FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
On the week of the 2023 Options Industry Conference, who better to catch up with than Mark Longo, Founder and CEO of The Options Insider?
Longo is a regular at futures and options industry events. The affable Connecticut native, Cornell grad and Chicago resident is easy to find: he’s usually around the free food, and he’ll be wearing at least three Options Insider-branded articles of clothing.
Ribbing aside, Longo has deep expertise in the options market from a unique variety of perspectives. He started his career as an options market maker for Stafford Trading from 1997-2001, and then was a proprietary options trader for four years, as well as an options columnist for Traders Magazine, before going entrepreneur and launching his own firm in 2007.
The Q&A:
How has your career evolved?
My career has evolved substantially since those early days in Traders Magazine. In many ways, my column in Traders led me to explore an interesting new path through the options market. It was a path oriented around options content as opposed to options liquidity. The strong response to my column proved that there was a robust demand for options content that was produced by experienced traders. That planted the seed for what would eventually eventually evolve into The Options Insider – our options-oriented media firm that launched back in January 2007.
The goal of our firm has alway been to provide an informed perspective on the options market. While my initial plan was to replicate my column in a digital format, our offering really gained steam when we launched the world’s first options podcast. The success of that podcast led to the creation of the Options Insider Radio Network. Our network has now grown to encompass over a dozen programs spanning all facets of the options market. And to think that it all started in the pages of Traders Magazine!
Why did you leave trading?
The writing (pun intended) was on the wall for options market making by the early 2000s. Most small and mid-sized firms were already closing by the time I launched my column in Traders. The few remaining firms dramatically reduced headcounts and shifted away from straight liquidity providing into more of a proprietary trading format. There was also a mass exodus out of open outrcy trading and into the electronic trading environment. It quickly became clear that I was going to have to shift my focus as well. As I was evaluating the next steps for my career I received the request to launch my column for Traders Magazine. I saw an opportunity to engage my love of the options market while also incorporating a creative element that was missing from my trading career.
How has the options market changed over the course of your career?
The rapid evolution of the options market has been incredible to watch. The three most substantial changes came before the turn of the century with the advent of decimal pricing, multiple listing and electronic trading. Those three changes gave rise to the modern options market that we all know today. When I entered the options market it was a floor-based product that was quoted in teenies and eighths on siloed exchanges. It quickly evolved into a predominantly online product that could be traded anywhere in the world in increments as small as a penny. It also opened up the door to competition between the exchanges and led to the “crowded” exchange landscape that we enjoy today.
However, the pace of change hasn’t slowed. We’ve seen the launch of weekly options and many other new products that have revolutionized the options landscape. In fact, the zero DTE revolution that kicked off last year may be the most significant development in the options market for the past decade. It is reshaping the options market and opening the door to styles of trading that were once unthinkable.
What do you recall most/best/worst from your time writing Options Observer for Traders?
My fondest memory from writing the column has to be the overwhelmingly positive response from the audience. The online options content space was quite nascent at the time so the audience gravitated towards my content in a way that surprised me. I’d spent years in the options trenches so I assumed that most of the information I presented in the column was already widely-known throughout the financial world. When I launched my column I quickly discovered that the options market was an opaque and terrifying place for even the savviest financial professionals. There was a clear and pressing need for insight into this marketplace. I’ve spent the last 16 years trying to deliver it.
What are the main strengths/weaknesses of the current options market?
The primary strength of the modern options market is its accessibility to virtually anyone. This market was once viewed as the domain of “experienced” (i.e. gray-haired) individuals with substantial bank accounts and a deep well of options knowledge. The past few years have shown us this is simply no longer the case. Younger people as well as people from different backgrounds are entering this market in unprecedented numbers. This was dramatically reinforced just last month with a new record high of 1.1 billion options contracts changing hands.
Ironically, that degree of accessibility may also prove to be the Achilles heel of the options market. While we’ve seen firms race to lower the barriers to entry to the options market, we haven’t seen the same race to provide those new entrants with the education they need to succeed over the long-term. We have a fragmented options market with 16 exchanges and more on the horizon. Yet only one of those exchanges maintains any sort of educational offering. These for-profit public companies now view education as an expense to be cut rather than a critical necessity to the long-term health of this marketplace.
What do you see for the future of the options market?
I think it’s clear that the future of the options market is in short-duration products. Over the last few decades we’ve seen the focus shift from monthly and longer-term contracts to weeklies and now to dailies. It won’t be long until we have hourly and other intra-day contracts. This shift isn’t without its detractors, many of whom view this as the options industry abandoning its core risk management function and diving headlong into the gambling world that it has avoided for decades. However, these products offer new points of entry for traders who potentially avoided options in the past due to cost restrictions. As long as we temper our desire for new volume with a mandate to continue educating these new entrants to the options fold then the future will remain bright.
