Saturday, November 08, 2008

New Broker Dives Into Rough Waters

IT MAY SEEM LIKE A STRANGE TIME TO OPEN an online brokerage, but record volatility also offers trading opportunities. So maybe it’s not so crazy after all.

TradeMonster (, like several other new brokerages, is a subsidiary of an options-oriented trading firm, OptionMonster. Co-founders (and brothers) Jon and Pete Najarian, the latter a frequent contributor to CNBC’s “Fast Money,” had their own idea of what an online brokerage should look like, and in 2007 put together a team to build a platform that they believe is simple, intuitive and fun.

For the most part it is flexible and easy to use and customize. Because it’s a baby brokerage, there are a couple of holes—there is no easy way to trade mutual funds and bonds online—but for those interested in trading mostly equities and options, it’s a good choice.

want to be tied to a single computer but wants ...the power of a downloadable application, with the ease of a browser,” says TradeMonster CEO Wade Cooperman.

The platform follows a cockpit model. There’s real-time streaming data everywhere you look, and the set-up allows you to create an order from every view. One especially nice touch is that education is thoroughly integrated: You don’t have to exit the screen you’re looking at—say, an options-order entry—to learn more about the order you’re about to place.

“We put all the education one click away,” says Cooperman. “Most brokers’ education takes you far away from the trading and data. That’s not the way it works in our platform; it’s all part of that cockpit.”

The layout is easily customized. The basic cockpit setup is divided into thirds, with two narrow columns on either side of the bigger center section, which is where you’ll find order entry, charting, and account information.

The two narrower columns allow you to display “mini-apps,” such as live data about your account, open orders, trading messages (like when a trade has executed or an alert has been triggered), a watch list, financial news, and an overview of the market. You can drag and drop these mini-apps from one side to the other; the mini-app remembers where you put it and will stay there.

News feeds come from Yahoo! Finance in a separate browser window, which brings you stories from AP, Thomson Reuters, Business Wire and PR Newswire. Currently there are no premium newsfeeds.

TradeMonster’s developers have strived to make the application conducive to trading. It allows you to multi-task, using the mini-apps and tabs on the main trading screen, so you’re not locked into the one-page-at-a-time setup of most browser-based applications.

A lot of thought went into helping customers develop good trading habits. You’ll find answers to many fundamental questions about a stock before buying it, and will be reminded to have an exit plan, either a target gain or stop loss, at the time you place an order.

As you might imagine in a platform created by options traders, there’s a lot of options data, mostly about volatility. You can specify the number of strikes to view, as well as expiration dates, and type of spread. When you click on a plus sign next to a quote, you’ll get more details, including risk metrics. There are 15 spread types to view, from simple calls and puts to multi-leg spreads like collars and butterflies.

of TradeMonster lets you view four different styles: line, candlestick, area and bar. The account-management screen lets you view your positions, and aggregates performance metrics and risk metrics by strategy.

Mutual-fund traders can find Lipper data to help make trading decisions, while bond traders will have to call customer service to get quotes and place trades. Trading mutual funds is a little clumsy; you have to type the five-letter ticker into a trade ticket yourself.

All stock and ETF trades are $7.50 for up to 5,000 shares (add 1 cent per share for larger transactions), while options trades are 50 cents per contract with a $12.50 minimum. Mutual-fund and bond transactions are $15 per trade. Trades are cleared through Penson.

All the tools on the platform are available to every account holder, and the pricing is the same no matter how many trades you place.

So if you’re frustrated with your browser-based broker, take a look at TradeMonster. Its features have some similarity with those you’ll find in thinkorswim or OptionsHouse, but they have their own flair, and I believe they’ll be a force to contend with in the not-too-distant future.

Published in Barron’s, November 3, 2008.

Posted by twcarey on 11/08 at 10:08 AM
Published in Barron's • (0) CommentsPermalink