Wondering if Tastytrade is a legit trading broker? In this Tastytrade review, I will share my experience and provide a Tastylive review as well.
Tastytrade is an online brokerage. Whereas Tastylive is an education and options trading education provider. I've spoken to both Tom Sosnoff and Tony Battista and I respect them tremendously.
Tom Sosnoff is likely worth ~$400 MILLION dollars because he's built legitimate businesses. He works hard and deserves his success. He's around 60 years old and he's built up businesses over the past 25+ years.
Tony Battista is also very reputable, he was a floor trader with years of experience. Also, when I email both Tom and Tony, they always email me back within 24 hours - that's fantastic!
Tastylive provides decent options trading content. However, there are issues that I have with the platform, broker & the trading education.
Read on to learn more about my personal experiences which motivated me to write this Tastytrade & Tastylive review.
Options Trading with Tastytrade & Tastylive: PROs
- - Tastytrade is a trading platform with an associated education-company, Tastylive, which provides options trading educational videos to help you learn the basics of options trading.
- - Tastytrade is, in my opinion, superior to Robinhood and Webull.
- - Their founders are reputable and I believe they have good intentions.
Tastytrade Review: Best Resources to Help You Make Money Trading Options
Is Tastytrade safe? Yes, Tastytrade is a reputable broker founded by Tom Sosnoff, who created ThinkorSwim. Aside from my YouTube videos, there are a few other good resources for you out there.
Regarding education, Tastytrade is, overall, solid. Another resource is Option Alpha, which I believe is adequate because the production value on Kirk Du Plessis' videos and podcasts are good.
However, I think that Option Alpha's strategy is not optimal and I believe that almost all his followers will lose money. Tastytrade, on the other hand, is solid. They have good videos, and great research, that you can learn from.
If you watch my YouTube videos and those from Tastytrade, then you will have a really good understanding of how to trade options by selling option premium.
But, remember, you also need experience and have to make good decisions.
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Tastytrade Cons
TOO RISKY.
With Tastytrade / Tastylive, you are taking too much risk because they encourage you to "trade small and trade often".
While I agree that you should always trade small, I believe that "trading often" leads to having a lot of small positions in too many underlyings - this creates significant correlation risk during a downturn.
Tom Sosnoff and Tony Battista will encourage you to look for underlyings that have very high Implied Volatility (IV) rank.
When you scan for IV rank, you are not necessarily discerning between a Tesla, which can fall 30% in a week, versus a more stable underlying.
They are telling you that the quality of the underlying is less important than the IV Rank, which I disagree with.
Also, the Tastytrade methodology does not discern between opportunities. They do not allocate more capital towards your best opportunities.
Tastylive followers do not hedge their positions and have significant correlation risk. During crash markets like in March 2020, I believe that almost all Tastylive followers got wiped out.
Even "trading small" can't save you from a 35% drop in 1 month.
Perhaps most importantly, Tastylive and Tastytrade does NOT encourage you to BUY options as portfolio insurance or as a hedge. As a result, I believe that, over the long-term, almost all Tastytraders will LOSE MONEY during a large volatility expansion event. I believe they will get a margin call and be forced to close out their positions at the most inopportune time.
Tastytrades' research team will disregard this by saying, "trade small" and eventually the market recovers, which may be true for the overall market, the problem for options traders is that due to large volatility expansion events, almost every single one of their followers will be forced to close out their positions for a major loss due to a margin call.
If their followers don't receive a margin call, then they're trading so small that they shouldn't even be selling options, instead they should simply hold QQQ.
Additionally, by "trading often", they're conflicted - as Tastytrade is NOT a low-cost broker (I pay 10x LESS with E*Trade than with Tastytrade).
As a result, there is a major conflict of interest by encouraging viewers to "trade often" because it allows them to maximize their fees.
Tom Sosnoff does NOT show his trading statements and many of their "experts" have been outed as frauds. "Karen the Supertrader" lost $50MM of client money, was fined $1.5MM by the FTC and was banned from the industry, whereas Jim Schultz allegedly lost over 50% of his account.
Regardless of the underlying stock, Tastytrade mostly cares about high IV (and liquidity) to maximize the amount of premium that you receive.
However, companies can have similar IV ranks and liquidity yet there can be a huge difference between them. In general, I believe it's best to ONLY sell options on stocks that you want to own.
But with Tastytrade, they are agnostic to the underlying. The point here is that NOT ALL STOCKS / UNDERLYINGS WITH HIGH IV RANK & HIGH LIQUIDITY DESERVE TO BE TRADED.
Additionally, I can tell you that there have been numerous occasions where Tom Sosnoff has LOST TRACK and forgotten about some of his positions. You may say, "Well yeah, he's producing a show, hours of content, running a company..", and that's true do YOU want to trade 70 positions and become so overwhelmed with your options positions that you lose track?
So while Tom Sosnoff is very busy, I believe that he has lost track of his positions because he trades too many underlyings. If you have a $10,000 account and you scan based on IV Rank and find Wynn Resorts, then that's not nearly as good a stock as JPM or Amazon.
Wynn has fallen from ~$240 to $90, that type of volatility will crush options sellers. In this Tastytrade review, it's important to remember that Tastylive makes little discernment between the quality of the underlying apart from IV Rank and liquidity.
With your money, you should care about being involved in the best stocks that provide the highest probability of profit and success. Tastytrade does not distinguish between the quality of the underlyings.
And, I repeat, there have been numerous occasions where Tom has admitted on his show that he has lost track of trades. He likely didn't pay close attention to it because he trades too many securities.
And even if his account size is $300 million, that's too many securities to keep track of! You simply can't keep track of your positions when you have so many.
Tastytrade Review: Keeping NEGATIVE DELTA
Tastytrade is very biased towards keeping negative delta. They keep negative delta by shorting call options to make money when the market falls.
The problem with this "hedge" is that when you sell options, your max profit is the credit you receive. By selling calls, even if the market crashes, then the call premium will provide a cushion for a ~5% market decline.
But, if the market crashes quickly, then those calls are basically worthless in comparison to the losses on your short put positions.
Also, those calls will get challenged in a bull market. So, in summary, those calls hurt you in a bull market and barely help you in a market crash.
A much better hedge would be to purchase put options during bull markets when volatility is low.
Trading Straddles
Tastytrade used to encourage their followers to sell straddles and then simply, "roll up the untested side". I always thought that this was horrible advice.
Thankfully, it seems that they no longer recommend this losing trading strategy.
Do I think that Tom makes money in the stock market by trading options? I actually am not sure.
Do I think that Kirk du Plessis from Optionalpha.com makes money in the stock market? I believe that Kirk is a losing trader.
Do I think that the Tastytrade options trading strategy is the best strategy that people should have? Definitely not. I believe our Strategy is better and safer, and you can take the options trading course here.
You should care about maximizing the amount of premium you receive and only enter the best trades with the highest probability of success.
High IV, days to expiration and other contributing factors are priced into the premium that you receive when you make the trade. Whenever you make a trade, the most important question is always:
"Am I being compensated for the risk I am taking?"
For example, "If I sell this put on Facebook / META that expires in 6 weeks, do I feel comfortable receiving $2.50 worth of premium for selling that $250 put? Or do I believe that the risk is too high?"
That is the only question that you should ask yourself.
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"Selling options provides you with a high statistical probability of profit in the stock market."
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Tastytrade Warning: Karen the Supertrader
There are, in my opinion, a few other red flags about Tastytrade.
- They have had Tim Sykes (who, in my opinion, is a scam artist) on their show multiple times. Providing Tim Sykes with a platform and granting him access to the Tastytrade audience is a red flag
- Tastytrade has made Karen Bruton, or Karen the Supertrader, a celebrity. In fact, in July 2019, they invited Karen Bruton to their "Geeks on Parade" seminar. The problem is.... Karen was charged with fraud, paid a $1.5 million dollar fine.
Here is an extract from the Karen Bruton SEC complaint:
E. The Fraudulent Trading Scheme
58. In October and December 2014, the Funds experienced significant trading losses due to volatility in the financial markets.
59. In response to these enormous losses, beginning in November 2014 and continuing almost every month to the present, Defendants entered a series of trades (“Scheme Trades”) in the accounts of the HI Fund and the HDB Fund that had the purpose and effect of avoiding realization of the losses.
You can find more information about the $1.5 million fine is here. The SEC handles civil complaints, it's possible that the SEC will refer the case to the DOJ for criminal prosecution.
Most importantly: I'm very surprised that Tastytrade continues to promote Karen the Supertrader as a successful trader when all the signs point to her not being successful.
How to Trade Options Easily
If you want to learn about trading options then following Tastytrade is wortwhile but if you want to maximize your profits, you should become an alerts member.
You can also subscribe to our options trading education course. It is the best options trading education course available.
It doesn't overwhelm you with extraneous information. It doesn't require you to log into your account and scan underlyings four or five times a day.
It doesn't require you to make a lot of adjustments like Kirk Du Plessis from Option Alpha (Option Alpha has now changed its business model to bots and automatic trading, which, in my opinion, is a scam).
During a bull market, you're better off trading the long side.
When we enter a bear market, if you want to switch to the short side, then that is a prudent decision.
Finding the Best Options Trading Platform / Broker Tips
- Choose the best trading platform. You don't want to log into your account multiple times and incur the stress of having a losing position.
- Be stress-free. You do not want to have to make a large number of adjustments when selling premium. Making many adjustments is not a good strategy.
- Reduce transaction fees. You don't want a pay high fees to your trading platform. Find the best online brokerage that will help you save and make more money.
- Account size – I recommend Tastytrade as an options trading broker and platform if you have anywhere from $5,000 to $10,000 dollars.
- Sign up for Trade Alerts – Receive real-time trade alerts so that you maximize your profits and minimize your mistakes. We have a 14 day trial offer.
"Am I being compensated for the risk I am taking?" That is the only question that you should ask yourself.
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Tastytrade Review: Exchange Fees
Tastytrade has very high exchange fees. They pass through their exchange fees and charge around 14.5 cents per option contract.
That's about 6x - 7x more than I pay with Etrade (E*trade). Tastytrade charges a maximum of $10 per leg, but there's an additional ~14.5 cents per contract in exchange fees. I pay E*TRADE $0 per trade plus 10 cents per contract (including all exchange fees).
Even though Tastytrade says that they are a low cost broker, their pass-through of exchange fees can make it more expensive than others. Their overall commissions, when you factor in the exchange fees make it more expensive than what I pay with E*TRADE.
Also, is Tastytrade paper trading available? Does Tastytrade offer portfolio margin?
Unfortunately, Tastytrade does not offer papertrading.
Tastytrade DOES offer portfolio margin to those with $175,000.
As a result, it's easy for traders to get approved to sell naked options (puts and calls) with Tastytrade.
However, I don't like the UI / UX of the Tastytrade platform. I find it extremely slow. It takes me about 10 taps to enter an order, whereas with E*TRADE, it only takes me about 3-4.
Also, as indicated previously in my Tastytrade review, the fees are significantly higher than other brokerages.
Tastytrade Sign up: Free Trade Alerts
Many of my followers use Tastytrade as their options trading brokerage.
Use this referral link when signing up or opening a new account:
New Accounts:
https://start.tastytrade.com/#/login?referralCode=7R6QHPKFNC
For Existing Accounts:
Visit: https://manage.tastytrade.com/index.html Enter 7R6QHPKFNC on the bottom of the page where it says, "Did someone refer you? Enter their link or code below"
You must fund your account with at least $5,000 to be eligible for the free week of alerts or the free 10-minute call.
Also, you must be located in the United States. Please email me once it's done so that I can keep an eye out. Tastytrade sends me an updated list every 2 weeks.
My Conclusion on Tastylive & Tastytrade Review: Recommended
Overall, I recommend Tastylive. A lot of my followers use this trading broker and the Tastytrade platform (for small accounts).
I find the visual interface annoying, and it's very slow to enter trades, however many of my followers enjoy Tastylive and Tastytrade. I actually trade a small account with Tastytrade (watch this video about how I'm up ~75% in 2019 in my small Tastytrade account).
Tastytrade vs. Robinhood
I also think that Tastytrade is better than RobinHood, so I recommend Tastytrade as a trading platform and online broker if you have under $20,000.
I wrote a blog on how to choose the best options broker that you'll find useful.
Thank you for reading my Tastytrade Review, and if you have any questions let me know in the comments section below.
Frequently Asked Questions (FAQs)
Is Tastytrade a scam?
No, Tastytrade is legitimate and it's founded by Tom Sosnoff, who is probably worth about $300 Million.
Will I make money by trading with Tastytrade and Tastylive?
Probably NOT. The reason is that they encourage their followers to trade too often. Additionally, to be a consistently profitable options trader, it's important to buy options at certain times to protect your portfolio against large volatility expansion events.
Does Tastytrade and Tastylive provide the best options trading strategy?
Definitely not. I don't believe their traders are profitable. We know that "Karen the Supertrader" was a losing trader and Jim Schultz lost the majority of his account when trading.
The problem with Tastytrade is that almost all their followers will eventually be forced to close out their positions due to a margin call during a stock market recession or large volatility expansion event.
Their "solution" to this is to "trade small", but if you trade too small, then you'll make significantly less than simply holding the SPY or QQQ.
Their strategy of shorting calls is horrible, and oftentimes leads to significant trading losses.
Is Tastytrade a low-cost brokerage?
No, their fees are very high. Compared to E*Trade, I pay 10x more when I use Tastytrade than when I trade with E*Trade.
Is Tastytrade a good brokerage?
It's decent, yet expensive. The best part about Tastytrade is that it's easy for traders to get approved for margin trading by applying for "The Works".
What are the Tastytrade fees?
Tastytrade charges $1 per contract (maximum of $10 / trade). They provide free closing trades and their exchange fees are ~14 cents per contract. Overall, Tastytrade is incredibly expensive.
Tastylive vs Tastytrade?
Tastytrade is an option trading brokerage, whereas Tastylive is an education company that teaches options trading.
Did Tastytrade change its name?
Yes, Tastytrade used to be called Tastyworks. You can read another review about Tastyworks and tastytrade here.
