EXCLUSIVE: Why Ming Zhao Says Split Options Trading Will Benefit Retail Investors

To meet Ming ZhaoCEO and Founder of Atomic Vaults and popularly known as @FabiusMercurius by thousands of retailers on Twitter.

She thinks the industry is systematically biased against retail investors and said she plans to change the future of options trading by doing something quite monumental.

Zhao on fractional options trading: At the Fintwit conference organized by Benzinga and Lupton Capital in Las Vegas, Zhao announced that his company Atomic Vaults was developing a solution for the existing options trading system – and said that this system would favor the retail investor, in providing him with a way to trade options in a fractional fashion.

While retail apps like Webull Financial LLC, Stash Financial, Inc. and Robinhood Markets Inc. HOOD allow retail investors to trade fractional shares, there is no options trading platform at this time. But later this summer, his company expects to change all that.

The Atomic Vaults product “makes the market fairer” for retailers by “not betting against the retailer,” Zhao said.

An integrated fractional options education platform, Atomic Vaults will allow both retail clients and brokers to buy and sell US equity options in lot sizes less than 100 times, or “sub- underlyings”, which require the buyer to bet on a minimum of 100 risk-value shares

. The platform itself is still pending FINRA approval but plans to launch in late summer 2022, Zhao said.

Zhao on retail: During his speech, Zhao described a scenario in which retail traders take greater risks than they can expect to be rewarded for. She compares the size of option bets to the game of St. Petersburg (PI) – a game of chance, where one places a risky bet on whether the outcome will be heads or tails.

“If you’re betting on your net worth, how long do you sit around and gamble until you get it all back?” she asked attendees as she began to dissect the Kelly Criterion for many to experience this concept for the first time.

“There is a natural risk aversion, or utility, that occurs within the markets. It’s the same reason why when it comes to super positive expected value trades, we end up not betting our entire net worth.

Zhao on market odds: Zhao discusses the probability distribution and the probability of achieving an expected value by betting on the stock market. She explains that everyone has their own methodology, and outside of insider trading, investors need to understand how to get the most out of their returns when making real trades.

She points out that few would likely invest 100% of their net worth in a speculative bet and that on average, reinvesting just 25% of their portfolio would actually provide the best return of all.

Drawing parallels between the stock market and the traditional coin toss game, one problem Zhao tackles is that the minimum contract requirements for trading options far exceed the ideal bet size for 95% of retail traders.

She discusses realistic options trading expectations – even for the most popular investments – and how simple binary trades differ dramatically when more complex variables, including stock volatility, are involved.

Although she appears to be in favor of reward trading options, she attributes today’s standards to how so many retail investors have lost money, especially those who trade on margin.

After all, “How do you determine the actual size of a trade?” Zhao questions.

She later explains how bigger rewards can be achieved through minimum stakes. This means that smaller trades could reap the best returns, as opposed to riskier bets that require investors to hold trades for longer periods.

Garland K. Long