"Slick" new options trading app launches but experts warn "options aren’t for the faint-hearted"

A trading app that allows sophisticated UK investors to speculate on, or hedge against, the movement in share price of some of the world’s largest and most profitable tech stocks including Apple, Nvidia, Tesla and Meta, has launched — but experts have warned “options aren't for the faint-hearted” and should only be used by experienced investors.

Investa is an options trading platform. An option is a type of derivative that can allow investors to make a profit by speculating on the future price of a share — giving them the ‘option’ but not the obligation to buy or sell the share at a specific price on a designated date in the future.

Options are used speculatively by more savvy UK investors to leverage potential returns, or defensively as a hedge, protecting against falls in the value of a stock.

Alec Beasley, co‑founder and CEO of Investa, said his company's research showed that just 1% of Brits have traded an option in the past five years, compared to almost a fifth (20%) of US retail investors.

“Our goal is to make the options market more accessible to savvy UK investors, as we believe it offers huge untapped opportunities.”

He emphasises that Investa only offers cash accounts and not margin accounts. In other words, when options are purchased, losses are limited to the premium paid and cannot be amplified.

A survey by investor information platform, Finimize, revealed that 23% of retail investors want to invest in derivatives but felt they did not know enough about them.

Beasley said: “Interest from retail investors to invest in derivatives is extremely high, the highest of any asset surveyed, but currently there is an education gap, one that Investa is looking to fill. There is not a lack of interest in options trading, but rather a lack of access.”

He adds the platform wants to reshape the market away from CFDs (Contracts for Difference) and spread betting towards listed options, with many options exhibiting volatility profiles similar to the crypto and meme stocks that are popular among Brits.

Investors using Investa are able to buy an option that gives them the right to buy or sell shares in a specific company at a set price in the future. They could do this to protect against a potential fall in the value of a share.

For example, imagine you own Tesla shares at $350 and are worried that there is going to be extra volatility until the end of the year and you want to protect against the Tesla share price going down.

As a hypothetical example, you might be able to buy a 19th December ‘Put’ option via Investa with a ‘strike price’ of $330, for $30. In doing so, you have bought the right to sell Tesla shares for $330 on or before 19th December, no matter how far below that the actual share price is.

So if the Tesla share price collapsed to $200, you would be able to sell it for $330, preventing a potential $130 loss — and for that you paid $30. This is why put options are sometimes compared to insurance.

As another example, let's imagine someone doesn’t own shares in Nvidia but is bullish on the direction of the share price, speculating that it will go up disproportionately in the months ahead.

If Nvidia shares are currently at $180, they could buy a ‘Call’ option that lets them lock in the right to buy Nvidia at $200 in six months for, say, a $10 premium. If the price climbs to $250, they can still buy at $200 — effectively enabling them to buy in at a sizeable discount to the market value.

Beasley says options purchased via cash accounts, like Investa, are significantly less risky than those bought through margin accounts, which can magnify losses. With cash accounts, you only lose the premium paid for the option. 

He adds: “High fees, confusing platforms and limited availability have kept UK investors out and we are directly addressing that gap.”

Investa operates under the FCA’s regulatory framework as an Appointed Representative and the Investa app is currently available on iOS. A team of former Citi options brokers and the co-founder of Freetrade, Ian Fuller, has built the new trading platform. It will be launched on Android within the next few months.

Investa’s app promotes itself as "zero-commission' but it does makes its money from FX conversion fees, when it converts GBP to USD to buy and sell international assets. It offers access to over 200 US listed stocks and ETFs with over 100,000 options contracts to trade.

At the moment the app only allows investors access to US-based stocks and options but Beasley said there were plans to launch an international version. During the platform's soft launch, Nvidia accounted for over 20% of options activity.

Financial advisers and traders warned the app was “not for the faint-hearted”. 

Samuel Mather-Holgate, independent financial adviser at Swindon-based Mather and Murray Financial said it was a “slick app”.

“It’s great it’s available to retail investors, but the demographic and users will remain sophisticated investors. 

“Options aren’t easy to understand and those with modest financial knowledge shouldn’t be tempted to use them, as you can easily lose the total amount you invest.

“For those who have the knowledge, and the risk appetite, the site looks great as does the charging structure but they will make their money somehow and this will be built into their option pricing.”

Anita Wright, a chartered financial planner at Ribble Wealth Management expected Investa to appeal to younger, more digitally engaged investors who are drawn to “big tech” names like Nvidia, Tesla and Apple. 

She questioned the app’s zero commission ethos. “It’s not truly free — clients may face poorer execution, raising the question of whether the broker’s incentives align with their best interests."

David Belle, founder and trader at Fink Money said it was a nice leaf out of the US investor playbook.

“Whether the UK investor base will take to it is another issue since there are cultural issues related to risk taking here, but options are a strong play where you can limit your risk by only paying a premium if buying, whereas with trading, your risk is undefined outside of using a stop loss. Love the idea."

Eamonn Prendergast, chartered financial adviser at Bromley-based Palantir Financial Planning Ltd, said: “Options aren’t investing — they’re speculation dressed up in complexity. Investa’s zero-commission app will no doubt tempt a younger generation of UK investors, much like crypto, but options aren’t for the faint-hearted. 

“Unlike long-term investing, they’re short-term, highly speculative bets where timing and volatility can wipe out your stake.”

Adam Bakay, derivatives trader at tradingriot.com, said: "Zero-commission platforms like Investa are often aimed at retail traders. Options are much more popular in the US compared to the UK because American retail traders have fewer alternative derivative products beyond futures. 

“In contrast, European investors have long had access to CFDs, and in the UK, spread betting platforms offer very favourable tax treatment, reducing the demand for options."