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TradeZero America Co-founder on investor trends during market volatility

Dan Pipitone, co-founder of TradeZero America, joins The Final Round to discuss what the platform is seeing in the wake of COVID-19 and trends among investors.

Video Transcript

- Welcome back to Yahoo Finance's live coverage. Stocks are rallying today with the Dow closing up over 500 points. We had financials, industrials, and materials, those three sectors leading the way today. For more on this, I want to bring in Dan Pipitone, co-founder of TradeZero America. And Dan, let's start with the moves that we saw in the market today and really what we've seen over the past week or so, this significant move out of growth into some value names. I'm just curious. Is this something that you're seeing from users on your platform?

DAN PIPITONE: We are. Not only sector rotation, but also, as you mentioned earlier, more attention focused on not just the long side, but on the short side. There's been a lot of movement in the last three or four months that we've noticed, a lot of new entrants into the marketplace as it relates to shorting, a lot of the younger demographic, the millennials, moving off of platforms that didn't allow or facilitate shorting at all. We're seeing a real explosion in interest and also in access to different various stocks. We saw many of them being COVID-related.

- Dan, let me follow up about that shorting. I'm curious, because haven't a lot of these investors gotten their fingers burnt? Haven't they been brutal?

DAN PIPITONE: I believe that-- listen, this is not for an investor just starting off. There are risks involved. But the old tale of the fact that there are unlimited losses that can happen with the short sell, I think, really clouds and jades the real motivation behind it. This is a tool used by some of the biggest institutions. We've all been pre-programmed, from news and everything else, that when things are going up, it's good and down is bad. Our traders and the access that we provide and equal treatment to the long and short side, we feel that it more democratized the market and also has demystified in a way that that actual fact of shorting is, you're going to lose all of your money every time you place a short sell.

RICK NEWMAN: Hey, Dan, Rick Newman here. I wonder if you could just go to that a little more in plain English. So first of all, is this smart money or dumb money that's getting into shorting? And does this demonstrate pessimism toward the recovery in markets? Or is it more technical in nature?

DAN PIPITONE: I think this is a way of traders understanding that volatility acts in both directions. And back in March and April, when we had those really wild and violent swings of 1,000 and 2,000 points, many people who only had access to the long side are just kind of sitting there, scratching their heads, and wondering potentially how they could benefit when things are going down. So I think more from a trading perspective, less of an investing, but more of a trading action, that investors are using this to capitalize on the volatility in both directions.

- And Dan, what do you-- I mean, you're talking about signing up more clients, more money coming onto your platform. And I think anecdotally, you see just a lot of people that I know that you see, like Dave Portnoy tweeting about his day trading. I mean, people are into day trading now in a way that it feels like we haven't seen in maybe 10 years. Is that your read on it? Because from my perspective, it seems like trading stocks is now fun again, which is interesting, considering kind of the economic backdrop.

DAN PIPITONE: Well, if you think about it, right now we-- you, I, the market-- we're the only live action in town. There's no more live shows. There's no sporting events. We have a captive audience. And with the tools that we have between the platform, the mobile, the web, you can really cater to a wide range of investors from their home and give them the type of market access that you had to be a pro just a few years ago to have. So then the fact that we have a captive audience, I think, has really skyrocketed the interest in both the markets, and as a byproduct, the volatility with the short selling.

- Dan, just following up on that, just in terms of what people are favoring now, maybe some of the smaller names that our audience hasn't, some of our viewers haven't heard of, because I know you were mentioning some of the big names in pharmaceutical or biotech specifically-- COVID vax, obviously, that has been in the headlines and that's a pretty new trade at this point. But what are some of the other COVID-19 winners that you're seeing on your platform?

DAN PIPITONE: Sure, well, Moderna-- everyone knows-- I mean, we started looking at this stock way back in March and $16, $17, $18. That's had a really nice run. Inovio, as you mentioned, vTvT is another small cap stock that's really been uber volatile related to news, COVID-related news. SRNE is another one that's really been a lot of short interest over the last couple of weeks.

- And Dan, what about other kind of ideas that speak to the change in our society and economy because of coronavirus? I mean, there are things that you see out there that are sort of nicer, longer term trends rather than just the vaccines or the drugs that fight the disease.

DAN PIPITONE: There's a lot going on right now. Something that we're not-- no one's even talking about right now, really, is the election. Given everything going on with China, the disease, there are so many news points built into the next six months that-- look. At the end of the day, a good company is a good company. We're seeing a lot of people coming into the tech names, the financials, some of the entertainment stocks like Disney and Six Flags. But over the course of the next six months, I think it's going to be really a trader's market. We've moved out of the sector-based and index-based investing coming into March, where now it's more of a stock picker's market. And we expect that to continue for the next six months up and through the election.

- All right, Dan Pipitone, co-founder of TradeZero America. Thanks so much for taking the time to join us.

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