Our Origins: How Trade Alert Brought Clarity to Options Trading

April 1, 2023

When open-outcry trading was the only way to participate in the market, it was relatively easy for someone on a desk to call a floor broker and get color commentary on who was trading what options in the open outcry pits. In the early 200s, as market structure began changing tremendously, that became a lot more challenging. 

Henry Schwartz was working as a market maker at a big bank in the early days of the options exchange electrification and trading automation, frenzy when he realized that there was an urgent need to create a comprehensive options trading flow tracker—and no one was doing it. The traders he spoke to were often asking, “What’s actually going on?”  

But the picture was no longer clear, and the fact that options were multi-listed now didn’t help. As a result, sometimes the answer to the question was just unverifiable color commentary from a bewildered sales trader.  

Seeing an opportunity to solve the problem and seeking a new challenge, Henry and Trade Alert co-founder Bill Sterling left their big bank jobs and got to work building the technology they wished they had.  

“The data was straight forward and already accessible,” Henry says. “The added value is knowing the direction, or whether a trade was a complex order or part of a sweep, or an unusually large trade. We saw a need for that context. We wanted to tell people the ‘why’ behind options trades.”  

Trade Alert, officially founded in 2005, was a bootstrapped operation in its early months. Their breakthrough system to help traders be better informed was developed for what might seem like an unlikely interface: AOL Instant Messenger (AIM).  

At that time, it didn’t matter if you were a billion-dollar hedge fund or small band of prop traders, everyone used AIM to keep connected. Bill and Henry knew that building their tool for AIM would make it easier to integrate it into their target audiences’ existing workflows. Plus, it didn’t hurt that plugging in to AIM saved them from building a front-end interface.  

With that approach, Henry and Bill built a robust, off-the-shelf tool for hundreds — and eventually thousands — of traders. With their strong networks on Wall Street and years of trading experience, the pair quickly got their revolutionary tool into the hands of many eager options traders. 

Trade Alert was first based off a few simple models and grew from there to incorporate more communications platforms (don’t worry, it’s not still relying on AIM), and more datasets. Trade Alert disrupted the options industry with context that hadn’t been available in the new age of trading. 

However, as other impressive options trading and analytics technology platforms started to grow their presence in the market — firms like LiveVol, Hanweck and FT Options —they started to worry about the competition. But when they visited clients, they’d see desktops populated with Trade Alert and one of the other popular platforms, illustrating how they could work together, rather than stay competitors.  

“We knew that these tools complimented each other,” Henry says. “So, when Cboe approached us about an acquisition, we knew it would be a fantastic strategic fit that was a win for all of us.”  

LiveVol had been a part of the Cboe network for about five years when Cboe acquired Trade Alert on the heels of acquiring Hanweck and FT Options. Now, deeper integration is the name of the game. 

“We’re all able to take advantage of the strengths of these different services and datasets and we’re just getting started,” Henry says. “I’m excited to see what things look like in the next few years.”