investment options 21, 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.

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