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Gone are the days of the coupon clippers. Now, even small investors - equipped with their E*TRADE accounts - are trading their portfolios as if they had their own institutional desks.

Average daily trading on the New York Stock Exchange (NYSE) has soared from 18.6 million shares in 1975 to 503.5 million shares in 1997. As for Nasdaq, the growth has been even stronger - going from 5.5 million shares in 1975 to 607.9 million shares in 1997.

Even though making money in the markets has been a relatively no brainer during the past 15 years, it still helps to have a trading strategy. Unfortunately, it has been the major institutional investors that have had access to sophisticated computer trading systems.

But with the advent of the Internet and the proliferation of real-time data sources (BMI, DTN, Dial/Data, Signal, Telescan and TeleChart 2000), even individual investors can be power traders.

A small company, called Omega Research, has been a pioneer in empowering individual investors with powerful investment software.

In 1991, the company released its flagship product the TradeStation. This is geared for the serious investor, who wants to trade in stocks, futures and foreign currency. With the software, you can design your own trading strategies. This is done using a simple language called EasyLanguage. As the name implies, you use English-like statements to tell the software what types of strategies you have in mind. You can then test your strategies against historical data. Once you have your system, you can tell your software to alert you when certain buy and sell signals are triggered. In fact, you do not even have to be at your computer-because the software can notify you via alpha-numeric pager.

A smart thing Omega did with the TradeStation is to make its platform open and extensible. In other words, it is easy for third party companies to develop ad-on solutions (there are over 150 independent software developers creating unique trading systems and applications for the TradeStation). This means the product evolves over time and, thus, becomes much more valuable.

A year after the introduction of the TradeStation, Omega released SuperCharts. This is a technical analysis tool, which has two versions: real time or end-of-day data. The company tracks over 80 technical indicators and has 15 drawing tools to show market patterns. Again, you can set alerts when certain events are triggered.

In 1996, Omega released its OptionsStation product. With it, you can analyze stock, index and futures options. This product serves two goals. First, you can do position searches. This helps you find the best risk-reward profile of an options trading strategy. Next, you can do position analysis. That is, you can graphically view each position's profitability and risk profile.

So far, Omega has been growing its revenues and profits nicely. And, with a hot IPO market, Omega now wants to raise money in the public markets - to the toon of $25,948,000. Omega also has a group of strong underwriters: Robertson, Stephens & Co.; Lehman Bros.; and Hambrecht & Quist.

Let's take a close look at the financials.

Revenues: For the first six months of 1997, revenues increased by a hefty 80% ($8.1 million to $14.6 million). As for its net income, it went from $1.9 million to $3.2 million.

Most of Omega's revenues derive from telesales to individual investors (the biggest seller, by far, is still the TradeStation). Moreover, the company has generated a majority of its sales by selling its product on an installment basis (over a 12 month period). This has resulted in a large amount of accounts receivables.

Interestingly enough, as of the end of 1996, Omega had 9.5% of its sales from outside the US and Canada. The company wants to increase the percentage. Although, this is not easy. The main reason is that financial data in many foreign countries is not as plentiful as in the US and Canada.

Cost of Licensing Fees: This includes product media (eg, CD-ROMs), packaging and storage. These costs decreased from $881,000 to $856,000.

Compared to other types of industries, this is a relatively low amount. This is why the software industry can be a very profitable business-because, after the product is developed, the marginal cost of production is small.

Product Development: These expenses involve the salaries and depreciation of computer equipment to develop new products, enhancements to the existing product line, testing and the development of training manuals. These expenses increased by 124%, from $377,000 to $843,000 (as of the first six months of 1997).

Sales and Marketing: These include the salaries for customer support, marketing personnel, shipping costs and marketing programs (such as advertising, brochures, direct mail and seminars). These expenses increased by 90% from $2.6 million to $4.9 million (as of the first six months of 1997).

General and administrative: These expenses are for such functions as finance, information systems, human resources, rent and so on. These expenses increased by 160%, from $998,000 to $2.6 million (as of the first six months of 1997).

Because of its net income, Omega has been able to generate strong cash flow. In 1996, the company had $5.6 million. In the first six months of 1997, the cash flow was $2.7 million.

However, the company does face a variety of risks. Perhaps the biggest one is a major fall-off in trading volume. During the last 15 years, the US equities markets has not had a bear market. This would have a significant impact on revenues.

There is also fierce competition. Omega faces threats from such competitors as AIQ, Aspen Graphics, Equis Itnernation (Metastock), Market Arts, and TeleChart 2000. And don't forget the many Internet analytical tools-many of which are free.

But what is crucial for the success of Omega is penetrating the institutional market. These players have hoards of money. And Omega recognizes this. The company is now developing a 32-bit version (that is, which is available for Win95 and NT) that is networkable. This is crucial for institutional investors.

But Omega has already made moves into the institutional marketplace. In 1994, the company entered an agreement with Dow Jones Markets to sell the TradeStation to institutional investors. Then in 1997, Omega entered another agreement with Dow Jones Market to distribute SuperCharts Real-Time.

An interesting opportunity for Omega is the proliferation of online discount brokerages. These firms are trying to find a way to differentiate themselves other than by deep price reductions. One way of doing this is offering content and analytical tools. Omega should benefit from this.

The money from the IPO will be very beneficial for Omega. It can use its stock as currency to make acquisitions of other software products. Then Omega can feed these products into its growing installed base. So far, Omega has been smart in growing its products and markets. If it continues, its own stock price will be an excellent one to track on its TradeStation software.

Tom Taulli