted to do that, but once they understood the power of retail, how important this is for their brand, for their company, that these were their customers, now not only are they in the product, they are actually promoting it. They are telling other companies, "Hey, you should talk to Sarah. You should learn about these products." It has been a fun year.
We went from the new kids on the block trying to get in to now people coming to us and saying, "Hey, how do I join part of your fund?
Yeah. I was going to say, Sarah, you kind of have one of the coolest jobs, I think, in this entire room here because if you are someone who's curious and optimistic and really focused on innovation and finding value for others, that's your seat right now. I look around the markets and a lot of the stuff's picked over. We all trade it every day right on The Legend and all that sort of stuff. But it's the stuff, again, going back to the private markets, I think they're driving a lot of the stuff that's going on with the companies who've been public for a long time. So talk to me a little bit about being on the doorstep of some of the most interesting companies, and I think we can say, that any of us have ever seen.
You've got to go back to the '80s with Apple and Microsoft and all that sort of stuff. So talk to me a little bit about that experience.
Yeah, of course. Thank you.
Look at that. You get a round of applause.
Wow. Look at that.
You got a nice cheer for you here, Shiv.
Thank you. I've been a private investor in the venture market. Something cool is happening there. I've been an investor in the private market since 2010. When I started, it's always been fascinating, it's always been interesting, but when I started, companies would go public when they were worth $10, maybe $100 billion. For companies like Shopify or for companies like Square, you could've bought at the IPO and done extraordinarily well in the public markets with a lot of the growth and a lot of what these companies are today happening post-IPO. What we've seen in the last 10 years is that that is just not the case anymore, and companies are staying private much longer, and so much of that value creation is happening exclusively in the private markets. We now have companies worth $1 trillion plus that are still private.
I never thought I would see this in my career. With this AI movement, we're just seeing an explosion of opportunity and of incredibly cool innovation happening. I just didn't think it was right that so many of us, so many of you, wouldn't have the opportunity to benefit from that and to learn from that and to gain from that. That's why I would agree. I think I have one of the coolest jobs.
Yeah.
But to give you an example, I was lucky enough, and probably somewhat smart enough, to invest in Anthropic in early 2023
Wow
when it was pre-revenue and largely pre-product. It's probably a unique example in the history of capitalism. Seeing that company go from where it was then to where it is today has been the ride of a lifetime. Now that we're building this at Robinhood Ventures with RVI and RVII, we're making that kind of ride accessible to everyone, which is incredibly fun.
Cathie, what Sarah just said, it's pretty fascinating in the scope of my career, your career, to see value creation to this scale in such a short period of time. Your point about Anthropic is like, think about it, ChatGPT had just come out in late 2022. Anthropic was not on the tip of most people's tongues. If anything, they were considered well, well behind. Look at how we've just had this sort of flippening a little bit. We'll get to that. But speak to past cycles when you've seen this sort of stuff. Is it something that has longevity or do you have to be so good at nailing a theme but also picking the winners? Because I think in technology, oftentimes it's been winner take all. If you think of Amazon. There's no shortage of examples going back to the late 90s.
Google's a good example, too. Just help us think about that. Put that in some context for us.
Yeah, I'll just set it up. It was beginner's luck maybe, but our fund started late 2022, so the end of a bear market, and one of our first investments was Anthropic. Believe it or not, back then, I think it was a $40 billion valuation. Back then, no, it wasn't, it was a $4 billion valuation. $4 billion valuation. Back then, because we had been in such a terrible bear market, the public markets, there were founders who really wanted to talk to us about what we were doing because they knew about our research. Very often our research ends up in their pitch decks, our big ideas research. We started our relationship with the founders at a very interesting time.
In terms of your question about this relative to past cycles, the difference is there are so many technologies evolving at the same time. The five major platforms, AI, robotics, energy storage, public blockchains, multiomic sequencing in the life science space. Those five major platforms involve 15 different technologies, and they're all converging like we've never seen before. Think about S curves. We have innovation slowly, then all at once. Slowly, slowly, then all at once. What we're seeing right now, and the reason we're seeing these valuations scale so quickly, is these S curves are feeding each other. If you think about Tesla, it's the convergence among AI. The autonomous vehicles will be powered by AI, but also robotics. Robo-taxis are robots. Energy storage, they will be electric. So that's three S curves feeding each other.
Yes, autonomous vehicles, we started doing the research 2014 when I founded ARK, and we thought it was on the horizon, on the horizon, and 12 years later, here we are. But it's going to happen really fast now, and the market is beginning to sniff that out. Of course, AI is speeding everything up. When the cost of something drops 99.99% per year as AI inference costs are dropping now, you're going to get a lot more of it. That's why we're seeing this explosion. It's pretty exciting.
Sarah, Cathie just laid out these different converging themes. When you are constructing a portfolio, because I think that a lot of folks out here, they are not just one-off trading this or buying that or whatever, they think about it holistically a little bit. How do you think about it? Because again, a lot of these themes are overlapping. The Venn diagrams are. That, I am sure it poses challenges sometimes for concentration purposes, but it also lets you really lean into some of the themes that you really believe in. How are you thinking about that right now? Because I have friends who are in VC, and if they have not invested in all the names that you guys have early, and you could call it dumb luck, I do not believe it. You know what I mean?
That sort of thing. It is really hard to raise money right now if you are not in OpenAI and Anthropic and Anduril. The list goes on and on. How do you think about it from a portfolio construction standpoint?
Yeah. We thought long and hard, and we think long and hard about what products can we build that will be attractive to retail, that will perform. Obviously, we want products that will deliver outstanding performance and that we can uniquely build very well. We started with a concentrated portfolio of what we think are the top 15 to 20 companies out there. The bar there is extraordinarily high. Think of Databricks, OpenAI, Stripe, ElevenLabs that just announced an up round today, Revolut, Ramp, and a few others. It is a fairly known universe, but we have to get these companies, we have to pick the right ones. We have to get in front of these companies and get them to say yes to us.
That is one strategy which we think is incredibly attractive because we think these companies have a lot of value creation ahead of them, and we actually think that a lot of value, a lot of talent, a lot of interest continues to accrue to these winners. As they become big, they become even more interesting often. Then we have a second strategy, which is our second fund, RVII, which is the other side of the barbell. As you think about what AI is creating, it is really opening up every category from consumer to enterprise. Everyone is looking at their tech stack and rethinking what they are using. We think it is a really interesting time to have exposure to early stage.
Yeah.
The right way to do early stage, in my opinion, is to have a very diversified portfolio. We picked Y Combinator as the right ecosystem to go and hunt in because they just have an incredibly high-quality, proven track record of attracting and creating amazing companies. Many of which we actually have in our first portfolio. So that one is a different kind of portfolio construction that will be attractive to certain customers. We just want retail, we want everyone to have the kind of choice that very high net worth individuals and institutional investors have. If you want diversified early-stage exposure, we have a product for you. If you want concentrated late-stage household names, we have a product for you, and it's just the beginning.
Okay. Now listen, we have these mics here. If you guys don't line up behind, I'm going to leave a bunch of time because we got a couple legends up here, and I really want you guys to be able to interact with Cathie. Obviously Sarah is building amazing portfolios and Shiv's building great products. So you guys were all here last night, and you heard about all the different products. I know you guys know about most of them, but as they're rolling out different ways to kind of execute trades and manage risk and all that sort of thing. Shiv, give me your best pitch on why someone out here who has all these tools at their fingertips now, right, and all these different products, why they should consider putting these products in their portfolio.
It's not something that you guys are going to be able to see every tick of, every day, that sort of thing. Maybe that's a good thing. Right? Because it's not something, "Oh, I want to trade that." I know that there's some liquidity. But what's the best pitch of why someone should buy this or one of these funds, put it in there, and not look at it?
Yeah, I'll start. The main reason is it's just a diversified way to private markets. So you can trade as much as you want in the public markets. We stand for access. We think that's fantastic. But if you want to invest in OpenAI, Databricks, et cetera, before they go public, this is one of the best ways to do it. You can get daily liquidity and get low cost. That's it. Now, in your own portfolio, you should decide what your allocation's going to be. Some people will want a lot of access to private, some will want smaller. But for us, just having access, that's the way to do it, and then you design your portfolio how you want.
I would add another reason, important reason, is thanks to the speed at which things are happening today, technology is progressing. There is going to be a lot of disruption, disintermediation in the traditional world. A lot of the larger benchmarks around a lot of high-frequency trading is based, a lot of companies in those benchmarks are going to be disrupted. If for no other reason, but to have a hedge
against the disruption, because these companies are. If you think about every sector, transportation is going to be completely disrupted, energy, completely disrupted. Almost every sector is going to be disrupted. I think it is important to at least have a hedge. In my own case, I think this is the way the world is going to work. This is where I have most of my exposure.
All right. You used the term hedge. Just so you guys know, Cathie mentioned the research that she puts out, the big ideas. You are not going to find someone who is as giving of their brain and their thought process. It is all out there. You can get it. You see her on TV a lot and that sort of thing. You have got to love transparency and access when you are thinking about investing. I give you a lot of credit there. When I first met Cathie, it was, I think, late 2017, and Bitcoin was $1,700. I just want to give you. You were taking a very long-term. You were not somebody who was saying, "By the end of this year, it is going to be 10 grand or 20." That is not what your thing is.
You are talking about the reasons in which you think it could go to these sorts of levels. Where are you right now? I am sure you have a lot of views about these private companies that are going in your portfolios and they are informing your views about your existing public market investments. What do you do when you get? You just used the term hedge, but some of these companies that are in your portfolios are going to get decimated. Is that fair to say or no? When you think about it.
You mean in the public?
In the public markets, in the public portfolios, a bunch of the private stuff you are investing is coming for your public stuff. Like to the point you just made as far as disintermediation.
Oh, yes. I am having a little trouble hearing here. So you are saying that some of these private companies moving into the public market?
Well, what I mean is you taking that long-term view like you did in Tesla.
Yes
and EVs.
Yes
and Bitcoin and SpaceX and that sort of thing. Some of the investments you are making right now, you are taking a very long-term view of how do you think they are going to affect, you just talked about disintermediation, how do they affect some of the names that are in your portfolio? Because maybe it is helpful for this group to kind of think about that. If they have access to these products, how might they think about moving out of some of their public equities?
Well, I think even within the public markets, there is for companies that have very little cash flow or not big cash cushion, there is still risk aversion. We are seeing that especially in healthcare. Healthcare has been the most difficult space in the last four years. We think there is going to be massive disruption there, but a lot of those companies are in the public markets because venture was not as open to funding them in the private market. So interesting, this is why having a public/private portfolio, which is what ours is, 80% private, 20% public, gives us an opportunity to arbitrage between the relative valuations or even the existence of opportunities in either space.
Sarah, when I think about, you just used that term private for longer. When companies are looking to get liquidity or an exit, it is a dual path for the most part, dual track. It is IPO and M&A, right? When you talk about some of those names that you have had access to, Stripes and Databricks and these are amazing companies, and they have valuations that would put them in the top easily 50 of the S&P 500, that sort of thing. How do you think about, okay, maybe these folks, they do not feel any need to do it. You still are getting the accrual from a value standpoint, but what are you seeing on the lower end? Do you know what I mean? Are you just seeing amazing opportunities in companies that are just kind of bubbling up and doing some new things?
Like how are you thinking about the early stage? Because to me, a lot of the money has been made for the time being, until you get an exit in the OpenAI and Anthropic, and some of these other names. Where are you seeing what parts of the private markets in and around AI are you seeing the best opportunities, the most exciting opportunities?
Yeah, I think the winners are still really, really interesting, which is why we invest in RVI in some of those. Even though they would appear to be really expensive, we build an investment case for each of them, and there's very good reason why we pick them, because we think they have a lot of growth in front of them. But in an early-stage portfolio or in an early growth portfolio, which is also a category that can be really interesting, we think about strategic value all the time. If it's an n of one team, if it's exceptional talent, if they're building something that is really valuable in this moment in time, then chances are that they'll be very good M&A candidates as well. We're seeing it with Stripe acquiring OpenRouter and AMD acquiring World Labs and Cursor being acquired.
Lots of these companies, you never hear about these acquisitions because they don't happen, because those offers are turned down. But I actually think we're seeing a resurgence of really interesting M&A now as, coming back to your previous questions, some of these large incumbents want to bring AI native talent in-house, want to diversify their offerings to meet this AI moment.
Yeah.
Maybe sometimes the best way to do that is inorganic.
That is such a great point about the M&A. When you think about Stripe, I do not think a lot of folks, maybe Cathie Wood was thinking about it, but like how do they become integral into this AI economy? They buy a company that has been around for 2 years at a valuation. Like, wait, what? That may prove 10x in 2 years, that sort of thing. I want to get to some questions, but Shiv Verma, I got to ask you one last question on the product front, because I know that you guys have been branching out, trying to offer different ways in which, we just spent a lot of time, investors can have access to things. IPOs is one of them.
How does this strategy fit within you gaining credibility with companies, but also other underwriters to find your way into, let us say, these underwriting groups when these companies are coming public?
Yeah, it is a great question. We have 2 constituents here. One is the retail customers, and one is the companies. For the retail customer, our goal is you should be able to invest across the entire life cycle, when they are private, when they go public at the IPO, and when they are publicly traded. For the companies, it is a very similar pitch. Our goal is any stage of the life cycle you need capital, the Robinhood customer can be there to support it. You are in an early-stage round raising your first capital, great. The early-stage fund can do that. You have grown, you are going to the growth round, we can do that in the growth fund. You want to IPO, we just announced we are an underwriter, so we can help you there. After you go public, we can help you engage with retail.
For example, you can use our Save product where you can talk to customers. We do that on our own earnings calls. You can now live stream your earnings in the app. The appeal is we do not just want to be there once. We are not a VC. We are not just going to provide you capital and go away. We are going to be there for the entire life cycle. That is the vision. When I talk to Vlad Tenev and the team, what does success look like? Success looks like in 5 years, every company that is raising says, "I want Robinhood on the cap table." Every company that is going public says, "Can you help me with my retail strategy?" Any public company that wants to engage with retail knows we are the destination.
You can see the pieces now, and it's because of everybody in this room and listening. I think we're getting pretty close.
Yeah. All right, listen, I want to get to a lot of questions, but you got to do me a favor. Let's treat it like a speed round. Let's have short questions, and we're going to give you efficient answers because I know there's going to be a lot of you. Let's start right here.
Hi, my name is Hu Zong, and by the way, thank you, Cathie, for all the good content you release regularly on internet. It's really good. I have two macro questions. The first question is, a lot of people say AI is going to give us a production boom, and I agree with that. But some people say that it's going to solve the debt problem. If we look at the history of the U.S. for the last 100 years, it seems like the spending of the government has been accelerating much faster than the booming of GDP. I don't see how necessary AI booming is going to change the behavior of the government. So what could be a possible way of the solution for the debt problem? The second question is related-
Let's just do the one, dude. I love you. I love you-
It's the one question
a lot. Great hat. Cathie, give it to me.
Okay. Thank you very much for the compliment, but I am standing on the shoulders of an incredible research team, so that's where I'll start. In terms of the debt problem, I know that that $40 trillion is grabbing the headlines. I feel as though I'm back in the early '80s when I first started my career, and the same question, it was the exact same question. The deficit as a percent of GDP was 5.5% back then as well. The right answer was we grew out of that deficit, and while the debt never went down very much ever, the economy grew and the wealth in the economy grew so much that it began to shrink that debt as a percent of GDP.
I think that's the main answer, and I think this S-curve feeding S-curves couldn't have happened at a better time because we need that kind of growth, and I think we'll get it
Right here.
Okay. Yeah. Hello. I really wanted to ask about the Robinhood Ventures funds and the fact that they have a negative NAV in both of them. I wanted to understand that a little bit better. I also wanted to see, as some of these companies that are venture start to become public, we have seen some of these other use cases before that could really drop the price of the overarching fund sometimes, depending on allocation. I just want to understand what you guys are thinking about and how to address that.
Mm-hmm. I can take the first piece. Our NAVs, more or less, in our two funds at this moment in time are about $25 a share. I have not checked in the last few minutes, but last time I checked, our first fund, RVI, was actually trading at a premium to NAV, and that has been true for most of its life. Obviously, I do not comment on the share price, but that has been true overall, as a fact. Most importantly, what we can control is the inputs, which is getting you guys access to the best companies that we believe will deliver performance at scale, then making sure that we pay the right price, then making sure that we, every quarter, deliver a valuation that is fair. There is a very disciplined process to do that.
It is highly scrutinized by the SEC, by our internal teams, by external auditors. Every single quarter, both of these funds will release a full asset-by-asset fair value, and that is what the NAV per share will be based off of. Our second fund, which is our early-stage fund, last time I checked again, was currently trading at a slight discount. It is not surprising. It is a new fund. It is a new product. It is a diversified portfolio of very early-stage companies. Again, what we can control is be in the right universe. I would definitely stand behind Y Combinator as the right universe, make sure we have the right portfolio manager. Rich Aberman is incredible. He is a successfully exited YC founder, former visiting partner, and making sure we are in the right companies.
In the previous batches, we aimed for 40 companies out of 200 which we believe are the most promising, and we got there, and we got 40 companies to say yes to us even before the fund was public, which I think is quite an achievement and would be very difficult to replicate for any individual retail investor.
Shiv, anything to add there, or no?
I think when you look at the closed-end fund structure, for the early-stage fund, it's not surprising. This is a long-term time horizon. Most of these companies aren't known. What you'd expect is some of these companies will do well, some won't. But as soon as you see a company do well, the NAV should go up and the fund should trade. In the growth stage fund, as Sarah mentioned, for the life of it's actually trading at a premium. I think a healthy premium, if you look at historically closed-end funds, is about 10%-15%, and for the most part, that's where we've been. The nice part is investors can make their own decision. If you think it's trading cheap, you can go in and buy it. If you think it's trading rich, you can sell it. I think that's a feature, not a bug.
It gives investors the ability to trade in and out if they would like.
Over here.
Hey. Cathie Wood's ARK Invest funds have underperformed QQQ since the inception. Based on what credentials, you guys invited her, where there are many people who are putting their money, expecting great returns? Thank you.
May I answer that question?
Please.
This is also making the headlines, right? There's a lot of endpoint sensitivity involved here. You're looking at the five-year record. If you look at our one-year, three-year, this is as of, I believe, the end of August, one-year, three-year, 10-year inception to date, ARK's performance is in the top 5%-10% in each of those periods of the Morningstar database in our category. Now, you are comparing us to QQQs. That is an incorrect comparison because we are focused on technologically enabled innovation across all sectors. Roughly 30%, 25%-30% of our portfolio right now is in healthcare, which we believe is going to be the most profound application of AI. The QQQs are not involved in healthcare or in financial services. It's barely involved in financial services.
Okay.
There's no comparison.
Thank you, Cathie. Let's go over here.
First of all, super happy that you're here, Cathie. Thank you for taking the time and traveling to us, and I'm super excited to hear your thoughts on my question. A major theme of this year has been space, not only of this conference, but of the overall market. I'd love to hear your thoughts, especially with the recent pullback in a lot of these stocks. What are the areas that retail investors should be looking at, whether it's infrastructure, launch, connectivity, IoT, that you think are underpriced by the market for long-term value?
This is specifically on the space.
Yeah.
Yes?
Yes.
Well, when people ask us about
About the ramifications of AI on everything and talk about job losses. We actually bring to life to them this new world that is opening up. I think it is going to create part of the boom out there. Now, it is very interesting. SpaceX has been taking most of the oxygen out of the room, understandably so, because it is going to be the most important company, not only in space, but I think potentially because it probably will acquire Tesla. Probably it will be the generational company of our time. I think if you are listening to Elon, he will tell you that chips, of course, are the biggest gating factor for him, because he is not looking at just launching rockets or at Starlink, but he is looking at his Neocloud business, terrestrial and soon to be in space, which is going to solve our infrastructure problem here.
He is also looking at chasing OpenAI and Anthropic and becoming the premier frontier AI play. So we are looking at space as a big part of enabling AI. It is a big part of the infrastructure play. This is the last thing I will say. I was in New Zealand, got to visit Rocket Lab, Peter Beck, just last week, 10 days ago. Just talking to him, I began to understand that what SpaceX is doing, and especially since it is going to phase out the Falcon 9, is opening up a whole new world for companies like Rocket Lab who are thinking about doing this vertically integrated way. So I think that variable is what you should really be looking at. Who is helping these companies that want to vertically integrate with reusable rockets, move into space, and help create this new world?
Thank you.
Thank you.
Hi, good afternoon. This is open for anyone. What challenges have you faced evaluating early stage or early growth companies, and what signals gave you confidence to navigate through the ambiguity and noise to find strong candidates that yield potential?
I am happy to take that one. Look, that is the job, right? First and foremost, for early stage and for early growth companies, it is all about the team. Is this an absolutely outlier group of people that is going to beat the odds whatever they do, and that is going to be a really attractive group of humans for potentially a larger company to want to bring on? That is kind of what we are seeing for some of these amazing teams that are getting these crazy acquisition offers from large companies, it is not so much their product. Some of it is, but it is really the ability of this group of humans to build something really special and to do it in a way that is extraordinarily differentiated.
Honestly, that just simplifies the question because when you think about, "Is this person a top 10 people I have ever met in my life? Would I quit my job to go work for this person?" Then you kind of get to the answer a little bit more easily.
I was just going to add to that. I agree the talent is absolutely critical. It's the number one score in our scoring system. I also think doing research on these new technologies, and actually choosing the right technologies is critically important here. And trying to understand what is the learning curve of this new technology, and how is it going to scale across sectors and become a really big opportunity, which with AI, we have so many opportunities. Is this kind of company going to be able to do it? And you're right. Whenever things are not going well, I think about the last conversation that we've had with the management team, looking in their eyes, and you can see conviction in eyes. I've been doing this for a very long time. And sometimes you just pick up the phone and you say, "Hey, what is going on here?
There's a lot of confusion." So being able to call management teams I think is really important.
Thank you, Cathie.
Hi, Cathie. Thanks for all the work that you do and your amazing team. Shout out to Tasha, Brett, Daniel. Really excellent team.
Yes. Thank you.
My question's regarding SpaceX and the AI compute build-out. Elon has said next year that they're forecasting 8 gigawatts of AI compute, possibly more.
8 to 10, yeah.
8 to 10. It seems to me like institutional analysts broadly do not think that that's going to happen. I believe that when you assign elite space engineers to these problems, then good things happen. I wanted to know, do you feel that this is priced in, and what's your sense on them achieving that goal in the next year?
So one of the things we've all learned is there's time and there's Elon's time. And of course, Elon thinks things will happen a little faster, typically, than most people do. Our view is that maybe they'll get into the 5-10. That would be heroic if they do anywhere in that range. But in terms of really scaling this business, we're looking more into 2028, 2029. We have a five-year investment time horizon, so that would be wonderful if they. Now he's saying that he expects much more than 10 gigawatts in the 5-10. I mean, yes, in the five-year time horizon. I agree with you. Institutional investors are finding this difficult to believe. And they're being appropriately cautious. I think that's good news. I love the fact that there's a lot of concern, a lot of caution, that we've got institutional skepticism.
This is the wall of worry we need to create a very durable bull market in not only SpaceX, but a lot of other stocks out there. And I think that's what's happening.
Last one. Very sadly, guys.
Oh, perfect. Good afternoon. Thank you, panel, for being here and your inspiration to us guys. For Ms. Cathie, and just kind of piggyback off the previous gentleman. When evaluating an early-stage disruptive technology, particularly AI and robotics, how do you distinguish a company that has genuinely crossed the promising technology into a scalable business from one that's still primarily a compelling technology story? And thank you, Ms. Sarah, for what you said, too, because in my job, people are the mission. But technology and scalable and crossing over, how is that?
Yeah, I can take the first pass and then maybe if you want to add on. That is a great question, and it is particularly true with physical AI, robotics, for example, where there is a lot that needs to be proven, lots of safety questions and issues. Oftentimes, the best way to figure that out is to talk to early customers that are deploying these technologies as pilots, and also to see where in the background of these founders have they defied gravity before. For example, Tesla engineers or SpaceX engineers tend to be very good second-time physical AI founders because they have found ways before to think from first principles and do things that were maybe not even science challenges, but engineering challenges, and solve them.
So a combination of has this team done something like that before, and can we talk to a lot of early customers to figure out if it is kind of tipping into that usefulness?
I will just add, I think you nailed it, Sarah. I always say follow the developers. Developers love hard projects, and if you see a company attracting more talent, again, we are back to the talent question. We are probably going to be talking more and more about follow the agents, given what we heard from OpenAI about dots yesterday. Again, even this monitoring for success world is changing very, very rapidly.
Listen.
Thank you.
Great question. Thank you all for being here. I could've done this all day long. This is amazing, and we really appreciate all your insights here. I hope you guys check out what they're all doing because I think they're taking a very, very interesting approach, and they're bringing it to you. I think that's what's really important about this, the access and democratizing, and that seems like something that is a theme here. This is my third HOOD Summit, and it seems like they keep building on that every year. So congratulations to you guys, and thank you, Cathie, for being here.
Thank you.
Thank you.
Thank you.
Well, they didn't disappoint. Thank you, Dan, Cathie, Shiv, Sarah Pinto. All right. Well. Where's everyone going? Guys. This is it. We're getting to the finale. We're in the bottom of the eighth inning here. Penultimate session before we get to our finale, but we've spent a ton of time today talking about markets, where potential opportunities are, how we find them, how we put capital to work. But now we're shifting away from the market, and we're looking inward to ourselves as traders. Because having a strategy is one thing, but actually following it when there's real money on the line, something totally different. How many people have experienced that? Like, oh, it all feels good until you're in the trade and things go sideways. I'm a trader. I'll be the first to admit, I've chased trades. I've held on my losers too long. I've taken profits too early.
I've gotten frustrated. When I get on a winning streak, I get overconfident and oversize. And my personal favorite, I'm literally looking at the screen and I know I'm about to make a decision that was absolutely stupid right as I was actively making it, and I said, "You know what? This is a bad idea," and I pushed the button anyway. So quick show of hands. Anyone else recognize any of those behaviors in your trading?
Everyone.
Great. So this is basically group therapy now. That's why I'm so excited to work with our next speaker. I started talking to Jared Tendler earlier in the summer. One, because he's phenomenal, but two, I need a little help with my golf game, and he also wrote a book about that. But Jared spent his entire career studying these mental patterns, not just how to recognize them, but how to correct them. So if you've ever known exactly what you should do as a trader and then watch yourself do something totally different, we are in the right place. So please welcome to the stage, author of "The Mental Game of Trading," mental game coach, Mr. Jared Tendler.
Happy to be here. You have heard from some fantastic speakers over the last couple of days, including those that were just on stage. You've gotten some amazing advice. Unfortunately, it's all useless. To you, that is. Useless to you, unless you have the right frame of mind to actually make use of it. The best knowledge in the world is absolutely wasted when you're not in the right frame of mind, when you cannot access it. Look, we all know trading is intense. Your goals are on the line, your future is on the line, your money is on the line. Now, being able to have the mental and emotional wherewithal to withstand that emotional intensity, to not get steamrolled, just as Obi just mentioned, where you know exactly what you should be doing and can't quite actually get yourself to do it. Right?
It's one thing to know that you should stay in the sidelines, not jump into a trade out of fear or FOMO, greed. It's another thing to be able to have that wherewithal in the heat of the moment. You know you should not close a trade prematurely out of fear, and yet what happens? Price dances around tantalizingly longer than normal, and you just can't withstand that intensity. Or if price is nose diving right back toward your entry, you're closing out of panic. It's easy to say, "Stay calm, be poised, sit on your hands, not revenge trade, trust your strategy." But can you do it when it matters, right? I've been a mental game coach for over 20 years, right? I have clients in 45 countries. I coach PGA Tour winners, professional poker players, sports bettors.
I have clients that are institutional day traders, fund managers, trading books of seven to nine figures. But I also work with retail traders just like yourselves. The reality is you're all dealing with very similar stuff, right? As a mental game coach, my job is to condition your mind, much like an athlete must condition their body. Now, we know Texas is known for a few things. Obviously, the space program, as we all got to experience last night. It's also known for football. Can you imagine a football player not conditioning their body to compete? It would be illogical. They'd get destroyed, they'd get injured, and yet, just maybe a quick show of hands. How many of you actively work on your mental game every single day that you trade? I don't see too many hands, and therein lies the point.
You're basically allowing yourself to get steamrolled. Okay? Now, one of the top priorities I have in my career is making the mental game tangible, right? Emotions, this mental stuff, it's hard to make real and tangible. Well, we're going to do that today. Okay? And make it a lot easier to help understand how to work your mind, how to condition your mind. Now, today, I am your coach, and I want you to take that seriously. This is an opportunity. You don't know where the breakthroughs are going to come from. Maybe it'll happen today. Maybe you'll plant the seeds for a breakthrough that'll happen down the line. But the reality is, your engagement is essential for that. So we're going to get started right now. I want you to open up your Robinhood app. Okay? And I want you to navigate.
You'll see a little button that says Watch live. Click on that, and you will see a poll. I want you to answer the question. For those of you watching the live stream not here, please do the same. Can you see emotions when they affect your trading decisions? Can you recognize that happening in real-time? Now, I've done some research on this. Five years ago, with the help of several partners of mine, we surveyed over 1,200 traders from around the world. You'll see 90% men, 10% women, stratified across age demographics, and from people from around the world. The effect that we found holds up across all different demographics. 91% of traders had the ability to see in real time when emotions were affecting their trading. All right. Let's put up the results here. 84% can see it. Okay.
The number is a little bit lower, which tells me that we have some work to do, and perhaps what we are going to do today is going to help you to actually be able to do that. One more question here. Navigate right back to that same spot. You are going to see another question. The next question is, do you have a concrete strategy to be able to manage your emotions effectively in real time while you are trading? Yes or no? How many of you have that concrete strategy in place? What I found was a whopping 57-point gap. One-third of traders had the ability to manage and control their emotions in real time. Everybody else, getting steamrolled.
Even worse, when you can see what is happening and cannot stop it, that is going to send your mind into a tailspin because it is inexplicable how you could do something so dumb. You know better. As Obi was saying. I have had clients literally grabbing their hand on a mouse, and they cannot stop themselves from entering a trade. This issue is ubiquitous. It happens around the world. You are not alone, but there are solutions. Let us see the poll results here, and it looks like the numbers are quite similar. 37% of you have an effective strategy. For those 37% maybe we will help to refine that strategy a little bit more. For the rest of you, pay very close attention. This is your opportunity. Take it. We can do something about this. You are not helpless.
I work with traders just like you every single day. There is a lot we can do. Let us drill down now. There are five big problems that I see every single day. I want you to open up that app one more time. Last question that I will ask you through the app. The rest we will do here. Which issues do you struggle with? There are five big ones that I find. Discipline, fear, tilt, which is another word for anger, getting a little bit of revenge trading, hating to lose, things like that. Confidence issues, and of course, greed. Which of the issues do you struggle with most? You are perfectly welcome to select more than one. I want to understand what we are dealing with here, because as a coach, I like to personalize everything I do, including a group of this size.
I want to have an impact on every single one of you. Let us see what the results are here. 34% lacking discipline, 25% dealing with greed, 25% fear, and confidence. It is a pretty decent stratified mix. The question is, let us get back to the other screen. The five big issues. Let us talk about each one in just a little bit more detail. I want to make sure that you all have a good idea of what we are orienting ourselves around. First off, discipline, which was the biggest issue that you all said was an issue. Do you really have a discipline issue? I would argue that you do not.
Now, it is easy to look at your violations of your rules as just being a discipline problem, but you must rule out that it is not caused by fear, anger, a lack of confidence, overconfidence. Overconfidence is a sneaky one, or greed. Because if you try to correct your discipline issues and they are actually caused by emotion, guess what? You are going to make that emotional issue worse. Why? Because discipline is like the muscle of the mind. You are pushing yourself to adhere to your rules. There are times where you can squelch your emotions, and we have all done that, right? Situations outside of trading that kind of frustrate us, but you cannot really let that frustration out. You are able to kind of control it in the moment. But trading is way too intense. It is not like situations in life where you can get away with that.
What will happen is that ability to squelch will get overrun by that emotional intensity, and I will explain more about that in a minute. So the discipline issues that we are mostly dealing with are boredom, right? Like those times where your mind starts to tune out, lack of a little bit of energy, market is chopping around, not a whole lot going on. Right? Then you kind of just do something random. Almost take a trade just to boost your excitement a little bit, have a little fun. Talking about impatience. Sometimes that impatience can come from a lack of energy. Sometimes that impatience comes because you have way too much intensity. You are so motivated to make money that you cannot help yourself, so you get overrun. Okay. Next issue, greed.
Now, the greed/fear spectrum that you see popularized is a kind of poor representation of what individual traders deal with. Because there is not a single person on the planet that would ever say that Michael Jordan, the Houston Astros, are greedy because they want to win championships. In trading, your job is to make money. So to say that you are greedy trying to make more of it does not really make a whole lot of sense, except when your efforts to make money actually work against you. Now you are like one of the Astros trying to turn a single into a double, and you get picked off. But as traders, you have to define the line. You have to know exactly when your decisions are being guided by greed that is excessive versus when it is actually just your inherent desire to profit and make money. Fear. Obviously, FOMO is a big one.
Fear of losing, sometimes even the fear of failure. There is that overthinking. The mind starts to spiral and go into overdrive. There is fear of losing. You get very defensive, protective of capital, excessively so. Now, one piece of advice around fear, especially for those of you that close positions prematurely regularly, this is a problem that you have. Sometimes fear actually protects you from success. Imagine you have a T-shirt business, and you are continually selling your T-shirts at a discount just because somebody walked in your door. You cannot run a business that way unless your profit margins are designed that way.
So if you are protecting yourself by continually closing positions prematurely, not being able to get out the full scope of your trade, not trading it the way it is designed, you are basically guaranteeing your long-term failure, because trading is not going to be successful enough to truly make your time worthwhile. So be very careful about what you are protecting against, because sometimes it might actually be the success you are after. And of course, tilt. Now, tilt comes from poker, but basically means anger and frustration, the hatred of losing, and many of you are very, very competitive. Just a quick show of hands. How many of you are very competitive and hate to lose? That does not surprise me. Look, it is a trait that has led to a lot of success in trading and elsewhere. We are not shy about your hatred of losing.
I do not want you to lose that, but you got to understand what losing means in trading, because it is not the same thing as in baseball and basketball. Right? You cannot think about a losing trade like losing game 1. You have to think of losing and trading like maybe striking out in the first inning. Maybe, having a small error. Just one single play. Imagine playing a baseball game that lasts 3 months. That is what trading is. So if you hate losing, have at it. But just zoom out and make sure that you are not thinking of trading like everything else, because it is not. This is a very different game. You cannot treat it the same way. All right. Last one here, confidence. Now, as I said earlier, overconfidence is a very sneaky problem.
I would imagine that very few of you here have the ability to recognize those early warning signs when your mind starts to deviate and starts getting a little high in your own supply. Believing that you are more capable than you actually are, believing that you deserve all the profits that are coming your way. There is luck in this game. It is a reality. I work with poker players. Any poker player that comes into trading has an edge in being able to understand that in the short term, you are not in full control of your results. But if you believe that you are, your mind is going to start to deviate. You are going to start to put on more size. You are going to start to take more trades. You are going to start to assume that you know what is going to happen.
The best way to know that you have become overconfident is that you start to become predictive of what is going to happen. Solid confidence means being very comfortable with what you have done in the past, but knowing full well that you have absolutely no control over what is going to happen in the next trade. You are a probabilistic business. You do not have psychic powers, but all of you can sometimes get a little bit seduced by it. I have institutional traders that killed it in 2020, 2021, and then they absolutely were awful in 2022, 2023, until they started to really understand how much overconfidence had infected their perspective. Of course, on the flip side. A lack of confidence. You are really down in a drawdown. It can very easy to question a profitable strategy, and you start working against it or maybe even not trading it.
Market conditions are challenging. It can be hard to know where your edge still lies. When we start to understand confidence, it is to understand that confidence is an emotion. It is not something that is solid. As an emotion, it is influenced by your perspective. So it is easy to have your sense of your own capacity be altered. I want to ask another question. A quick show of hands. How many of you would like to make easy money? Wish that you could make easy money? Okay. Now, how many of you also believe in Santa Claus? Okay. To me, this is adult Santa Claus. It is fiction. You do not have the ability to make money easily, except the trading will maybe give it to you once in a while. Anything hard is worth doing.
If you believe, and if you are motivated to make easy money, I can promise you that when you are making money easily, you are going to get overconfident. When you are struggling, the idea that you can make money easily is going to be eviscerated. So you are creating a lot of emotional volatility by having that little outdated wish hanging in the background of your mind. Okay. So let us drill into this a little bit more and understand why it is very difficult to control your emotions, because I have just given you a bunch of advice. As I said at the outset, maybe it is worthless, too, unless you are able to use it. So let us understand how we can drill into your emotions a little bit more by discussing a concept called the Yerkes-Dodson law.
Now, I am colorblind, so I am going to try to get these colors right. The reality is that emotions make us dumb. They allow us to believe things that are not real, and they are the primary cause of all of the repetitive problems that you have in your trading. These are not That is an R. All right, so on one side, we have got performance, and down here, we have got emotion or energy. Now, I am going to say some important things today. Hopefully, maybe a few that I have already said. This needs to be burned into your brain, because if you do not understand this very simple concept, you are fighting against reality. You are believing that you can send a rocket into space without any propulsion. That you could fly. Gravity is real. We all accept gravity.
If you do not understand this concept, you are fighting against the reality in your brain. All right. Here is what this is. So when your performance is low, it is because you do not have enough energy or emotion to power the mind. So think about those times when you are exhausted, burned out, tired, just getting back from vacation. Your performance is going to struggle. As your energy rises, performance rises as well. But you get up in this space. Now, this is where the boredom might start to take place. You are there trading, but not totally energized. We find ourselves right at the top. Now, if this is not green, somebody yell at me. Now, this is the peak of your performance. Green means go. For the institutional traders, the traders that have been trading for 25, 30 years, they have got a lot more territory that is green.
They can have a little bit less energy at times. They can have a little bit more emotion at times, and they will still be rock solid. The more junior trader you are, the less experience you have. You have got a narrow slice where you are going to be at your best. So you have got to know what that looks like. You have got to know what helps to create it. Talk about preparing yourself, conditioning your mind like you condition your body. What is going to get you there? Do you know? I would argue many of you don't, because you are not studying yourself enough to be able to do that. Now, problem is that's fickle. So as emotion or energy continues to rise, you are going to fall down this curve and your performance is going to suffer, and we end up down in this zone. Let's call this 80. Right?
80 out of 100. This is where mistakes are inevitable. You cannot stop these mistakes from happening. You can only rip yourself away from your desk, from your phone, chuck it, run away. Because at that point, the intense emotions have shut down your ability to think clearly. This is a fundamental law of human nature. You may have heard of it as the fight or flight mechanism. Okay. Now, higher brain functions include thinking, planning, making decisions, but also includes emotional control. So just understand this clearly. The part of the brain responsible for controlling emotions is shut down and turned off by intense emotions. Okay? It's a sadistic way the brain is wired, but this is the reality. So when you get to 80, you are pretty close to being in a blind rage, on a blind panic, or euphorically blind, right?
The language there is real, because at that point, you are not thinking at all. If you are not thinking, well, then you lose access to new knowledge. You lose access to the advice that I am giving you right now and the other things you have learned today. This is firmly a red zone. Do not go. You have to be able to prevent yourself from getting to that point, and if you do, you rip yourself away. That is your only defense. Okay? Everything else we will say is sort of shades of yellow. Right? Caution. Now, there's a few other points here. When you are at 75 and 80, one of the most difficult parts about that is that you have awareness. It's like the last mental feature to be dissolved. Just before you become blind, you are still aware of what you are doing, but you cannot translate your thoughts into action.
As Obi was saying earlier, right? Know exactly what you are doing is wrong, cannot stop yourself. That is why. It's not some random thing. You are more emotional than you realize. Now you know, and now you can't make the excuse. From this point down to here, there are early warning signs, and as we begin to develop a strategy here, this is what you need to keep in mind. Okay? Let's keep working at this and begin developing a strategy that is going to help you to take your trading to the next level here. All right. Step one, mapping your pattern. You all have spent years studying the markets, studying the charts, studying the patterns that exist there to find opportunities for profit. Turn that same skill on yourself. There is no randomness here. There is no randomness on that board.
The patterns that you see in yourself need to be studied and nailed down so that you have the warning signs before your emotional system shuts down. You can't stop what you can't see. It's as simple as that. Here is what you're going to do. You are going to create a map of your emotional patterns. This is an example. It comes from a client, and I'm just going to read a couple of these, but the idea is you're trying to create a scale from 1 to 10. The blank spaces are purposeful. When you're first getting started with this, you might only have 1 and 5 and 10. Very early warning sign. The signs that you're in danger, kind of firmly in that yellow, and then the signs of complete mental shutdown, whatever that looks like for you.
This is personalized. You have to spend the time yourself studying your own patterning. So example here at level 1. "Start thinking about the utility of my money, wanting to lock it up again." "Want to have a big trade to secure profit." So very clear example of an early warning sign. Now he knows that greed has begun to take hold in his mind. The very end here at level 10. "Want the absolute best return right now, give up all control, only focused on making money." Not very complicated, and this right now is enough to give you some control as long as you're taking action early enough. But why stop here? There's some holes in this, and the more you study your own patterning, I promise you, every single one of you will find more details.
This is not something that you're born with. This is a skill that is developed the more you pay attention and the more that you practice, and this is what you can end up creating. This took about 2 to 3 weeks. I'm going to give you some advice on how to do this, but it is not overly complicated, and one thing I want you to notice very clearly, step 1 or level 1 is different now. Just logging on to this client's brokerage account was an indicator that something had changed mentally. Just logging on, because he wouldn't do that. Now, this is a swing trader. He would not do that if he was truly comfortable with the positions. When he starts looking for more, he wants to get a taste of what that P&L is running at that moment.
You see the other things that are now filled in. There's more detail. There's early warning signs. He set up a phenomenal defense. You want to win championships, you got to have a good defense. This is the beginning of how you develop a good defense. And here is how you do it. You're going to spend time collecting data around whatever problems you dealt with. Whether it's discipline issues, fear, FOMO, greed, overconfidence. And here's how you're going to do it. Every single day you're trading, you're going to pay very close attention to whenever your emotions start to creep up. When you know what is optimal, it's easy to see when they deviate. You also can do this immediately after a mistake, whether or not you know it was emotional or not. You can do it defensively, maybe every hour, every 2 hours.
The point is, you are actively collecting information that gives you indicators about where your emotions are. Study them. Over time, you do this 3 times, you're going to gain more information than you know now. You do it 12 times over a few weeks. You collect these puzzle pieces that eventually allow you to turn it into this. And there it is. That's what you get to create. Let's just go through a few examples so you know exactly what we're dealing with here. First, you're listing down the instrument of the situation, then the trigger. What sparks the emotion? What sparks the mistake? Was it a loss? Was it market conditions? What are your thoughts that are happening in that moment? What are you thinking to yourself or out loud?
I can't believe I was so stupid," or, "I'm looking for more money." What are the emotions? Can you identify what you're feeling in that moment? What are the actions or behaviors? The behaviors might include death grip on the mouse. Maybe you're leaning into the monitors. Maybe your foot's tapping a little bit more. Maybe you actually feel some tension in your head or your chest. And of course, what's the mistake? Now, this last one, change in decision-making. I do not mean what should your decision-making be, I mean how does your thinking about your trading change? Now all of a sudden, you're maybe thinking probabilistically. You're thinking deterministically, like you know what's going to happen. Maybe you're worried about losing profit, certainly unrealized profit. Let's look at an example. Situation, bought Apple.
Trigger, it got stopped out by a tick, and then, of course, it races to your target. Thoughts, "I can't believe this is happening again." Obviously not saying it with the same kind of inflection as you would when you want revenge. There's a lot more intensity there. Behavior, hyper-focused on finding a new entry to get my money back. Then, of course, finding a suboptimal entry, because that's what you do when you're hunting. Anything looks good at that point. And then the change in decision-making is being overly focused on making money. So like I said, you spend time doing this enough, and over time, you have a clear map of your own emotionality. Gives you an opportunity for control. All right, now the next step, getting to the root. I want you to just imagine that you experience pain in your foot while you're walking.
What would you do? Certainly, some of us would just try to walk it off, maybe assume it was temporary. Maybe you hope it just goes away, and maybe it does. But if it doesn't, you're going to investigate. You're going to want to understand what the heck is causing this pain. You're not going to live with it. Why do you not do that with your emotions? Emotions are a signal. They're a pain signal, in a sense. That there is something wrong. And in this case, what is wrong is with your perspective. The flaws, the biases, the wishes, like making easy money. These illusions that we can easily get sucked into, they are what cause the emotionality. Emotions are not a problem. As we saw on the whiteboard, we need emotion to perform. It's not bad.
What is bad is what causes it to become excessive and have you cross that threshold and have it start to work against you. If you are going to develop a strategy that is going to actually not just gain control, but truly correct your emotionality. Look, the reality is you want to be able to not have to defend against your emotions. If you are constantly having to be aware of and monitor your emotions, guess what you are not able to do as well? Focus on the charts. Be as receptive as you want. You want your mind clear and not having to play aggressive defense. But to get there is going to take some work. You have got to understand what the hidden flaws are. These are some examples.
I know many of you got "The Mental Game of Trading." In the book, I talk about 40 different of these underlying flaws. I will just go through a couple right now. Expecting perfection. There is a massive difference between expecting perfection in your performance and in your results. Execution is maybe more in your control. You can have perfect execution, aspirationally at least. But if you expect it and you underperform, then your reaction to mistakes can be quite a lot worse. The trigger is the loss of the underperformance, and it causes you to have frustration because you were expecting more of yourself than you could reasonably deliver. Aspirationally, be perfect. Some of the best traders and athletes in the world have that desire, but they do not have the expectation. Hating bad luck. Hating to lose.
If you have these beliefs or perspectives in the back of your mind, it is going to produce anger. It is going to create overreactions when things happen in the market that you do not have control of. Hindsight bias, one of my favorites. You see how much money you could have made and then falsely assume that you are going to be able to do the same thing in the next time. That this hindsight should turn into foresight is a flaw that many people struggle with. Okay, your job is to figure out. I want you to really be inquisitive around the mistakes that you have. Now that you are collecting more data, you are peering into your issues a little bit more clearly, ask yourself why. What is going on in the background? Why am I reacting in the way that I am? You will start to uncover these flaws.
Okay. Now, we are going to put this all together and allow you to start to correct the problem in real time. Bring the battle to the moment. The reality is, conditioning your mind is a lot like conditioning your body. You have to be able to train, and the difficult part about the mental game is that the best time to train is in the heat of the moment when the weight is at its heaviest. If you go to the gym and you are only lifting weights, it is easy, you are not really going to gain much. When you are trading, you have to be ready for those moments to be able to push yourself to have the right perspective in those moments. When you do that again and again and again and again, rinse, repeat, that is how you start to retrain your mind.
That is how you gain control and ultimately delete these issues entirely. All right. I like to make the mental game tangible, right? Let us put this all together here. Just so it is very clear. What if we start labeling all of these points, much like the map I was talking about there, like this. Now we can do the same thing on the discipline side, when your energy is too low, but this is effectively what we are talking about. The yellow area is your best time to be injecting the right perspective. You still have enough brain capacity, enough ability to think clearly, that you can fight up against your patterns. If you wait till here, you are going to get steamrolled. That is a reality.
By finding those early warning signs, you create the ability to work against the issue, work against the reaction, and pull yourself back up. Maybe on days where you typically would have turned towards revenge, taken several losses in a row, frustration is rising, you are in a little bit of a drawdown, just rough conditions, don't really see a whole lot of opportunity. Can you hold? Can you avoid the self-inflicted wounds that maybe have blown accounts before, maybe turn into actual gambling? To me, betting on a negative edge is gambling. When you are not trading with an edge, to me, you are gambling. Can you, in those moments, keep yourself in control and take steps to decrease your emotionality? This is not rocket science. Went to Houston yesterday, the Space Center. It is remarkable what they have done. This is not rocket science.
This just takes a little bit of diligence, a little bit of preparation. Now, I want to challenge all of you right now. Just show of hands, how many of you are ready to battle in the way that I am suggesting? How many of you are going to take the time every single day to start conditioning your mind? Okay, great to see a lot of you raising your hands. For those of you that are unsure, understand that the next time you struggle, and you will, if you are not ready to avoid your mistakes, this is the path forward. I wish there was something that I could just sort of snap my fingers and make you have the perfect mentality. I wish there was advice that was capable of transforming you instantly. That is not reality.
We deal with rules, and when you understand the rules of the game, you have an opportunity to develop a strategy that might actually bring things home for you. All right. As we wrap up here, I want you to understand just a few key takeaways. Got time for a couple questions. Anyone who comes to the mic, I will be happy to answer any questions about anything I have talked about. Any questions that you want, maybe a little bit more personalized, I will be at the Robinhood booth during happy hour. Happy to answer questions then. First off, you cannot rely on emotional control. Why? Because emotional control is a mental process that gets shut down by intense emotions. What are you going to do? You are going to understand your pattern of emotions.
You're going to find ways to be really detailed and specific about what you're struggling with and where and why. When you do that, over time, the pattern becomes clear. You now have something that you can work with. Again, you're making the mental game tangible. It's not rocket science. Lastly, uncover those flaws. Take the time to ask yourself that why question. It can be challenging. I will not be shy in saying that the biggest gap between my abilities and my clients is in this step, really being able to understand the underlying flaws. It is not impossible. You start asking better questions. What a great mentor of mine said, "If you want better answers, ask better questions." Just asking a why question will give you an opportunity to do that. All right, so with that, we have a few questions here.
Yeah. Thank you. When you get to one of those extreme levels where the mind's turning off, you're not thinking critically, time frame, think about real-time, how long should you wait? What are some indicators that you can check in on to know that, hey, I'm ready to revisit this again and through?
Ideally, you're catching those earlier warning signs before you even get to that point. Let's assume that you didn't.
Right.
Right. You want to act immediately. If you don't act immediately, you're gambling with your mentality at that point. You're hoping that you're going to get lucky and be able to gain control. Honestly, in those moments, just rip yourself away. If you can just stand up and run. I mean, close the position, obviously. Do what you need to protect yourself. Get away, and then you can go do a bunch of writing. Do a data collection. Just dump out what's going on in your mind. It'll help to make what's going on a bit more objective. Sometimes when the emotions are running rampant in our minds, it's hard to see things clearly.
I actually had a PGA Tour player who I worked with who would send me voice notes after the round, and you would hear at the first few minutes was just all the frustration just getting released. Then by the end, he was answering his own questions. We have all had those instances where, once you sort of weave a heated argument, cooler heads prevail. That is my advice. Just run away, get it out as best you can, and give yourself an opportunity to kind of digest a little bit.
Okay. Thank you.
Yeah. Go ahead.
Hi. Oh, it is not.
Oh, there you go.
Oh, there we go. Hi. I really like what you said about betting with a negative edge is gambling. I think when you have an edge or believe you have an edge, emotions can blur whether you actually have an edge or not. Some people look at technical analysis, then they misread it because of emotions, or they might just be mistaken. I am wondering, how do you determine if you truly have an edge versus something that is just an emotional based edge?
That is beyond my pay grade, because I do not get into anything technical or strategic. You need to prove over a large enough sample that you have an edge. That is sort of easy to say, but if you need advice and perspective, there are lots of great traders around who can help you do that. What I will say is it is okay to at least be questioning, right? If you go through periods where you are having high profitability and you are not certain exactly what your edge is, if you cannot explain exactly why you are making money, that gives you an indication as to what to be looking for. At least give yourself some pause to think here.
Generally speaking, I think if you are not overconfident, if you do not get too far ahead of yourself, if you are a little bit cautious about the profitability that is happening, I think you are well ahead of most traders in that regard.
Thank you.
Yeah. Go ahead. I got time for one more question, then I guess I will take the rest elsewhere.
Thank you so much for this. This is wonderful. My question is basically regarding a bias. Many a times you think you have this stock in mind or an equity in mind, and you go in with that conviction that, okay, I want to get this. I personally try to go to AI and ask it to challenge me. I would be like, "Play my devil's advocate and tell me where is the flaw in my thinking." My question really is, if I am the one who is choosing the prompts, the assumptions, the evidence and everything, then when AI challenges me, I am like, "Oh, no, you do not get the context, and here is the context." How do I actually genuinely make AI give me that right perspective that I might be lacking?
What are some of those practices you would recommend so that an AI can genuinely be helpful?
The AI training, I am going to leave aside because I think
Okay
there is more complexity than I can get into in 30 seconds. What I will say is, have a pool of people that you can trust to at least bounce ideas off, right? Do not just rely on a computer to challenge you. Find people that can do that you respect. But you also can do it for yourself. So if you are keeping a very clear trade journal, to me that includes lots of trades that you do not take. I think it is very easy for traders to only track the ones that they have taken. But when you go in with certain biases or theses, it is okay to track how those theses play out, whether or not you actually take trades or not. Because over time, again, you are going to see patterning in your own ideology and your own thoughts, your own theses, and then how things play out.
And over time, you will be able to make sense a little bit more. Again, when you get lost in your mind, when emotions are swirling, the best way to gain some objectivity is through writing for yourself, whether that is turned into an AI that is going to maybe help you make sense of it or not. I will be very clear and honest, AI is awful at mental game diagnostics. It may help you summarize these themes, but it is honestly quite dangerous in some respects. Some of the things I have seen come through are quite bad. So just be very cautious at this point about how much you are relying on AI for your own perspective. I am not saying do not use it. Like a lot of things, it is a tool. And when there is a lot of overlapping perspectives, you converge on some certainty. That is true with AI.
It is true with other people, right? It is impossible to not have bias. All right, that is all the questions for today. Like I said, I will take additional questions back at the booth during happy hour. At this point, the improvement is in your hands, okay? My job as your coach has concluded, so take the next step seriously. You have got an opportunity, and it is one that you can take now. I wish you well as you take that and really make some progress here. Thank you.
Got visual aids and everything. Jared, he was worried about his handwriting. Emotional. I can read it. It's good. We've made it. I do not know about you guys, but I am considerably more aware of what is happening inside my own head when I trade, which is useful. Also a bit terrifying. We are there, guys. We are at the finish line. We have one session left. This has become one of my favorite traditions at HOOD Summit. We started it three years ago because we launched Robinhood Legend. We were looking for a fun name to go for a segment. We came up with Lessons From a Legend. The goal was simple: bring someone on stage who has spent a lifetime in the markets, get beyond the headlines and the hot takes and the mechanics. Actually, this one has a lot of mechanics.
Let us let them teach us what they have learned over their career. Two years ago in Miami at our first HOOD Summit, it was Mark Fisher taking us inside the world of futures trading and the career that he built in the pits in New York. Last year, we were in Las Vegas. We launched short selling. We brought in Fahmi Quadir, who gave us a totally different perspective on the world of short selling. This year, we turn to a legend that came from the options world. Trust me, this one is going way beyond options. I started my career working for this guy back in 2007.
I was young. I was new to the retail brokerage industry. Somehow I got lucky enough to be surrounded by this incredible group of people at this company who thought about markets differently, thought about trading differently. They genuinely loved it. At the center of all that was Tom Sosnoff. A huge part of how I learned to trade about options, thinking about probability, risk, and frankly, this entire business that we work in, started with Tom. The guy that I get to introduce that is going to introduce Tom, he has also been woven in my entire career as well. I have worked with JJ Kinahan for nearly 15 years. He has been a boss, a mentor, and a friend for a very long time.
Getting to stand here and watch JJ introduce Tom, and then afterwards sit down with him and moderate a Q&A for you guys, it is pretty special. There is really no better home for it than a session sponsored by our friends at Cboe. Let us finish strong. To introduce our legend, please welcome to the stage Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe, my friend and fellow White Sox fan, Mr. JJ Kinahan.
Thank you, Obi. I am honored to introduce Tom. He has been a boss, a coworker, a friend for many, many years. Tom and I started on the floor of the Cboe many, many years ago. I think they actually may even have a picture of it. We stood in the OEX pit, which at the time had 600 people in it. You can see the yellow circle around Tom. I am actually at the very top left of the picture. If you look in front of the American flag, the guy with the giant forehead, that would be me. We were in that pit together for many, many years. Tom went and founded thinkorswim. I went and worked for Tom at thinkorswim, and then at tastytrade, Tom called me and I was CEO at tastytrade.
We have been together in different roles for about 40 years. A quick thing about Tom before he comes up. He is probably one of the most humble people I have met in my entire life. He really does care that everybody else, in terms of being a retail investor, is successful. He has all the time in the world for anybody here, anybody who was a client of our firms when we had brokerage firms. Tom would sit and listen to a story about a one-lot vertical spread for hours. If any one of us suggested anything, Tom would say, "You are an idiot. You do not know what you are talking about. Please be quiet." That was just how he operated, he will talk about, if you have ever read anything about Tom, it is always no high fives. You did your job if something went well.
You were an idiot if it did not. In talking about humility, he always wanted to be one of the team. One really quick story. My son went to work for Tom as an intern at one time. My son comes back home after the first day. I am like, "How was it?" He goes, "Oh, man, it was so great. Mr. Sosnoff is so smart. I learned so much on the first day." After the second day, Tom calls me that night and he goes, "I am firing your son tomorrow." I am like, "What did he do? I will kill him." He is like, "He keeps calling me Mr. Sosnoff. I am Tom. I am one of the group." He goes, "I am not 100 years old.
If he comes in tomorrow and calls me Mr. Sosnoff and not Tom, he is going to get fired." My son had said to Tom, "I cannot do that. My dad will kill me if I call you Tom." But I am like, "Well, if it means your job, you better go in and call him Tom." The whole point of the story, Tom always wants to be one of the group. He is, as I said, one of the most generous people here. Many of the folks who are now at Robinhood worked with us at thinkorswim or on the pit, and Tom was a huge influence in all of our lives. But that is enough of an introduction because I am assuming many of you already know who Tom is. With that, Mr. Tom Sosnoff.
Thanks, man.
Beautiful.
Thank you. All right. That's the nicest things JJ ever said about me. I'll take it. It's a true story, by the way.
Yeah, I was never really going to fire his son, but I hate being called Mr. Sosnoff. I hate being called Grandpa now by my grandkids, so it's Tom. No, it's amazing to be here and when the guys asked me to do this, I was like, "Sure, I'd love to. It's really cool." It's been an incredible event, and I'm happy to be here. I had a couple of jokes that I was just doing this so I could get a Gold card. But quick little story. I applied for the Gold card, but they rejected me. If you're the only ones that got rejected, don't worry about it. It happens to everybody. JJ, Q, Obi, we have these great stories. We go back 45 years together, 40 years together. I met JJ playing softball, and found out we were trading in the same pit.
I met Q when he stood about 10 feet to my left. The best story about those two guys is that when we started thinkorswim, I tried to bring them over. First I went to JJ and I said, "JJ, I'd love you to come work with us. We're building an education part component to this brokerage firm." He goes, "You think I'm going to work for you? Never." That was the rejection year number one. Rejection year number two, same thing. Year number three, I got him. We've been together now the last, whatever, 25 years. Q, the exact same story. Rejected me the first year, rejected me the second year. Third year, he came over, and now he's pretty much running everything at Robinhood. It's just awesome to see what's happened.
And there's so many other people, and I'm sure a lot of you. Anybody ever seen me speak before? Where the hell you guys been? Hiding under a rock? I've been on the road for 25 years talking about options. I've probably done 500, 600 shows all around the country, all around the world, and it's how we promote. The only reason I have this, whatever they call it, legend status is because I've outkicked my coverage. I've lived longer. Legends aren't anything special. It's just you live long enough, you keep doing something long enough, and it gets special. One of my big things is there's very few outliers in life, and occasionally you'll run into an outlier, like the guy that's going to come up and close this event, Vlad. He's an outlier. He builds this amazing company, turns it into an incredible venture. Those are outliers.
Most people, the key to success is longevity. The key to success is being able to do something for a ridiculous amount of time. Warren Buffett's probably the best example in the world of finance, doing it for, I don't know how many years, 70 years, 80 years. But for a lot of us, this is year 45 for me. If you can do something for a real long period of time, it's really special, and that's how you get this reputation or you get to talk to people like you guys. I only talk to self-directed investors. I only talk to do-it-yourself traders. I'm on the active side of this business, not the passive side. In fact, I put out another video today which talks about the dangers of passive investing. But I'm not going to scare anybody.
The piece I put together today, this is a relatively short piece to take you through different stages of both my life and also things that I've learned with lots of different takeaways. I'm going to get right into it. Most important thing, and this is the thing I just want to stress to everybody here that this is the biggest takeaway, just bet on yourself. Life is all about you get all these different choices, and the one person or persons, the one thing that you have, especially when you're a little younger, actually any time in your life. I didn't build thinkorswim till I was 42 years old. I didn't build tastytrade till I was in my early 50s. I'm not building Lossdog now until I'm in my late 60s. If you get an opportunity to ever bet on yourself, just bet on yourself.
I am a freak about that. But for today, I want to talk about, hey, where do I start? The reason you came to this event and the reason you go to any event like this, the reason you take time out of your day, your resources, whatever else it is to figure out, hey, where do I get started down this path? What do I do? How do I get here? And how do I make it special? Well, learning how money works is not easy. You have to challenge yourself nonstop. I spent 20 years. That picture JJ showed you of the trading pits, I spent 20 years challenging myself, standing in one single stupid spot that was about a foot wide just to figure out how this business works. I was a political science major raised by a civil rights attorney and an art teacher.
I loved finance. I fell in love with the trading floors. But I challenged myself nonstop, and that's how you survive. The real risk in life is not challenging yourself, not taking any risk. When you're young, and one of the things I stress more than anything else, roll the dice on everything. I can't stand when people say measure your risk or think about risk or take a step back and think about what you're about to do. Don't take a step back. Don't think about what you're going to do. Take as much risk as you can when you're young because you're not going to build wealth when you're 22 or 23 or 25 or even 30 years old. That all happens later on. But if you don't start when you're young, it's really tough. Wall Street's version, put a little timeline together here.
Wall Street's version of wisdom is to surrender. That's the traditional conflicts. That's the embedded conflict in Wall Street. There's something called the 40-year nap. The 40-year nap is this fun little saying I do that when you're 25 years old, you close your eyes, you take a nap. You just close your eyes, say, "You know what? I'm just going to go to sleep for a few minutes. I'm tired." You wake up, you're 65, and you look around and you're like, "Where the fuck did my life go?" You're sitting around going, "I'm 65 now, and I got no idea how markets work. I don't understand strategies. I don't understand financial markets. I don't understand options, futures. I don't understand crypto. I don't understand anything." Because you're 65 now. Take the risk when you're young. That 40-year nap, it happens to everybody that's not in this room.
Success is not about marginally beating a benchmark. I want to stress this because it's such an important thing. People think success is the S&Ps are up 11% this year and I'm up 13%. I killed them. No, you didn't. Doesn't mean anything. If you did it passively, if you did it without strategy, if you did it just because you're a bull market genius, it doesn't mean anything. Success is not about marginally beating a benchmark. Success is about learning how to consistently improve against yourself, improve against risk-free rates, improve against whatever the opportunity is. If the market's down 5% and you're unchanged, is that success? I would argue not. Success is not about marginally beating a benchmark. When you outsource your money decisions, and this is really cool because people in this room are here because they don't outsource their money decisions.
When you outsource your money decisions, as a default, you've already lost. Because there's only so many things in life you can do where there's an efficient market playing field, where it's literally an efficient market, and it's literally a level playing field. When you get to that point, you get to make so many decisions and so many positive things happen, and you learn so much, and if you outsource those decisions, it's over. You can't catch up. I'm going to give you a little brief background and then we'll talk about it. The picture JJ Kinahan showed before, which I didn't even know they had. I grew up in New York. I got out of college in the late '70s, and I moved to Chicago in 19-- well, here's the thing. I was a political science major. There were no jobs in 1980.
I got a job interview on Wall Street. They offered me the job. I took it. Six months later, I met some people. They said, "I will put up some money if you move to Chicago." I moved to Chicago, and I never left. The reason I never left is because I stepped on the trading floor, and it was the last frontier of raw capitalism. It was an insane place. There were people yelling and screaming. I had no idea what was going on. I am like, "I got to figure this out because this is the coolest place I have ever been." That is how I started my career. It was very entrepreneurial-like before there was the word entrepreneurship.
20 years I spent trading in the S&P 100 pit, and I stood 15 feet from Q, I stood 30 feet from JJ, and my friends that I still have today, my partner Scott Sheridan, and a bunch of other people, Tony Battista, that I work with, we have been friends for 40 years. One of the coolest things is, A, working with your kids or, B, working with your friends. I have been lucky enough to work with my friends for my entire life. 1999, 2000, we built thinkorswim. I am not sure how many people in this room have ever traded on thinkorswim or even heard of it, but it is a pretty big platform. It was the first platform to democratize trading for retail investors. We were a public company.
We were bought out by TD Ameritrade, and TD Ameritrade was bought out by Schwab, so now it is Schwab's primary platform, which is super cool. There are a lot of fun stories about thinkorswim, but all I will say is, just to give you just a tiny little bit of background, the name thinkorswim, I made it up when I was walking through my living room one night, and a reporter for Crain's Chicago Business, which is a business newspaper magazine, when we were launching, wrote a story that said, "This is the worst name I have ever heard for a brokerage firm." When this reporter wrote that, Scott and I looked at each other, we go, "Oh my God, we are going to be successful." Because you need people that hate your name to motivate you with bulletin board stuff. Anyway, the name thinkorswim obviously stuck around because it is still around today.
But when we sold thinkorswim to TD Ameritrade, TD Ameritrade, the first thing they said was their CEO said, "Oh my God, I hate the name thinkorswim. I am going to change this name to the ultimate trading platform." I looked at the CEO, I said, "You know what? This is a dumb move. Everybody loves the name thinkorswim." Needless to say, they went through a couple of different studies. They spent a few million dollars figuring out that everybody loved the name thinkorswim, and then Schwab did the same thing, and today thinkorswim still exists and it outlived TD Ameritrade. That is one of my fun stories. When my deal was over with TD Ameritrade, I wanted to build another company because I just thought financial media needed something. I wanted to build this company called tastytrade.
I was friends with the CEO of TD Ameritrade. I went to him and I said, "Fred, I am going to leave." He goes, "I thought you were going to leave eventually because I knew you wanted to do something else." I go, "Yeah. I am going to build a network, not another brokerage firm at the time, but just a network." He goes, "I am sorry I am going to ask this, but what is the name?" I go, "tastytrade." He goes, "Oh my God, I hate that name worse than thinkorswim." I looked at Fred and I said, "I knew you were going to say that, but." Then he did the weirdest thing. He goes, "But I am going to bet on you.
I am going to write you a check." It was a big check. He goes, "I want to be a partner." We were partners. We launched tastytrade. Then 11 years later, we sold tastytrade. Those were two billion-dollar companies at the time that we sold. Now they are two multi-billion dollar companies. I do not look backwards. I want to keep moving forward. Now we are building a company called Lossdog, which is about optimization of portfolios and optimization of careers. We are about to launch the most amazing platform we have ever built called One Lucky Dog, which is about ideas. The reason I love ideas is because as opportunists and as self-directed traders, you know what we need? We need ideas. People always say to me, "What are you doing? What are you trading?
What are you doing?" It is just like, we all need ideas. I will be doing a live show and somebody will say, "Well, what do you think about XYZ stock?" I am like, "I do not know. I never looked at it." Then all of a sudden, I will look at it. I will make a trade in there. I love that whole concept. Anyway, that is where we are today. The most important thing and one of the most important things in life, whether you are an entrepreneur or a trader, whatever it is, a business person, you need to know that you own the opening trade. You need to know that that decision, you control that decision. You control that opening trade. After you make a trade, you have no control over what the underlying is going to do.
You do not know if a stock is going to go up or down, sideways, or whatever is going to happen to that company. You have no control. But you control all the dynamics, everything that goes into making that opening trade, no matter what it is. No matter what kind of investment you make, you control that point. You control the decision to make that trade based on whatever it is that you are looking at. You can never forget that. Control what you can or just own the opening trade. The root cause of wealth inequality is just a lack of financial know-how. It is a fact. People that are not successful or do not build wealth do not have what we call financial know-how. It is called economic bias. Economic bias comes from not making enough decisions and not making essentially enough trades.
I talk about this next slide, and it is one of the most important things in life. If you run into anybody that has built a lot of wealth or has been very successful, I can promise you the one characteristic of every single person is they make the quickest decisions of anybody you have ever seen. Speed over everything else. Being first is way more valuable than being right, and that is something you almost never hear from anybody else in the world because this is my life in a nutshell. I do not necessarily care about being right. I care about being first because I want that opportunity, and I want to figure it out. Most of the time, our intuition, most of the time, our sense of correctness, our sense of probabilistic outcome is really strong.
Being the first person that has the opportunity to make that opening trade or make that trade, that is the single most important thing. Every person you run into that is super successful will be the quickest decision-maker. When we put boards and stuff together, I always like to bring in really successful people. The reason is not because I really care about their know-how, I just want their speed. I want speed of decision-making. Make a quick decision. Do not think about it. A quick little story. My son, when he got out of grad school, he got a job offer, and he called me up and said, "Dad, I got this job offer. It is a great offer. It is just what I was looking for with an amazing company." I said, "Okay.
When do you start?" He goes, "No, I told them I need the weekend to think about it." I am like, "What is wrong with you? I have been training you for 27 years to make quick decisions, and now you are going to take the weekend to think about it? If somebody did that to me, I would hire somebody else." I told him that. I do not think it made a dent, but I tried. Most losses stem from illiteracy or a mechanical gap. The business of finance is not rigged. This is not a rigged game. Most of the time when we make a mistake, we do something like we trade too big, or we do something else like that. You do not know what is going to happen next. Nobody knows what is going to happen next. Most of the losses, it is just, hey, you know what?
We did something that was mechanically incorrect. We lost our discipline, whatever it was. The agentic tools that are being launched now on new platforms, it is really going to solve a lot of that. For the most part, it is just important to know, you know what? The counterparty, it is not rigged. Nobody knows what is going to happen. You do not know. They do not know. Nobody knows. We do understand how to optimize mechanics nowadays. Going back a couple of years, they said it would end in tears, but it did not. Essentially, when we eliminated commissions in this industry, and Robinhood is obviously one of the leaders in eliminating commissions, they thought that no commissions would remove the structural disadvantage that separated retail from the pros. You know what? Everything is better today. Markets are tighter. Markets are more liquid. Markets are more efficient.
Everything's better today than it ever was. There's more products, more liquidity, and the technology is so much better than it was 5, 10, 15 years ago. It's just incredible. It is a true level playing field today. Real-time experience pays dividends. When you sit back and you think, "You know what? I'm going to paper trade for a while. I'm going to think about this," there's lots of ways to do things that are very capital efficient, and it's really important to recognize that the value is not necessarily in the return. It's in calibrated judgment over uncertainty. That just means do it. Put your foot in the water, put whatever, jump in the water, whatever it takes. Keep your size in check and just experience it. There's nothing that can replace experience. If you're going to bet on yourself, you have to make lots of mistakes.
If you're going to bet on yourself, you've got to take the last shot all the time, or you're going to miss a certain percentage of them, that's cool, but you're going to get paid. Most people never get to sit on a cap table. That's a very fair statement. But trading is what makes it possible for some people, or it's made it possible for somebody like me. Your ability to articulate things because of your understanding of how financial structure works and financial markets work is critical. Once you can articulate things, you can get to places that you're like, "Wow, I didn't even know that that was possible." Articulating the mechanics, super important to everything. If you can articulate mechanics, you can jump ahead of virtually everybody else in the queue.
Most people, including most young entrepreneurs, have a really difficult time of articulating the mechanics of how they generate free cash flow, of how they're going to turn the business into something successful, or how they're going to trade or whatever else it is. Once you do that, opens up a million doors. There's a fallacy out there, it's called the fallacy of the crystal ball, and essentially that's the assumption that you know what's going to happen next. It's crazy. There's no such thing. Thinking that somebody else knows what's going to happen, that's a fallacy. What you need to understand is just how the mechanics work. Control trade size, and then therefore you control your risk. That's all this whole business is about. If you control trade size, you control your buying power, you control your risk.
When genius fails, when genius fails all the time, when genius fails, it's always because people trade too big. We've owned two brokerage firms, millions of customers, and the only time people blow out is when they trade too big. It's it. It's the same thing for everybody. Understand law of large numbers. Know how that works. Law of large numbers is simple. If you do stuff that has a high probability of profit, a high probability of success, and you do that one time, doesn't mean that much. 10 times, doesn't mean that much. 50 times, doesn't mean that much. 100 times, doesn't mean that much. 1,000 times, law of large numbers start to work for you. Your 70% probability success is going to come in 70% of the time. There's a reason to this day, this year, I'll make about somewhere between 15,000 and 17,000 trades.
A lot of them will be losers, a lot of them will be winners, whatever it is, but whatever my statistical probability of success is when I opened every one of those trades will be the exact number with give or take 1% at the end of the year. That's essentially how you use law of large numbers to your advantage or your benefit. It's always decision-making speed over deliberation. First person to make the trade. The reason JJ's up here, the reason Q was up here. Professional traders, it's always about speed. It's not about being right, it's just about speed, and life is like that. I just ask everybody here, because you came out midweek to Houston to meet people, to network. It's crazy important.
All the stuff you've done here over the last day and a half is super important to how you network, how you articulate, and also how you carry the torch, how you tell people about this industry, this business, the wonderful parts about finance, and the opportunities it presents. First, right now, everybody in this room, you carry the torch. Next thing, you pass it on to whoever that is, your friends, your family, whatever it is. We just ask you when you leave here to hand down fluency. A lot of people focus on the fear part of this business. What happens if the market crashes? What happens if I lose money? I feel more comfortable if somebody else makes decisions because then I can blame them for bad decisions. Hand down fluency, not fear. Fear is this insane mean reverting opportunity, and let's focus on that.
Let's end this with leave here, walk out these doors tonight as an opportunist. Nothing else. Just think about this. Everything I learned at this event over two days, I'm walking out of here as the consummate opportunist. Thank you. I'm going to bring back JJ. I'm going to bring back JJ. We're going to do a quick little fireside chat or Q&A.
That was a great speech, wasn't it, guys? How about it?
That's it.
Tom, it was great, and I think your messages have always resounded well with people. As I said earlier, Tom really does care that the people in this room are successful. But those of us who have known you a long time, I think the question people always ask about you is this: How do you stay motivated? As we said in your intro, you've sold two businesses for a lot of money, almost couple of billion dollars, but you work still hard. Tom works harder than anyone I know of. You send Tom an email at 1:00 A.M., your answer is usually at 1:03. I know Tom doesn't really sleep much. But that all said, how do you still stay every single day where you're always excited? You're excited to give these talks. I think you're giving four or five over the next couple of weeks.
What keeps you going that way?
I actually am going to turn this around on JJ. First of all, I should say I don't have a hobby. I literally don't have a hobby. That's a bad thing. But I think the other thing is, I don't understand the other. It's weird, my brain's wired in a way where I don't understand the other side. I don't know what I would do. I love to work, and I work with my friends, and I do things I like, and I find technology to be fascinating, and I don't think Warren Buffett should've retired at 95 or 6, whatever it is. I really don't. I think he should've kept going. I don't think he should've retired. I don't think anybody should ever retire. If you've never heard me speak before, I don't believe in work-life balance either.
You do believe in work-work balance.
Yeah.
All right. Well, the second thing, and actually, I have heard Tom speak quite a bit, but I have only heard you give this talk once, and that is the entire talk was an hour and a half, and it was nothing about his successes. It was just about his failures. I would say it was my favorite talk of all the ones I have ever heard you give, not just because it gave me a few laughs at some of the investments over the years. But what I really thought was important is people see the glory, but they do not see all the little things that go into it, and it just translates so well to everybody's trading. Just talk a little bit, if you can, about how you transition from some of those bad things into making things successful.
Because you love to talk to people outside trading who are just entrepreneurs about this also, I know.
I think it is important that we measure ourselves by a lot of different things. One of the things is not how much we make, but how much we give. Other things is, I think it is important that we have lots of failures. JJ is talking about a tour we did for a couple of years called the Bad Trader Tour. I did it all around the country and talked about all the horrible investments I have made in my lifetime, which is millions and millions and millions of dollars. But the other side to that is, I do not know that I ever would have built anything crazy successful if I did not have all these ridiculous learning experiences and just. What would have happened if nobody? Like when I moved to Chicago when I was 23 years old, what if somebody did not give me a check to trade with?
Somebody took a blind shot with me, and it worked for them. I have done blind shots with hundreds of people and some works, most do not. I do not care. I think it is just important to remember how you got here and support young entrepreneurs. We probably make 30 investments a year in young entrepreneurs around Chicago and the Midwest, mostly in fintech. To be fair, I am not sure any of them ever paid off. I do not even know if I have ever cashed a check.
Well, I have invested with Tom, and I remember one time where it did not turn out pretty well, and he is like, "Can you believe it? We actually made money.
My Irish good luck charm.
That leads to something else. First of all, I think you have invested in a lot of entrepreneurs. You understate the amount of influence you have had in people's lives and the amount of individuals you have helped to hire. When we were at thinkorswim, one of the women who ran balancing was the Starbucks barista 2 weeks before that, but she worked really hard. Tom noticed it every morning, he is like, "You want a job?" There are a lot of people who I have worked with at the firms that Tom has owned who were doing something completely different, but Tom noticed they worked hard at what they were doing, and they were friendly, so he would hire them and let people like that into the financial industry and change their lives. Yes. I agree 100%.
It is funny, but I go through life with this idea that everybody is smart. I know that is not the way everybody else thinks, but I think that I have spent enough time on the road and met hundreds of thousands of people. I think everybody is really smart. I think the difference sometimes is that you talk to somebody, and you realize, this person is actually really likable. This is somebody I want to spend time with in a business that I love. Likability is super important to me.
Yeah. Well, there is no question. As Tom said, we have been fortunate. We work with people who we have liked our whole lives, and it has been absolutely fantastic. Tom, we talk about there are so many new products. I cannot remember a time where the industry is changing so rapidly as it has in the last, we will say, three years. As you look at the new products, which ones are you most excited about? Is there any that you are like, "That one kind of scares me a little bit"?
I do not want to say anything scares me because I do not want to jinx anything. I think that the coolest thing about new products is that it creates new areas of opportunity that you really do not know what it is ultimately going to turn into. I think if there is anything scary about it is I do not want there to be this gap in know-how. Sometimes you will find an exchange that will launch a new product, and they are hoping that somebody like me or JJ Kinahan will talk about it, or Q, and then we will talk about the product to help them promote the product. That is not really the business we are in. We want to promote opportunities for retail investors. If we do not think the product is liquid or it has legs, we are going to make the exchanges, we are going to make the product creator prove it.
Show us that this product is really good. Show us there is a market for perps. Show us there is a market for crypto. Whatever it was at the time. Show us there is a market for tokenization. Show us there is a market for everything that comes on board. If there is a market for it and there is liquidity, I am all in.
And one of the things, I found your talk really good, and again, I've heard you talk a lot. You talked about a lot of mistakes people make and a lot of ways to think about planning. One of the things I don't think you emphasized as much as I've heard you emphasize perhaps before is in terms of knowing your risks and really setting out your risk before you actually. You said own the trade, own the opening trade, I believe it was. But you didn't talk, I think, as much about how I've always heard you talk about really defining your risk in trading. And I think for a lot of people here who maybe have made a few trades going to the next
Yeah
level, it's important.
I'm pretty much a premium seller, and I do a lot of undefined risk trades. But I think the most important thing is you have to keep your size/buying power in check. The one mistake people make is that they don't use really simple back-of-the-envelope mechanics. Back-of-the-envelope mechanics for risk is buying power. So if you have a $100,000 account and you're using $5,000 for a trade, that's acceptable. You have a $100,000 account using $2,000 per trade or $200, that's absolutely acceptable. You have a $100,000 account, you're using $80,000 on a trade, that's not acceptable. So it's all about trade size, and it's all about how you use capital efficiency, how you use leverage. And none of this stuff is overly complicated. It's actually very common-sense driven when you think about it. But buying power reduction, back-of-the-envelope way of really understanding risk.
Yeah. And I think it's really important, and I don't know that enough people actually talk about or actually think about it when they're first making their opening trades. And then the other question I know you've gotten quite a bit in the past, and some folks here who don't know you as well are probably wondering it, they're like, "I've never heard you talk about any individual stocks or any individual equities." So now's your opportunity, Tom.
I trade a lot of stocks and a lot of individual equities. When I talk, I talk in more general terms. When I trade, I trade in more specific terms. Meaning like when I come out here and there's an audience of 1,000 people, let's say, the last thing you want to hear is, what stock do I like? Who cares what I traded today? I bought and sold a bunch of different stocks. I traded a ton of options today. I probably made, I don't know, 50 trades this morning from my hotel room. I love trading, but you shouldn't care what I think. What's interesting about what I say is the mechanics that we drive people towards so that we optimize your returns. So we optimize the things that you do so that you have better outcomes. That's why I don't talk about specific underlyings.
Right. I think that with that, when you think about how you trade, I always feel like it's an interesting message for people. You want to make money on every trade, of course, or you wouldn't make it. But to you, it's more of a bigger game in terms of the overall portfolio, right? Not just the one individual trade. Because one of the questions I love when people ask is, they will say they're buying a call on Apple, then they buy it, and you're like, "Why would that person sell it to me?" So I always find it interesting that everyone's worried about the person on the other side of the trade rather than themselves.
Yeah. Don't ever worry about whoever's selling you an option when you're buying an option, don't worry about that person. They're okay. That firm is doing just fine. Don't worry about it. I look at this business, and I want people to focus on really the opportunity that's in front of them. Like, listen, I'm doing this trade because everything looks exactly the way I want it. Okay, fine. Make the trade, move on to the next trade. Don't overthink it. You don't know anything, and the counterparty doesn't know anything, and you don't know what the market's going to do next. So you made your trade for all the reasons you made it. That's great. Move on to the next trade.
Yeah, no one knows anything. I think the longer you trade, the more you realize that you certainly know nothing. But I think you get used to the fact that there is no one who actually knows what's going to happen in the markets overall. With that said, I think one of the things, just talking to so many of the nice people who are at this event, I think people have a question about their own confidence. So what I mean by that is not in a bad way. They're like, how do I know when I should be trading a little bigger? You talked about sizing a position. I think it's a really important message. How do they know when they should go from, say, three contracts to four or five contracts? What is it that should give them that confidence?
First, I just have to say one other thing about the last question, because I forgot to say this, which is really important. All my friends trade. I don't have any friends that don't really trade. The beautiful thing about that, which is a huge advantage for me, not because they know anything, but because I have the opportunity in life to do the opposite of what all my friends do. When JJ looks at me, I go, "What are you doing?" He goes, "I'm selling bonds here." I'll buy them. When Steve comes out here in a few minutes, he goes, I'll say to him, I'll go, "What are you doing?" He'll look all smiley, and he'll look at me, and he'll say, "I'm buying XYZ." I'll short it.
I have the advantage of knowing what my friends are doing and knowing that they don't know anything, which is really a good advantage.
As I said earlier, he thinks we're all idiots.
I don't think you're idiots. I just love the idea. It goes back to a time earlier in my career. I was on the trading floor, and there was a huge trader who I had met who I really respected. He was an amazing trader, probably the best trader in Chicago. I was walking off the floor with him once, and we were going in the elevator to go up to our office, and I said to him, "Man, can't believe that sell-off. I bought the close. I think they're going higher tomorrow." He looked at me and said, "Do me a favor. Don't ever tell me what you think again." Here I was thinking I'm some smart kid, and he's like, "Don't ever tell me what you think again because I don't care what you think." I think you scale when you prove concept.
A lot of people will start in the self-directed space with a portion of their money, and they really want to move moreover, but they don't yet have the confidence. What you do is you scale very small, and you prove concept at each level. There's no rush. Everybody in this room, you're going to be doing this like JJ and I for the next 40 years. There's no rush. You start small, and you incrementally increase, and you prove concept at each level that you can handle the additional risk. Ideally, first you widen the strikes. Second, you add contracts. If it's stocks you're doing, you incrementally add shares. If it's futures you're doing, you start micros, and you move your way up and that kind of thing. You incrementally increase.
I know there's one other question. I think the folks from Robinhood actually had one more question. Our buddy Obi is going to come out and ask this one.
Uh-oh.
How often have you been caught in a lull? A couple things I want to accomplish with this question. You mentioned you're a premium seller. We know that, so you don't buy options. And you're a bit of a sports fan, especially a Chicago sports fan.
I am a Chicago sports fan.
There's a great debate going on between generations of who is the greatest basketball player of all time. So two questions here. I believe on tastytrade, you once said the last call option you ever bought was your season tickets to the Chicago Bulls in 1984. You mentioned experience is what matters. Tell the audience about your experience with Michael Jordan and why he's the best basketball player of all time. We got proof. We got proof of this.
Oh, no.
That's Tom on the floor of the old Chicago stadium in the, looks like the 1991 NBA finals.
I'm going to tell you a quick little story because this is kind of fun. We're a bunch of cocky young traders. It's 1984. I think it was 1984. Bulls draft Michael, the whole deal. You have to remember, in the '70s and early '80s, because JJ grew up in Chicago. I grew up in New York as a Knicks fan, but the Bulls were the worst team. 3,000 people used to go to the old Chicago stadium to watch the games, and every seat was empty. 3,000. It held like 19,000 or 20,000. Bulls drafted Jordan, and the Bulls ticket office decided we're going to go and try to sell courtside seats. 1984, 1985. We drafted this kid, Jordan. We're going to be good. We're going to try to sell courtside seats. They never sold them before. They were $75 a ticket in 1984, 1985.
I do not remember exactly the year. They knocked on our door first, which just out of pure luck, they came to our floor, they knocked on our door. There were a bunch of trading firms. They just happened to knock on our door. They sat down with us. They said, "Would you guys like to buy courtside seats? We drafted this kid. He is going to be really good." We are like, "All right, we will take a shot." We are young. We are like, "We will take a shot. We can afford it." Four of us, we bought one ticket each, and we bought the four courtside seats at center court at the Chicago stadium in 1984. One of my buddies leans over and he goes, "The Bulls suck. We do not want the center court seats.
Let us take the four seats at the end of the bench and sit next to Michael Jordan because he always sits at the last seat on the bench." I go, "Okay, we will do that." We took the four seats at the end of the bench. Those seats became very valuable over the course of the next 15 years and six championships, and we got to talk to Michael every night.
Yeah.
That was
Woo!
the best long trade I ever made.
Yes. And settle it for everyone. Not only is he the best basketball player of all time, probably the best athlete of all time.
Why are you asking me this?
Because I think there is some people out there that think otherwise.
I think Michael is the best basketball player. Yeah.
All right. Thank you, Tom.
You don't want to hear my story of when I played basketball against Michael Jordan, do you?
Oof.
Can I tell one last story?
The floor is yours.
This is worth it. Yes. Yeah.
Michael, he didn't have a gambling problem, but he loved to gamble. I'm going way off topic here. Remember, it's me.
He didn't have a gambling problem because he had a lot of money.
Well, he didn't at the time. One night, Michael Jordan leans over to us, and we're sitting on the edge of the bench, and he goes, "Someday, I just want to make as much money as you idiots." Talking to me and my four friends. We're like, "We'd like to bet on your career as opposed to my friends, but whatever." Anyway, a couple years later, or a year later, he didn't have any friends in Chicago. We're not really friends, but we're talking to him every night. He goes, "What are you guys doing tonight?" It's like a Thursday night, and we're watching the Bulls game. I go, "We're going to go home?" I go, "We're going out.
Where do you want to go?" And he goes, "Let's go out and play cards." So we go to a buddy's house, Michael Jordan shows up, we played cards, we became friends, that went on for a number of years. Well, one night, we're playing cards, we have a basketball court at the place we're playing. So we decide it's Michael and another person who played at North Carolina, one of his best friends, against four, let's say, rec league Jewish players.
At 4:30 in the morning, in the middle of a playoff series against the Philadelphia 76ers, we played four on two against Michael, he was in slippers, he had been drinking all night. We're thinking to ourselves, "If one of us steps on his foot and hurts this guy, we're going to be dead. We're going to be Bartman, like 20 years before Bartman." Anyway, we played basketball for about an hour. Surprisingly, he beat us. I was shocked. We lost a couple thousand dollars because we had to bet on the game to make it worthwhile, that memory has stayed with us forever, it was just a good time.
That is why he is a legend, folks. Thank you so much, Tom Sosnoff, J.J. Kinahan, our friends at Cboe. This was amazing.
A blast. Thanks, Obi.
Thank you, everybody.
All right, one more round of applause for J.J. Kinahan and Tom Sosnoff. Thank you. All right. Well, as they say, all good things must come to an end, and after two days of product launches, trading, markets, technology, innovation, and conversation, we are reaching the end of our journey. Space Center Houston has us on approach, and we are ready to reenter the atmosphere. There is obviously no two other people I would rather have up here to help us officially land the ship. Please welcome back to the HOOD Summit main stage, Robinhood's founder, chairman, and CEO, Vlad Tenev, and Chief Brokerage Officer, Steve Quirk.
We just challenged Tom and J.J. to two on two.
Yeah, we are going to bet. We might be playing out here, if there is a hoop out there anywhere.
They told me I am never touching the ball because Q here is a ball hog.
I am quite a ball hog. I will freely admit that.
You played basketball, right?
They used to call me the black hole.
I did, yeah. I think we'll play quite well together because I'm just a lockdown defender.
Okay, that works.
Blocking shots, grabbing rebounds.
You're like Dennis. If you defend and rebound, we're going to get along great.
Yeah. I was a great shot blocker. Amazing. Well, thank you guys. Look at this crowd. Man, at 8:00 in the morning, the crowd wasn't quite as-
No, I think everybody's-
Yeah. Does it have a little-
kind of come to now.
Little too much fun at Space Center last night maybe?
They were up all night trading.
Yes.
You had alcohol.
It is true. That is true.
I didn't have any, but I'm glad you did.
He's from Wisconsin.
Oh, nice. Well, Q, what was your favorite part of the day? What did you enjoy?
I thought today was really good. There was a lot of sessions, some that I was participating in, but some that I was just able to sit and listen to, at least components of, and it was just really good. Everybody was extremely engaged. I just think, as we talked about this morning, even listening to people talk to each other and exchange information and just talk about what they're going to do from a strategy standpoint, and sharing wisdom, was really kind of cool. I'm hopeful that, we say this every year, Vlad, right? Next year, this is going to be twice as big, right?
Well, I got to give Q your flowers here. Hood Summit's really Q's brainchild. I frankly didn't think it was a great idea at first. I was like, "Why don't we just go out there and launch some products, call it a day?" But he's like, "No, we've got to have these events, have the traders there, have educational content, and have this Star Trek thing." I was like, "No, Q, we don't want to do that.
Star Trek may not have been my idea. Not that I have an issue with it.
I was like, "Q, it's too corny. We can't do it." He's like, "No, it's got to be like a movie.
But I think to Vlad's point, there are companies, firms, and others that do events to launch products, and there are companies, firms, and events that do educational content, but there's very rarely somebody who launches a product and then spends the next day teaching you how to use the product, which makes absolute sense, right? And then continues to educate so that you can use it suitably and be successful with it. I think that's where you get the magic. And by the way, it's not just us. There's a lot of industry participants, and our partners and sponsors here that all were helping with this education because when we're all successful, the industry's successful. Everybody's successful, and that's really what we're striving to do here.
I was just amazed at how unhappy people were today. People were very unsatisfied. They just keep coming to me asking for more stuff. Options on futures, naked options. It's like it's never enough.
That was just Tom.
Yeah.
People also want more HOOD Summits, so I told them we're going to do this every month, and we're taking the show on the road.
I love that.
Gonna hit every major city in the U.S.
Hey.
I love that. How about that?
That would be exceptional, actually.
Yeah.
You guys might have to increase your travel budget a little bit, though, right?
We got to get to work. Hopefully, we can get the sponsors to sponsor a Hood Summit every month
Yep
in every city.
Obi, how about you?
One, the main stage, you guys are great today. Give yourselves a round of applause. We had a lot of tough choices to make, but that is our job as traders. Between the trading lab, the pod stage, the main stage, I hope we did justice for Hood Summit. I hope you guys enjoyed the panels and the speakers. For me, guys, in the early part of my career, I was on the phones every day, and I was talking to customers with questions about their account and this, and you would have a really good. Your finger was on the pulse of what was happening
Yeah
with customers. Over the years, I have gotten away from that. So having an event like this allows me to really kind of hone back into what matters to you guys, what is important, what products they are looking for, what education they need. More importantly, it is great to be around traders. This feels like family, and Vlad, I think with the launch of Social, this community is just going to exponentially grow and improve, and whether it is in person or on the phone, I cannot wait to see what is next.
Yeah. Before we completely wrap up, I think we want to thank a few people. To everybody who took the time to speak, moderate, join panels, thanks for sharing your time, your expertise, and all your wisdom. We appreciate it. To the sponsors, and of course, all the teams, the sponsors, all here, we thanked you this morning. We will thank you again for making this all possible. Most importantly, to our event team, the whole production crew.
Yeah
everybody with the food, the drink, it all showed pretty well. It was a pretty amazing experience.
Yeah.
I think we should all give them a round of a hand.
If you guys, if we could lift the curtain, there is an entire village back here of people working hard, the producers, the event staff, and it was great.
I want to thank everyone that waited in those huge lines to take selfies with me or to have me sign their badges. Please don't sell those badges on eBay for at least another 20 years. I think they will be worth something. They will be worth more.
Yeah, and Vlad, how about the hoodies? How about all the hoodies that put this together?
Oh-
Yep
Unbelievable. It is just we get to talk about these products and be here on stage, but there is just an army of people and AI agents working very hard to create all of this.
AI Vlad is good.
Yeah.
Yes.
Well, boys, I think it is about that time. Vlad, any parting words as we head to happy hour?
I think you guys should know that Robinhood works very hard, and we are actually going to go and continue to work on all the things that we have heard from you today and yesterday, and our goal is to make it so that you are at a disadvantage keeping your money elsewhere, trading elsewhere, managing your finances. We just take the obligation to make this the best possible financial home for you extremely seriously. Thank you for the trust.
All right. Well, Vlad?
And keep pushing us to get better, too, because actually, I know Q loves the criticism. I love it a little bit less, but I send all of the feature requests to Q.
This is the way it works. Compliments, please send them here. Any criticism
I have very thin skin
because they are going to go that way anyway.
But no, keep the feedback coming, and it's just the honest feedback for how we can serve you better that leads to 16 product launches every couple of months.
Yep. Well, you want to finish up, Q?
With that, I think you got to-
And I look forward to trading with you all on Saturday. That'll be very fun.
Yes, and Sunday.
All right. Well, folks, we are officially cleared to land. A few housekeeping notes with that. Happy hour, officially open. We have CNBC's "Fast Money." Guy and Dan are doing the remote hit. We have, I think, CME Group giving away some silver?
Yeah.
That is not bad. Make sure we check that out. Also, do not forget.
Good stuff.
Nasdaq selects their MarketSite New York City trip winner, if you're in on that. We've got hosted food and beverage, and I think, Vlad, are you spinning, or do we have a DJ? Do we have a
I mean
DJ Vlad?
I was. DJ Vlad is a real guy.
Please don't leave, because the party's just getting started. Grab a drink, find somebody you didn't get to meet, keep the conversation going. Vlad, Q, everyone, thank you for spending two days with us, making Hood Summit what it is.
Thank you.
Thank you all.
Give it up for Vlad Tenev.
Live long hoodies and prosper.
Make it so.
Live long hoodies and prosper.