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Investment In Options
Mar 21, 2011: Schwab to acquire OptionsXpress for $1 billion
Jan 8, 2009: TD Ameritrade to acquire ThinkOrSwim for $606 million
Impressive headlines. And nice votes of confidence for option traders. Investments of these sizes are serious bets on the continued growth of options trading and option investing. Subjects near and dear to our hearts.
What did they actually buy? Customers and assets, mostly, but also technology and education services. Let's compare the two purchases:
| Acquired Company |
Number of Accounts |
Customer Assets |
Trades Per Day |
Price Paid |
Price Per Account |
|---|---|---|---|---|---|
| OXPS | 385K | $8.1B | 18,000 | $1B | $2600 |
| SWIM | 87K | $3.0B | 42,000 | $606M | $6965 |
ThinkOrSwim had fewer accounts (at the time of purchase) but their accounts traded more frequently than OptionsXpress account holders. Trades per day is of keen interest to commission-driven investment firms, which is probably the reason why the SWIM price per account was over 2x the price of OXPS. Still, no matter how you slice it, it's interesting to know the value these firms place on funded option-related investment accounts.
Who can blame them? Not only do the acquirers get great options-based technology but about 4.6M trades/year for OXPS and 10.7M trades/year for SWIM. That's a lot of commissionable events. Hopefully their investment in options will pay off for them and they will keep the great technology and education coming.
Mike Scanlin is the founder of Born To Sell and has been writing covered calls for a long time.