TD Ameritrade Institutional announced Thursday the launch of the Options Market Center, an options platform for its affiliated advisors which the registered investment advisor custodian says was prompted by increased use of options strategies and will help differentiate RIAs’ practices.
In an interview in Hoboken, N.J., on Tuesday, Jeff Chiappetta, who is in charge of the Options Market Center as well as running TD Ameritrade’s institutional trading and fixed income operations, said the center is designed to educate advisors about the use of options, to allow advisors to vet potential options strategies with TD’s options strategy desk, and then to execute those strategies through TD Ameritrade’s trading platform.
Using an “advisor version of thinkorswim,” the options software company that TD Ameritrade acquired in 2009, the center’s educational offerings include eight-hour workshops for advisors in various sites around the country that “start with the basics” and then provide information about more actionable strategies, Chiappetta said. The education program includes webcasts and online resources as well, and Chiappetta said that “ultimately we’ll have two-three levels of workshops” for advisors depending on their knowledge of and comfort level with options.
The strategies desk supports advisors by providing multiple ideas on options trades, which advisors can then choose to execute or not through thinkpipe, the options trading platform. Accessed through TD Ameritrade Institutional’s Veo technology platform, thinkpipe allows advisors to forecast the effects of an options trade on a client’s portfolio, a feature that Chiappetta said advisors had specifically asked for.
“We get granular with advisors” on options trading, not just executing trades, Chiappetta said. “They want specificity in knowing what criteria to look for, say, in selling covered calls. That was the secret sauce of thinkorswim—providing actionable strategies.”
Options use among advisors has increased over all and among advisors who custody with TD Ameritrade, Chiappetta said, with options trades by TD Ameritrade advisors up 58% year over year. Options trading in general has seen massive growth, Chiappetta noted, with volume on the exchanges setting record highs for the past eight years.
Speaking at the Investment Advisor Group’s 4th annual Retirement Income Symposium on Oct. 18, Eric Cott (left) of the Options Industry Council quoted OIC research that showed “nearly half of advisors used options last year, more than one-third increased their use of options over the past few years and one in three say they intend to increase their use going forward.” Moreover, Cott said OIC’s research “correlate with Harris Interactive studies of individual investors that find options users are more affluent and more knowledgeable than investors who don’t use options.”
Chiappetta concurred with those findings, noting that the high-net-worth client has more sophisticated needs, and for advisors, being able to offer options is a differentiator. “We’ve been brought in to help with prospects” numerous times, he said, referring to potential clients of TD Ameritrade-affiliated advisors.
There’s another angle to offering sophisticated options strategies. Since options use remains higher among wirehouse brokers, being able to show the sophistication of the options platform can help in recruiting those brokers to the RIA model. “We do demos every day with potential breakaway brokers,” Chiappetta said.