Is TastyTrade Safe?
If you’ve ever logged onto TastyTrade (aka tastyworks), you’ve likely noticed that the broker does things a bit differently than its competition. Everything from the quirky referral rewards to the game-like options chain to the website design feels different than anything else you’ll see in the industry.
While different can be fun, you might ask if the broker can be trusted.
Is TastyTrade a scam? Can you find positive feedback from customers at BBB? Let’s find out.
TastyTrade Origins
TastyTrade is a top-rated broker offering investors a diverse range of investment products and services.
The broker has a long history in retail investment.
TastyTrade’s owners (founded by Tom Sosnoff)
are well known for many innovative products. The Smalls Futures Exchange is one of the newest, and
Charles Schwab’s ‘thinkorswim’ trading platform was originally their creation.
Is TastyTrade a Scam?
Now, let’s address the question at hand. Is TastyTrade a scam?
The short answer is no. TastyTrade is not a scam.
There are several places you can look to see if TastyTrade is a scam or not.
The first thing you’ll notice is that the broker is a member of SIPC. The insurance policy is in place to protect investors from any wrongdoing from their broker.
TastyTrade is also a member of the National Futures Association, the self-regulatory body for the
futures industry in the United States. Moreover, TastyTrade is a member of FINRA, the equivalent body
for securities. The company's membership ID is 277027. Its membership number with the SEC is 69649. With
so many memberships, we can conclude that TastyTrade is a very safe and legitimate enterprise.
You can also note that TastyTrade works with a clearing firm to handle transactions (Apex Clearing).
Apex Clearing is also regulated and would not be able to do business with TastyTrade if ‘questionable
practices’ existed.
Is TastyTrade Secure?
To maintain licensure from (and partnership with) regulatory bodies, brokers must ensure customer safety. It is also vital that steps are taken to keep customer finances and personal data secure.
To achieve these goals, TastyTrade does the following:
TastyTrade employs a complex security strategy to protect its customers. From software to hardware to real-time observation, accounts and money flow are tracked closely.
In addition, all customer data (personal and transactional) is encrypted with TLS v1.2 256-bit protocols while ‘in transit.’ Customer passwords are also hashed. The result is a highly secure platform to place trades and keep your capital safe.
TastyTrade Referral Code
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TastyTrade BBB Rating
A good place to see if a broker is following sound business practices is the Better Business Bureau – more commonly known as the BBB.
The BBB rates companies based on a variety of factors. Some things that affect the score are customer complaints (filed with BBB), how long the business has been in operation, the company’s licensing, business practices, and more.
The TastyTrade rating is currently A-, and the BBB does not currently accredit the broker.
TastyTrade BBB Reviews
We've collected some reviews from the Better Business Bureau to make it easier for you to see what others are saying about TastyTrade. Although there are now positive reviews listed, the negative reviews do not suggest that the broker is running a fraudulent operation.
In fact, it seems clear that the complaints made are based on traders misinterpreting their customer agreements rather than the broker doing anything shady.
This may be a good time to remind newer traders to read through the documentation before putting any
money to work. Details of how brokers operate can take some time to learn, but it’s worth the effort.
See more on BBB website.
Is TastyTrade FDIC/SIPC Insured?
Only banks qualify for FDIC insurance. Because TastyTrade isn't a bank, it does not provide any FDIC protection. However, it is a brokerage firm.
This means that it qualifies for SIPC protection; and it has become a member of the SIPC. Hence,
every investment account with the broker is insured up to $500,000. Half of this amount can be used for any uninvested cash in an account.
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TastyTrade Review
Now that you know TastyTrade is not a scam, we thought it worthwhile to share our thoughts about the broker.
Briefly, TastyTrade is an innovative broker that delivers diverse securities and investment tools to traders. There are several account types to choose from, an attractive pricing schedule, and plenty more.
Here are a few more details.
Available Securities
No matter what you like to trade, you can find many opportunities at TastyTrade.
Stocks, ETFs, indices, options, futures, commodities, and cryptocurrencies make up the current securities lineup. That means investors at TastyTrade can access virtually every corner of the investing world, and they can do it all from one account.
Stocks/ETFs
You can take advantage of rising and falling prices for stocks and ETFs by buying or selling (shorting) on margin. All U.S.-based stocks and ETFs are available.
For foreign stocks, ADRs are available. There are currently no OTC foreign stocks.
Futures & Commodities
Futures and commodities are traded via two exchanges: CME and SMFE.
CME is the most common futures exchange and the most liquid. If you are looking to day trade futures, CME is probably what you are looking for.
The Small Exchange (SMFE) is a newer exchange built by the owners of TastyTrade. Contracts are much smaller than their CME counterparts. As such, trade costs, as well as the potential for profit and loss, are decreased. Despite the low liquidity, there are many exciting aspects of the SMFE lineup.
Cryptocurrencies
The cryptocurrency listing is not exceptionally long, but the most popular digital assets are available.
Something to note about cryptocurrency trading at TastyTrade is that all transactions are to and from the US Dollar. There is no wallet function for digital currencies, nor are there crypto pairs to trade.
Here are the available cryptocurrencies at TastyTrade:
TastyTrade Trading Platforms
The technology behind the trading platforms and the mobile application creates a fast and secure trading environment you can take advantage of from anywhere.
Built from the ground up, TastyTrade’s platforms provide an experience you won’t get anywhere else. Not only are trade executions fast, but security is also top-notch.
To choose the ‘best’ platform for your needs and expectations, you will want to consider the strengths of each.
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Desktop Software
The desktop trading software is a feature-rich platform that is lightweight and easy to navigate.
Trading on the platform is intuitive and straightforward. Watchlists help investors track the ongoing market state, and trades can be initiated from several places within the platform.
One of the most impressive aspects of the software is how options trades are handled. With the platform's click and drag functionality, complex options strategies can be created in seconds.
It should be noted that charting is not the best but is improving with time.
Browser-based Platform
TastyTrade’s browser-based platform is also quite capable, but it certainly feels like a pared-down version of the desktop platform. All the same options and tools exist, but they are packaged differently – everything is more compact.
The platform is excellent for trading away from the desk or on a Mac.
Mobile Application
Trading on the mobile app is also quite simple. Controls, watchlists, and transaction execution are easy to understand and navigate. TastyTrade also makes it simple to build and manage complex options positions from the mobile app.
Of all the app’s interesting features, the ease at which investors can follow the trading activity of the TastyTrade team is one of the more intriguing. If interested, ‘copying’ trades posted on the list is only a couple of taps away. The feature is also available on the other platforms.
Account Types
You can open several types of accounts at TastyTrade.
‘The Works’ – is the most versatile trading account you can open. It is an Individual Margin account with the broker’s highest permission levels.
Individual Margin – is a standard brokerage account. Permissions are set based on self-declared financial and investment information.
Individual Cash – is a non-margin personal brokerage account.
Joint (TIC/WROS) – there are two shared brokerage accounts.
Retirement – you can find several retirement accounts at TastyTrade (Traditional IRA, Roth IRA, SEP IRA, Beneficiary Traditional IRA, and Beneficiary Roth IRA).
Corporate – is a brokerage account with a corporate owner.
Trust – is a brokerage account for a Trust.
International – is a brokerage account geared toward a global client base (Canada excepted).
Fees and Commissions
TastyTrade has a pricing schedule that can benefit the right trader. Some fees are set at industry-standard rates. However, TastyTrade also places a cap on commissions, making larger trades far less costly than what you can see at other brokers.
Commissions for options are charged on a per-leg basis and only on the opening of the contract. The options fee for stocks and ETFs is $1 (maximum $10), options on futures are $2.50 each, and options on micros (futures) are $1.50.
Stocks and ETF trades are always free.
Futures have a per-contract fee of $1.25 ($2.50 per contract, per round trip). Micro futures are set at $0.85 ($1.70 per contract, per round trip). Smalls futures are set at $0.25 ($0.50 per contract, per round trip).
Cryptocurrency has a 1% commission on all purchases and sales. However, there is a $10 cap.
Capped Commissions
Speaking of commission caps, no TastyTrade review would be complete without a mention of the broker’s capped commission strategy. It is one of the features that help the broker stand out.
To put it briefly, commissions are charged per leg on the opening of a contract. If you trade complex options positions with up to four legs, you pay the commission on each leg. If you trade multiple lots, the number of legs increases exponentially.
Fortunately, TastyTrade caps the commissions at $10 per leg. Here is what it looks like.
Here is a comparison of how the capped commission system compares to other brokers. Keep in mind, however, that the benefits are geared towards investors trading considerable size (i.e., 20 Iron Condors at a time).
Margin Rates
The margin rates at TastyTrade are about average compared to other popular brokers. Ranging from
11% to 8%,
rates depend on the account balance:
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Debit Balance
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Tastytrade Margin Rates
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under $24,999.99
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11%
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$25,000 - $49,999.99
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10.5%
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$50,000 – $99,999.99
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10%
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$100,000 - $249,999.99
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9.5%
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$250,000 - $499,999.99
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9%
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$500,000 - $999,999.99
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8.5%
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$1,000,000 +
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8%
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Is There a Cash Management Option?
One thing that is missing from TastyTrade is a cash management solution. Unlike many other popular brokers, TastyTrade is not directly connected to any bank or financial institution. Because of that, there is no checking account or debit card available.
Which Investors Does TastyTrade Cater To?
TastyTrade caters to investors of all types. With so many valuable tools and services, it is not hard to see how the broker has such a diverse customer base. Still, some things may not suit everyone.
Investors looking for high-volatility penny stocks or advanced charting tools will not find what they need at TastyTrade. The platforms are not ideal for high-speed day trading. The case is similar for short timeframe futures traders who need to pay close attention to price action by the tick.
On the other hand, options traders and investors making large trades can certainly find a lot to love about TastyTrade. Investors looking to trade a range of securities all from one account will also gravitate towards TastyTrade.
Awards
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TastyTrade Pros and Cons
As with all things in life, TastyTrade comes with some pros and cons. There are things the broker does very well and things we don’t like.
TastyTrade Pros
- Opening an account is fast and easy
- Complex options strategies are at the heart of the broker’s platform and technology
- It is possible to trade stocks, ETFs, commodities, futures, and cryptocurrencies all from one trading account
- The capped commission schedule can be hugely beneficial for investors’ bottom line over the long term
- The broker’s interface and trading platforms are fun, modern, and fast
- The mobile application is one of the best in the business
TastyTrade Cons
- TastyTrade’s charting has come a long way in recent years, but it is still a work in progress
- Fast or high-frequency trading is not easy on any of the TastyTrade platforms
- Chart trading for stocks, crypto, and futures exists, but it is not as intuitive as it should be
- There is no Pink Sheet support
- No cash management option available
Ben Wright is an investor, a trader, an educator, and something of an explorer. He spends his days in the markets when he is not teaching or spending time with his family. Ben writes about stockbrokers, markets, investment vehicles, promotional offers, and tools that help investors make the most of their time in the markets.
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