- Indiana University undergraduates Vishu Namburi and Ishaan Sandir created Eagle Investors last July, hoping to form a tightly-knit community of options traders.
- The Discord server has ballooned to include 20,000 members and is projected to pull in $300,000 in annual revenue through various subscriptions.
- Pandemic-fueled market volatility drove much of Eagle Investors' expansion, and both moderators and clients have made money along the way.
- But the group's rapid growth presents a challenge for the founders who strive to maintain closeness within the community while still making space for new members.
- Visit the Business Insider homepage for more stories.
Millions of Americans are trading stocks for the first time, hoping to profit from pandemic-fueled volatility and unprecedented government aid.
Vishu Namburi and Ishaan Sandir started a $300,000-a-year business with that in mind, built on the idea that these Americans needed guidance.
They also plan to resume undergraduate courses at Indiana University's Kelley School of Business this month.
Eagle Investors began as a server on the popular communication app Discord with some 100 retail traders looking to chat about options positions. Namburi, 20, and Sandir, 21, created the group with 32-year-old software developer Alex Brown in July 2019, after the three met discussing options in a separate server. Word of their community quickly spread, and the founders realized they had struck gold.
Their timing was close to impeccable. Major brokerages including Charles Schwab, TD Ameritrade, and Interactive Brokers began cutting commission fees in the fall, taking after millennial-favorite Robinhood in a bid to attract more investors. When the coronavirus turned global and markets nosedived into bearish territory, the population of casual day-traders only grew faster.
Many younger traders eventually wound up eschewing equities entirely and turned to options as markets rallied through spring. The assets, which are riskier than single stocks, let investors bet — often in levered fashion — on whether shares can surpass a certain price by a certain date.
But such opportunity comes with a price. Options contracts can expire completely worthless if the price threshold isn't breached, leaving traders with potentially severe losses. It's an outcome that an increasing number of young traders must contend with, especially as they assume more risk.
Even some of the industry's most successful investors warn against trading options. Calls for better regulation of the products were amplified in June when a 20-year-old student committed suicide after losing a large sum of money through options.
Yet it still only takes a few steps for new investors to access free options trading — and that low barrier to entry has helped Eagle Investors leap from its 100 first members to more than 20,000 paying members in 13 months.
Inexperienced traders want more than an online forum to brag about gains and lament losses, Sandir said. They want to know how to play like the pros.
"We're seeing a lot more younger kids come in with their Robinhood accounts. They're saying, 'Yeah, I'm 18, how do I trade?'" Namburi told Business Insider. "It's relatively easy right now to trade options … but a lot of these traders don't understand what they're doing."
"You have a few people winning a lot of money, and the vast majority of people are left kind of clueless and bankrupt," Sandir said in a separate interview.
Read more: Wall Street is being shaken to its core by a legion of Gen Z day traders. From a casual hobbyist to a 20-year-old running a 14,000-person platform, meet the new generation of retail investors.
A Peloton for options traders
Sandir describes Eagle Investors as part classroom, part chatroom, and part investing tool. The server includes groups for chatting strategy, tips, and successful trades. Certain members focus their activity in the earnings channel, looking for promising volatility plays before and right after companies report their quarterly figures.
Other channels are dedicated solely to bots scraping public trade data for options sweeps — large-scale trades usually made by institutional investors — and unusual market activity. One bot aggregates stock news from several media outlets, giving subscribers a play-by-play for the broader market.
Investors can use a seven-day free trial to test the platform before paying for membership. Subscriptions range from a $37-per-month beginners service to the $147-per-month Diamond plan. Investors can also pay a one-time installment of $397 for a month of middle-tier membership, options chain software tracking all available contracts, and lessons on trading strategy.
The Diamond subscription touts one of Eagle Investors' more innovative features: an interactive day-trader. The company started working with the individual in the winter to stream his activity to the high-tier members, allowing them to learn from him and — if they so wish — directly copy his positions.
The number of moderators on the server quickly expanded as the coronavirus pandemic boosted Eagle Investors' membership, Namburi told Business Insider. He says today the service acts as a sort of Peloton for options traders, where subscribers follow specialized traders based on the strategies they want to adopt.
Brown — now the company's CTO — focuses on credit spreads. The day-trader, who goes by Julian, broadcasts his rapid-fire transactions. Another moderator, Samuel, mainly deals with earnings plays.
"Everybody was online and wanted to be a trader," Sandir said. "There was a huge influx of demand."
Metrics from popular brokerages back him up. Robinhood announced in May it added more than 3 million new users year-to-date, with half of them being first-time investors. Daily average trades on Robinhood, E-Trade, and TD Ameritrade hit record highs as stocks rallied from March lows.
Read more: Billionaire investor Paul Tudor Jones famously earned a 4-year streak of triple-digit returns. Here are the 7 trading rules he lives by after suffering a devastating loss.
Raking it in
So far, the students' formula is working. More than 70% of options trades made by Eagle Investors' 11 moderators have posted a profit, according to the company's public ledger. Sandir holds a 87% win rate, and Namburi profited from 61% of his trades. Average gains across moderators range from 4.6% to 35.8%. Only one moderator holds a negative win rate, but has only closed four trades so far.
Subscribers are experiencing success in their own right. Donnie Young, 23, joined Eagle Investors' Diamond membership "right around Christmas," and has since quadrupled his account balance. His biggest trade involved a put option against Franco-Nevada, a Canada-based gold mining company, in early March.
When the coronavirus pandemic slammed gold prices, Young's bearish bet netted him $4,800. He could have made more, but he followed advice learned on Eagle Investors and only used about 8% of his account balance for the trade.
The Dallas-based college graduate invests as a hobby. He had been looking for an investing community that boasted more than potential pump-and-dump schemes or uninformed commentary.
"A lot of them, they'd just send you an alert and you either followed it or you didn't. And if you didn't follow it and everyone made money, you were like, 'Dang, I wish I could've got that sort of thing,'" he said.
Young found out about Eagle Investors on the investing-focused social media platform Stocktwits. He wasn't aware that two students created the company, and was "shocked" when he learned of the co-founders' ages.
"When I saw that, hey, you have these guys who are really respected people and they have great trades, and their bosses are two college students, I thought 'these guys are legit,'" Young said.
Sam Halse, a 29-year-old owner of a CPA firm, agreed that the students are punching above their weight. The Diamond-tier member joined Eagle Investors 11 months ago looking to learn the methodologies practiced by successful day-traders. Dabbling in options is "gambling until you make it not gambling," Halse said, adding the team behind Eagle Investors more than met his expectations.
"I've worked with lots of financial advisors and professional traders for work. And these guys know more, if not just as much as, guys that have been doing it their whole careers," Halse said.
The rough draft
The origin story of Eagle Investors starts well before the birth of the Discord server.
Sandir and Namburi previously worked together in 2018 at a student-run investment fund called the Endowment Consulting and Management Group, which Sandir founded as he looked to cut his teeth at institutional investing. Namburi then joined early on as its domestic equity portfolio manager and has since climbed the ranks to chief investment officer.
Forming the student group served as a dry run for starting Eagle Investors. Namburi and Sandir had to navigate strict university guidelines for founding the group and separate rules for turning in into a 501c3 non-profit, all while convincing alumni and other Kelley students to invest. ECMG now manages more than $15,000 and uses its proceeds to fund scholarships.
The group isn't Kelley's first student-operated investment group, but it's the first to come "solely" from student origination, Andrew Butters, an assistant professor at the school and ECMG's faculty advisor, said.
"They want to set this thing up in a way where they'd be returning as alumni and this thing was still going to be around," he told Business Insider. "They really haven't tried to circumvent the reality that they're a student-run org that's going to have to develop a track record before people trust them."
Read more: JPMorgan says buy these 19 'diamond in the rough' stocks that have plunged from yearly highs, but are spring-loaded for huge gains ahead
Culmination and continuation
Building that track record has since paid off with Eagle Investors, but the company's rapid growth presents new risks.
The server prides itself on its personal touch, Brown told Business Insider, but maintaining that closeness as its user count skyrockets is a tough challenge. Moderators are expected to stay involved in large channels and answer individual questions from members, all while continuing to post and explain their trades.
Eagle Investors could bring on more moderators, but that might diminish the camaraderie that attracted its current clients, Halse said.
"Wouldn't you agree that it's going to be almost impossible to keep up?" he said. "Keeping that personal connection, especially if you have thousands of members?"
The founders seem up to the job. Sandir plans to "fully commit" to Eagle Investors after he graduates in 2021, and he's already planned his post-grad budget accordingly. Namburi is similarly focused, though he still has two years of college to complete.
The company may even grow out of Discord to become a fully-fledged office, Sandir said. The founders haven't yet decided whether they'd want to mimic a traditional hedge fund or a more collaborative service between members and managers. But they're confident that such evolution is in the company's future.
"We have people asking us to take their $50,000 and invest it daily. If we're able to capitalize on that demand — because there's true demand there — and we're able to market for the client base, I feel like we would be able to build our own shop very quickly," Sandir said.
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