UsableMarkets

Mention Gong’s name in New York and most people know him as a premier designer, one of the guiding lights of Rare Medium (back in the day). Mention his name in Chicago and most people associate him with OptionsHouse, an up and coming retail options brokerage where he is the Director of Product Design. Gong, in the few times I’ve met him, always seemed rather down to earth for all the accolades he’s collected. And in his low-key way he now commands great respect in two cities (and elsewhere, I’m sure).

Recently he was nice enough to spend some time answering my questions via email about his experience with OptionsHouse, and talk about how design can prove itself in the rough and tumble world of options trading.

UsableMarkets: Give me a bit of history about OptionsHouse. How did it start? What business opportunity did you (PEAK6) see that made you think it was worthwhile to introduce a new retail, options trading site?

Gong Szeto: OptionsHouse was founded in 2005 by Chicago-based PEAK6 Investments, LP. PEAK6 is a successful proprietary options trading firms in the U.S. PEAK6 felt that it was a good time to introduce a retail offering because A) most major brokerages’ options trading offerings weren’t that compelling, B) options volumes had been growing at a remarkable clip for the past few years, and C) wanted to leverage their knowledge and proprietary technology into a fresh retail offering for the public.

UM: The site seems to place a lot of emphasis on “intuitive design” and reducing the complexity of options trading. Can you talk about some of the design innovations that differentiate your site from other online brokers, specifically other retail, options brokers?

GS: OptionsHouse spent nearly a year and a half developing a clean-slate options trading platform before the public ever got to see it. The truth is that there were several players in our space who had pretty decent platforms so it was a great challenge in coming up with a solution that differentiated ourselves, but also solved some issues we had with existing options trading user experiences. On one end of the spectrum, a competitor offered a broad range of tools, but the user experience was broken in a lot of places, i.e. very, very long HTML-pages, user-interactions required a lot of paging back and forth, etc. Another competitor had a Java-based platform that was overly technical, seemingly appealing only to options traders at the very high-end.

We analyzed the ergonomics, if you will, of real-time trading sessions of professional traders and observed that A) they all had multiple windows open showing different data sets, B) their eyes constantly bounced back and forth between stock prices, option prices, greeks, stock charts, volatility charts, their own watchlists, news, idea generation tools, risk management tools, and so on. There is a ton of related data and feeds that a trader has to stay on top of minute-by-minute in order to assess the risks to a trade idea.

We distilled down the essential views (or modalities, if you will) and generalized a user experience that minimized the number of page-flipping you’d have to do to access information, minimizing the number of clicks it took to place a trade, and to “chunk out” data in smallish bite-sized chunks while the user was in “scan” mode, always allowing a user to then “maximize” that view to see more detail, but never letting their eyes lose context. It’s a lot, and if you think about it, sounds like we’re trying to do too much. But the dirty little secret is that we set a constraint at the very beginning to be able to accomplish all this in a 1024×768 screen footprint. (Current web development specs shoot for 1280×1024, but we wanted to be extremely disciplined). The point here is that we wanted even the lowest common denominator user with a 7-year old monitor to be able to use this. The trading screen is now expandable to any resolution you want, so the constraint is no longer there. But OptionsHouse believes we’re the only prosumer options trading platform where you get 100% functionality at that small a resolution.

We also chose to develop for the web-browser rather than a Java client using the latest in AJAX and DHTML browser technologies (optimized for IE6). I think it was and still is one of the most sophisticated thin-clients out there. Multiple-data feeds, deep logic embedded in the UI, flexible interface, customizable option chain, the list goes on. And surprisingly it runs with a very small memory footprint. There’s a lot of pretty sophisticated engineering going on, and that’s just the interface.

UM: How does the retail options trader differ from your “typical” investor?

GS: From our research, an options trader is definitely a more active trader. Because of the time sensitivity of options (they expire), options traders tend to monitor their positions pretty frequently, and because option trades require less capital than stock (in most cases) options traders tend to trade more frequently because the power of leverage allows options traders to control 100 shares of stock with only 1 option contract. It’s a different mindset than just stock trading. We also believe that options traders understand hedging and risk management better than your typical buy-and-hold stock trader because of the unique nature of options. There are also lots of complex combinations you can do with options (straddles, strangles, iron condors, diagonals) that options traders use to manage their risk in a given trade. Depending on their level of investment experience, objective and sophistication, non-traders may make use of options in their trading strategies, but there is plenty of complexity for the more advanced trader.

UM: Over the past year or so, as the site has grown, what have you learned about your users?

GS: OptionsHouse has learned that our users are pretty vocal when it comes to feature requests, which is a good thing. Because we’re a very focused development group, we are able to push out new releases on a very short timetable, thus being able to satisfy user requests and bug reports very quickly. Another thing we’ve learned about our users is that there are as many trading styles as there are traders, which validates our design approach; there is no one-size-fits all solution, and if you design in a two-stage experience (scan, then detail), that tends to satisfy most trading styles. We call our “maximized” views “Go-Pro” views; people can still do pretty sophisticated things just in “basic” view, but we allow much more detail if they want it.

UM: What do they really find valuable?

GS: I think our customers gravitate to the intuitive user experience. I think most successful interface designs you forget about after a while because you’re busy using it and not running into any problems. Our execution is really robust, which at the end of the day, is what traders care most about since that determines that a trade was filled properly and to their exacting specifications. Our customers also love our flat-rate pricing model which can save them a lot of money (compared to brokerage firms that charge higher, escalating commissions)..

UM: What ideas did you try that didn’t seem to resonate with them?

GS: I can’t really think of anything that hasn’t resonated, but can think of features and functionality that they wish to have. We are hard at work delivering on those requests as we speak.

UM: How do you make an options chain sexy?

GS: Well, an option chain is an option chain is an option chain. We didn’t really invent anything here, but rather injected our option chain with rich functionality you generally don’t see on other platforms. We update prices and highlight them in green or red, on-the-fly, which is useful for seeing block price movement patterns in the chain (and they move a lot). You trade directly from the option chain view rather than having to fill in an option symbol in a box somewhere. We offer a number of filters so you can focus on the data you most want (option chains can have miles of prices). You can also color-code chain columns, so you can focus on the values or greeks you use most often. We’re constantly adding new functionality to the chain since we are finding that our customers come up with new ideas after having used ours for a while.

But to really answer your question, to make anything “sexy” you must A) render the data on a black background (which we allow as a user option) and B) show lots of blinky lights (which we do with updating prices).

OptionsHouse option chain

UM: In New York you’re known as a design guy. How did you end up in the options trading business in Chicago?

GS: The CTO of PEAK6 saw a presentation I did a long time ago for a conceptual project that I did for Dow Jones re-conceiving WSJ.com as not just a web-version of the newspaper, but making cross-connects between online financial news streams to positions in your portfolio or stock watchlist, which at that time were two separate and distinct experiences and products. So my concept was to make WSJ.com more like a “financial tool” than just a news site. He asked me if I’d be interested in designing a next-generation options trading platform, so of course, I said yes. I have always been interested in the financial services space, having design clients of Merrill Lynch, Goldman Sachs, First Data, Dow Jones, and Reuters for much of my design career, so this wasn’t a huge leap into the dark for me. My favorite kind of online design projects are data-rich applications that require multi-modal user interactions, so a trading app fits that bill nicely.

UM: Thanks Gong.

Additional information:
An article in BW about Gong and OptionsHouse: That’s the Ticker
And Gong’s Blog

As always, thanks for listening.
~alex