I wouldn't click those links.
most of those links are garbages unless someone can
prove it otherwise.
So far, no one in this thread can confirm this Option MM is a
successful MM
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Option MM, Ask Me Anything
- Thread starter Pekelo
- Start date
I wouldn't click those links.
most of those links are garbages unless someone can
prove it otherwise.
So far, no one in this thread can confirm this Option MM is a
successful MM
The only people during my time as a MM and buy side trader who used technical analysis were the posers. More often than not, they were some form of sales trader who were using technicals as a way to start a conversation or to participate in one.
Yes you are. I have been posting reddit links for 4-5 years, it is not really that hard to recognize them.
But because I am a good teacher, in the future I will make it clear, for even the short bus kids.
For the special people in this thread, I will post some of the more interesting Q/As...
Q:What noticeable differences did you notice in your day to day work after the influx of retail traders post pandemic, specifically with the rise in popularity of platforms like RH?
A:The 0-5 DTE money has gone up massively. At risk of incurring the wrath of WSB, most of the short term option buyers (and they are mostly buyers) have no regard for the spread and pay through willy nilly, so market edge has gone up a lot.
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Q:I have a bunch of questions, so feel free to answer only those you feel like answering.
1) How did you hedge your option positions? Other options or delta/gamma hedging or a combination of both?
2) At what time of the day did you start trading? Right at the open, or did you wait until volatility has subdued slightly, maybe like 15 min after open? Or even later?
3) Where did you get your fair ivol skews/surfaces from? Did you have a data provider or did you calculate your own? If so, which method did you use (e.g. Heston + Residuals, Splines, ...)?
4) How many options did you trade concurrently, and where did you get your live options data from?
5) Did you trade way-OTM options (e.g. strike 1 puts or calls when spot is at something like 100+) as well? Or did you only concentrate on a certain moneyness range?
6) Did you have a database of historical ivols and if so, were they at all useful for trading options?
A:
Q:What noticeable differences did you notice in your day to day work after the influx of retail traders post pandemic, specifically with the rise in popularity of platforms like RH?
A:The 0-5 DTE money has gone up massively. At risk of incurring the wrath of WSB, most of the short term option buyers (and they are mostly buyers) have no regard for the spread and pay through willy nilly, so market edge has gone up a lot.
---------------------------------
Q:I have a bunch of questions, so feel free to answer only those you feel like answering.
1) How did you hedge your option positions? Other options or delta/gamma hedging or a combination of both?
2) At what time of the day did you start trading? Right at the open, or did you wait until volatility has subdued slightly, maybe like 15 min after open? Or even later?
3) Where did you get your fair ivol skews/surfaces from? Did you have a data provider or did you calculate your own? If so, which method did you use (e.g. Heston + Residuals, Splines, ...)?
4) How many options did you trade concurrently, and where did you get your live options data from?
5) Did you trade way-OTM options (e.g. strike 1 puts or calls when spot is at something like 100+) as well? Or did you only concentrate on a certain moneyness range?
6) Did you have a database of historical ivols and if so, were they at all useful for trading options?
A:
- Options have different kinds of risk right? Assuming a fairly liquid underlying, I usually hedge the delta exposure via the underlying. For the other risks (vega, gamma.etc), it has to be through other options.
- I mainly did index and STIR options which are 23 hour markets. My desk had 4 ppl on it so we basically traded EU and US sessions splitting the hours.
- We generate our own. Method is quite proprietary so...
- Depends on the market. As market makers in fairly active markets (think ES, UST) we can have quotes in tens of thousands of instruments at once. Live options data is from the exchange.
- Yeah sure, there are limits on how many instruments you can trade before running into nasty constraints like data capacity on the link to the exchange, but usually we trade everything.
- Yes, most definitely.
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Q:Which degree in university do I need for applying to be a option market maker ? What is the process ? Which companies usually hire for this role ?
A: A quantitative degree helps massively. I did electrical engineering, and a lot of my colleagues come from STEM backgrounds. Surprisingly not many finance majors. You apply during your university's career fair if the firm comes calling, or apply through the website. Each firm differs in their process though so not much aside from very general advice here. List of firms include susq, jane street, optiver, IMC.etc
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Q:
How much is automated vs point and click trading?
Are you predicting/modeling future vol, or just hitting "fit to curve" and going from there?
A:
It's pretty automated. While it varies market by market, I'd say 90% of the trades are automated and 10% manual.
It also depends on the market. For big products like ES where we can afford to have a trader stare at the screen all day, it's definitely the former as the additional manual pricing adds a lot of value. But we also trade X hundred smaller stocks each one of which may contribute a few hundred to a thousand bucks a day, and there automation is the main approach.
--------------------------
Q:
A: A quantitative degree helps massively. I did electrical engineering, and a lot of my colleagues come from STEM backgrounds. Surprisingly not many finance majors. You apply during your university's career fair if the firm comes calling, or apply through the website. Each firm differs in their process though so not much aside from very general advice here. List of firms include susq, jane street, optiver, IMC.etc
----------------------------------------
Q:
How much is automated vs point and click trading?
Are you predicting/modeling future vol, or just hitting "fit to curve" and going from there?
A:
It's pretty automated. While it varies market by market, I'd say 90% of the trades are automated and 10% manual.
It also depends on the market. For big products like ES where we can afford to have a trader stare at the screen all day, it's definitely the former as the additional manual pricing adds a lot of value. But we also trade X hundred smaller stocks each one of which may contribute a few hundred to a thousand bucks a day, and there automation is the main approach.
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Q:
- Illiquid Options. Could you speak to how the market marker you worked for would assess the price-point to accept an order on an illiquid option? Does this calculus differ for incoming offers to sell versus incoming offers to buy?
- Pricing After Jumps or Earnings. What methods were used to ensure that the options sold or purchased after a jump or earnings were competitively priced at the time of market open? Was it based on the orders that flowed through premarket or something else?
- Price-Time Priority. When there are a multiple orders resting on the order book--say there are 16 contracts for sale at the ask, of which 15 are by the market maker and 1 (the earliest order) by a retail trader--are marketable orders from a PFOF brokerage automatically routed based on price-time priority or does the market maker get priority for said order flow?
- We would have a theoretical value in mind for this option, given we know all variables and can guess-timate what the right implied vol level to be. We'll then just have a wide bid ask spread to accommodate the uncertainty in implied vol level. The greater the uncertainty, the wider the spread. Usually not, but it depends on the absolute vol level. I would need very little edge to buy vol 1, for example.
- À lot of guesswork and wide spreads
- This is quite a technical question. I don't know the answer to this. My GUESS would be it depends on the exchange and how the MM program works on that particular exchange, but logically it should be by price time.
and you would be most qualified to know short bus kids.
Sure because I am the driver. Now sit down and droll peacefully. Let's get back to options...
Grade F.
not much use. Rambling narrative. Better to answer questions posed so drive your bus over to this one: Where is your performance data? No record = no interest.
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