I'm a professional options market maker AMA

I'm a professional options market maker AMA

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how much do you make?

how do i get your job?

Explain how I can use volume to predict price movements.

Mid 6 figures (salary+bonus). I have 4 years experience at this point.

Most market making firms scout for quantitatively apt people, so a degree in math, physics, engineering, computer science, or economics is good. Interestingly a business degree is not all that relevant. Interviews are again completely quantitatively focused in most places as it is easier to teach a mathematically competent person finance than a financially competent person mathematics. Probability, stats, and mental math are important.

You cant in any meaningful way, if the volume has already happened the price impact will have already happened.

when i google market making firm, i get results for prop trading. are they the same thing?

do you trade options using the firm's money? or do you make markets for clients?

What's your biggest single loss

The definition of a prop trading firm is a firm which utilizes its own money as opposed to outside money. Most market making firms happen to be prop trading firms, however there are hedge funds that engage in market making activities and of course banks (broker dealers) that have market making arms.

I post electronic quotes and provide quotes in the broker markets (which function over voice and chat) as well as take on proprietary risk.

Depends on what you mean. I accumulate very many positions that tend to be correlated with one another and manage my book so my overall risk isnt particularly bad. My worst one day loss for my entire book was a little less than a million dollars (this was on a particularly unusual event.)

What was your biggest one day gain?

OP, can you hire me?

I'm a unemployed guy, can do anything for you, living on a thirld world country, I have many things to pay and a dog to feed.

Please, hire me.

So is your job just options trading? What kind of math do you use?

About 2 million. I've seen much more asymmetric wins/losses with other options traders though just due to the convex nature of option payouts.

Nope

Depends on what you mean by "just". I do research/studies so I can better calculate fair values for options/optimal times to trade against other quotes, and some light programming.

Most math is fairly simple. Just first year calculus and probability. However, I do have a background in Stochastic Calculus and Monte Carlo simulation and do find those helpful for some intuition/implementation of tools

So spill it, what equity should we know about that you think is ready to explode or should be shorted?

Whoops, sent that to the wrong person like a tard.
That was meant to go to you.

What equity are you long on most or think should be shorted?

Not what I do. I dont care much about directional moves at all since I typically hedge my delta (or at least am indifferent to it, if I think the underlying is efficient enough.) In doing so I am effectively trading the volatilities of various underlyings.

Also a trader that gives you advice on what to trade is either full of shit or pumping his position, buyer beware bruh

What trading strategies do you mostly use?

How old are you, and how did you get into this job?

where are you looking to short?

what sectors are you looking for value?

what's your general consensus on the state of risk assets and fixed income?

I come out of PE as a principal investor and have started taking positions on public securities. I am shorting the Swiss Franc, AMZN, and USD, and am long a couple cos that have invested heavily in their PPE vs financial engineering and therefore are trading at a lower multiple but will create more long-term value.

I relate volatilities of less liquid securities to volaitilies of more liquid ones and price options of the former based on ones on the latter/mathematical models. Then additionally there is more traditional market making of fade-and-trade (basically the idea is that if you are able to buy something, you should reduce your fair value, and if you are able to sell something, you should increase your fair value. The result is that you should be scalping.)

Mid 20s

As for how I got into this job, I had always been good at math and discovered investing on high school. When I discovered quantitative finance existed, I decided to focus in that in school, and slowly accumulated experience through various internships.

Like mentioned before, not what I do.

Nice, last one from me: Do you guys have free reign to make up your own strategies? Or are you guided on how to trade/what to do?

option mm,,so your are making bidask spread, implied volatility and time decay?

Well, I can somewhat tackle "what's your general consensus on the state of risk assets and fixed income?"

Flight to safeties have now become concentrated in the back end of the UST curve and the 30yrs move proportionally more than the 10yrs than they used to

Yes, a lot of my job is making my own strategies. We take things pretty seriously so we prove efficacy through rigorous back testing, appropriate statistical tests of significance, and making sure the strategies make sense on a first principles level. Often people will decide to trade entirely new products and they are given full blessing as long as it makes sense monetarily.

I dont always scalp just bid ask spread. If I think fair value is .98 and bid ask is 1.20/1.22 I rather just be doing the 1.22 sales.

The other two terms are just option buzzwords and dont make sense as a question. I primarily think about vols, yes.

Best book about option trading or options in general?

Well Natenberg is a classic and easy to find on the web (literally search Natemberg pdf, first link on Google)

Another good one is Euan Sinclair's Volatility. Also obtainable by searching euan sinclair volatility trading pdf

How many monitors do you have in front of you at work? And what OS does the computer run?

Sounds like a great job, i'd be interested in doing this as well but i'm a brainlet at math.

Why do you make a fairly small amount of money from this?

You would think that the alpha would be captured by a few larger participants who would make fuck loads, rather than plenty of people like you making mid 6 figures (see Renaissance tech for example).

Is this market not efficient yet>? Does your firm not have enough capital? Is there small volume in these instruments?

is it kind of job they're asking 3-5 years of experience? in my company there are vacancies for data analysts and etc, I'm interested but want to have better insight of how much effort is needed to get to these heights, and since stuff you're saying here is very reasonable I would ask your opinion in regards to amount of stuff to study in math+CS+finance stack

Im sorry but that job literately sounds terrible. To each is own I guess.

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