Market Making Interview Question

A market on the number of office people of 2@100 or 30@120 is ridiculously wide... and you will probably be frowned upon.
But indeed as @winnertakesall says, you start by making a guess of the price/number.

Your confidence level is indicated by the spread you give... So if you are unsure, go wider...

If you think there are 60 people working there... give 50 bid @ 80... ask slightly higher because potential upside risk is bigger...

Tip: If they think it's too wide... and you already have a decent market, ask them for an improvement.. and you improve that again or trade on it if it's interesting. That's how it works in MM.

Also, liquidity means tighter markets... because a product is traded more often... so if they ask you a market in something crazy, go a bit wider.... but not ridiculous and uninteresting, you're a market maker and want to trade.. not just sit on your butt the whole time.
If it's an easy one, like a market in a cup of starbucks coffee, you can go tight... like 2 @2.40... or aim high and try to buy it so the interviewer has to go get you one... always a laugh...
 
We used to do this all the time, especially when it's quiet.

Markets in 20 Big Macs and lift a trainees offer... Markets in which team wins World Cup... even outliers... It's a fun game, but also trains the brain to really think about it and try to trade out of it with someone else on the floor. Do some spreads... etc.
 
Finally a thread that exposes who's worked on a trading floor.

Had a guy who used to put all his loose change in his desk draw. Every month or so we'd make a market on it.
 
JamesTrader said:
In a sense it would be wise to ask the interviewer wether or not he or she is someone who is not price senstive?
More...

Don't... no... just don't... you're asking a market maker in an interview is he's non-sensitive to the price you give? Everyone is price-sensitive... everyone has a number at which he would buy and a number to sell at. And if someone is a buyer, that doesn't mean he's just going to buy it for whatever price you give...
 
JackRab said:
Don't... no... just don't... you're asking a market maker in an interview is he's non-sensitive to the price you give? Everyone is price-sensitive... everyone has a number at which he would buy and a number to sell at. And if someone is a buyer, that doesn't mean he's just going to buy it for whatever price you give...
More...

not true. Many participants are not particularly sensitive to price. Say you own a refinery and it goes down for a 2 week fix. What is your priority? to hedge yourself or get a good price.
 
Other price insensitive participants are traders who have some other reasons for trading besides making a profit, they are termed utilitarian.

Investors & Borrwers, Asset Exchangers, Hedgers, Tax Avoiders, Cross Subsidizers & Gamblers/New Traders.

If I were in the interview I would emphasise that you are an extremely competitive analytical person whilst not being a douche about it. Ideally you want to be better than the next person for the sake of it, not because it pays.
 
I agree.
Basically come across as being smart.
And willing to being willing to be financially anally raped by them, for experience.
Throw in some team sport
And examples of crushing the opposition, because u could.
 
So @propwarrior, you're saying that those people will take whatever price? Even in a situation where there's very low liquidity... they will trade market? So, the refinery will even hedge oil if the market is 15@75 and hit the bid anyway while normal it sits at 45?

The only people that are non-sensitive are the ones that are forced, in margin call or forced buy-back.

I know what you mean, that some need to buy and trade through offers to get filled.. but there most definitely will be a limit, unless forced.
 
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