From the Wall Street Journal via MSN, November 25:
The chief executive of Robinhood Markets took the stage at the online brokerage’s annual summit in Las Vegas this fall decked out in a race-car driver’s jumpsuit and customized Nikes.
Vlad Tenev told the hundreds of cheering traders in the audience that they had chosen “one of the most intense lifestyles out there.” He compared trading to driving a race car. “A finely tuned machine can make all the difference,” he said, “and that’s the role we feel Robinhood plays for our active investors.”
Risk-taking is back for individual investors, and few people have done more to stoke those spirits than the 38-year-old Tenev. Robinhood’s trading app makes it easy not just to buy and sell ordinary stocks, but to invest in options, cryptocurrencies and other exotic financial products, even to make sports bets and play the prediction markets.
The company’s critics liken the environment to a casino, but its fans credit Robinhood with democratizing the lucrative world of sophisticated investments.
“He’s almost building a cult,” said Aaron Cook, a 28-year-old plumber who was in the audience in Las Vegas. Cook said he had used his profits from trading stocks, options and memecoins to buy a Jeep Wrangler and a $60,000 home.
A host of new products have entered retail-investment markets in recent years and worked their way into the mainstream. Investors are wagering on the price of bitcoin and piling into ultrarisky types of options, such as the “zero-day” variety that expire rapidly and require perfect timing. They are buying futures contracts tied to all sorts of events, betting on whether a Taylor Swift album will top the Spotify charts or whether the Green Bay Packers will beat the Detroit Lions on Thanksgiving Day.
Abishek Gopal, 35, said he wakes up at 6:30 a.m. to start trading zero-day options. It’s a hobby he said he never would have picked up if not for how easy it is on Robinhood. “The thrill gets me going,” said Gopal. “If $500 can get me $50,000 or $60,000, let me just try.”
Recent volatility, including steep slides in stocks and cryptocurrencies, have offered a taste of what happens when markets head in the wrong direction. Investors who leverage their bets with borrowed money supercharge gains in good times but get crushed in bad ones. The Nasdaq composite shed 6% in the first three weeks of November. The price of bitcoin has plunged 20% this month.
Robinhood executives say they are on the right side of a long-term trend in markets to make all kinds of trading less expensive and more accessible to individual investors. Products considered risky now—from crypto to options—may become part of a typical retail investor’s portfolio down the line, they say.
“The next generation of investors—that’s who we serve,” said Steve Quirk, Robinhood’s chief brokerage officer. “We are introducing more asset classes and capabilities to people. That’s what they want.”
Just a few years ago, Robinhood looked cooked. It was cast as a villain in the GameStop trading frenzy in 2021, when individual investors banded together to send shares of the videogame retailer skyrocketing, triggering mayhem on Wall Street before the stock fell back down to earth. At one point, Robinhood temporarily restricted trading of such “meme stocks,” infuriating users who said they lost money.
That February, Tenev told Congress that the “pattern day traders” at the center of that market chaos represented just 2% of Robinhood’s customer base, and that most were long-term investors buying plain vanilla products.
Since then, Tenev has come to realize that plugged-in, aggressive traders are actually key to his company’s success.
Power users
Robinhood offers a host of ordinary financial products, including retirement accounts and credit cards. It is the riskier products tailored to day traders that make the most money for the company. In the most recent quarter, customer trading generated more than half of Robinhood’s revenue, and 78% of that transaction-based revenue came from crypto and options trading.
Tenev said he directed his team to cater more to that group. “These are our most engaged customers that generate the lion’s share of our revenue,” he said in an interview. “We put our best people on active traders.”
Robinhood’s stock has more than tripled this year. It was added to the S&P 500 in September, replacing Caesars Entertainment, and quickly became one of its best performers. The value of Tenev’s Robinhood stake has soared to nearly $6 billion....
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"...replacing Caesars..." is just so perfect.
