A McLean, Va.-based asset management firm plans to take options trading mainstream.

Vest Financial’s options trading platform allows investors to automatically hedge their equity and ETF investments without having to conduct heavy research into options strategies.

“The options market is huge, and the benefits of these kinds of investments accrue to institutional investors,” says Karan Sood, Vest’s CEO. “Those benefits do not extend to the middle-market institutional or retail investor.”

Vest was originally backed by California-based start-up accelerator Y Combinator, but after being featured at the tech development firm’s 2015 demo day, it picked up interest from the Chicago Board Options Exchange.

Earlier this year, CBOE Holdings made a majority investment in the options platform, and moving forward will make its own options strategies available through Vest.

“Karan and his team are distilling the presentation and benefits of options to their most simple form,” says John Deters, the CBOE’s chief strategy officer. “Someone who hasn’t spent a lot of time applying options trading successfully, or someone who isn’t entirely sophisticated in options investing should consider Vest’s product.”

The terms of the Chicago Board Options Exchange’s investment were not made public, but the company says that the transaction was funded with existing cash.

Sood hopes Vest's platform, at http://www.vestfin.com, will expose the greater investing universe to options trading, especially advisors and investors whose lower risk tolerance may be keeping them away from equities.

Sood, a veteran of options trading at ProShares Advisors and Barclays, explains that Vest will make it easier for advisors to explain the benefits of options trading to their clients.

“Most advisors, especially the bigger ones, know options, but are looking to make it simpler” for their clients, Sood says. “Advisors already like what options deliver, but they don’t want to get into the complexity. We do a lot of the hard work around the implementation of options, which frees them up to spend more time growing their practice and managing their client relationships.”

Vest’s interface allows advisors to choose how much risk they want to take in a portfolio—how much downside protection they want to buy and whether they want to offer some of their potential upside to cover the cost of the options contract. The platform performs all of the calculations involved in purchasing the strategies behind the scenes.

Joel Bruckenstein, publisher of Technology Tools for Today, says that while Vest’s philosophy and functionality impress him, he’s skeptical about bringing options trading to a wider audience.

“These are sophisticated strategies; anyone using them should be a sophisticated investor,” Bruckenstein says. “If they’re a sophisticated investor, they already understand how to do simple hedges. They do their own research first, and there are better, more sophisticated tools for those types of investors to use for options trading.”

Vest’s target market is the RIA channel, Sood says, but the platform is also open to individual investors.

For the latter, the platform can be used to hedge investments in one stock or ETF at a time. Currently, clients can access strategies for between 600 and 700 individual investments on Vest. The minimum trade size is 100 shares.

Investors might balk at Vest’s fees. Though there are no commissions on trades, the company charges a 0.5% annualized fee for assets invested through its platform.

“To me, that seems a little high,” Bruckenstein says. “If you’re an affluent investor, for whom these strategies are appropriate, for somewhat more you can get a comprehensive wealth management firm that will do this for you, plus give you a financial plan, plus do tax planning, estate planning, risk management and quite a few other things. Isn’t that preferable?”

But Sood says the time might be right for a platform like Vest because diversification has become less effective as a risk management strategy as investment products like commodities, stocks and bonds become more strongly correlated.

“In times like these, when you need diversification most, it doesn’t work because things go into lockstep,” Sood says. “Options aren’t an uncorrelated strategy; they act as insurance for your investments.”

And he says options strategies fit better with younger, conservative or more passive investors than hedge funds or other managed strategies.

“We actually think of ourselves as more passive than using stop-loss or stop-limit orders,” Sood says. “If you put a stop-loss order on an investment, you would get out of the market entirely when it executes and then you’re faced with the dilemma of when you want to get back in. You end up trying to time the market anyway.”

Vest structures a protective strategy using options to match an investor’s personal goals and risk tolerance.

The platform offers three pre-packaged strategies for advisors to build protection for an existing portfolio or a new one. Alternatively, advisors can request that Vest customize a hedging strategy for a portfolio, or create their own.

“Even if an advisor doesn’t want Vest, we think that options have significant benefits for investors,” Sood says. “For example, if you can combine the benefits of downside protection and use options to generate yield, you can use equity instruments like fixed-income instruments. I would encourage every advisor to learn about options and to offer them to their clients.”

In the future, Vest will partner with an index provider to offer unit investment trusts, mutual funds and ETFs, eventually evolving into a full-service asset management firm, Sood says.