Robert Morse
Sponsor
This is backwards. Customer go in front of firms.
Options market making through Interactive Brokers
- Thread starter Aquarians
- Start date
This is backwards. Customer go in front of firms.
Robert Morse
Sponsor
Happy to have a conversation to explain. You can't compete this way as customer.
There's no way you can compete... you won't have the speed you need with IB. You might be able to do something in the less liquid series, but you should ask yourself whether you really want to take the risk, because those usually are more volatile and you can't hedge properly...
To be clear, just putting in 1 or 2 orders in front of the market isn't really market making....
To be clear, just putting in 1 or 2 orders in front of the market isn't really market making....
There seems to be some confusion here. As a MM you are not customer or firm. The only priority you will have will be to take the other side of the customer order. You will only be entitled to the other side if you are:
Best Market and on some exchanges even best market will have a primary or DPM MM and they will have first crack at some percentage of the order. You also won't be alone - customer crosses do occur - they are not a big percentage of the volume. There are many other MMs and their ability to participate in the customer order(depending on venue)will depend on either size you are quoting or the time your quote was entered. Priority isn't the issue - the MM is commonly the other side - in fact almost always.
How quickly your technology refreshes the quote. Remember that in the option world orders will ship to another venue if they become best market.
Most of the visible size is on maker taker venues - everybody in the world wants to get paid for providing liquidity. As a MM you are the liquidity provider.
The Citadels and Sigs will run you over - absolutely true and a bad or stale quote can cost you a ton. You are also paying a lot for technology and exchange expenses to never get to an order.
Why are there so few market makers and why are they so concentrated - technology is going to be EXPENSIVE !
Try one of the smaller exchanges - not a lot of orderflow, but not a ton of competition. Still a concern with linkage of exchanges. Look at Box and MIAX.
How expensive is it to make a mistake ? Look at what happened to Knight.
I just want to pick my spots and trade when it's attractive - not as a MM you'll need to be available to make two sided markets.
I'll pick a slow product and cut my teeth on that - as I said earlier forget about SPY,BAC and APPL - that market is well served by the existing community.
Best Market and on some exchanges even best market will have a primary or DPM MM and they will have first crack at some percentage of the order. You also won't be alone - customer crosses do occur - they are not a big percentage of the volume. There are many other MMs and their ability to participate in the customer order(depending on venue)will depend on either size you are quoting or the time your quote was entered. Priority isn't the issue - the MM is commonly the other side - in fact almost always.
How quickly your technology refreshes the quote. Remember that in the option world orders will ship to another venue if they become best market.
Most of the visible size is on maker taker venues - everybody in the world wants to get paid for providing liquidity. As a MM you are the liquidity provider.
The Citadels and Sigs will run you over - absolutely true and a bad or stale quote can cost you a ton. You are also paying a lot for technology and exchange expenses to never get to an order.
Why are there so few market makers and why are they so concentrated - technology is going to be EXPENSIVE !
Try one of the smaller exchanges - not a lot of orderflow, but not a ton of competition. Still a concern with linkage of exchanges. Look at Box and MIAX.
How expensive is it to make a mistake ? Look at what happened to Knight.
I just want to pick my spots and trade when it's attractive - not as a MM you'll need to be available to make two sided markets.
I'll pick a slow product and cut my teeth on that - as I said earlier forget about SPY,BAC and APPL - that market is well served by the existing community.
The problem with a slow product is that those spreads will be too tight to get in there... and then you still need a speedy system, since quoting tight spreads means 1 tick or 1 cent move could already cost you.
When I started out as a market maker in Europe, options on Euronext where quoted in 5 cents increments (now 1 or 0.1 cent). You could only trade 5 cent, 10 cents, 15, 20 etc. So what we used to do, as a market maker!!!, was put in GTC orders stacking the book in low delta options, so we would be 1st since regular quotes where deleted every day.
That meant keeping a close eye on them during opening rotation and deleting them in time when they weren't good anymore. Made very good money that way... but those days are gone with 1 cent spreads in quotes...
Come to Chicago - winters are lovely here if you are a polarbear. Plus they have an "in office barista"
Title: Derivatives Trader
Location: Chicago
Start Date Options: February 2018 and August 2018
Who we are:
Optiver’s story began over 30 years ago, when we started business as a single trader on the floor of Amsterdam’s options exchange. Today, we are at the forefront of trading and technology as a leading global electronic market maker, focused on pricing, execution and risk management. With over 1,000 employees globally and over 200 in our Chicago office, our mission to improve the market unites us.
We work in the fast-paced, high-tech financial markets. Our Derivatives Traders require sharp analytical and quantitative skills to complement their quick decision-making abilities. Using our proprietary and automated trading systems, our traders identify and capitalize on market opportunities and partner with our Development team to build out long term solutions that impact our firm’s profitability.
At Optiver, we believe our people are our greatest asset and invest in their continued development. As a new Derivatives Trader, we provide you with a comprehensive theoretical and practical training program, so prior experience in the financial markets is not required. Throughout this program, you will learn derivative theory, algorithmic trading practices, and the technical skills needed to improve Optiver’s current trading strategies and develop new ones. Additionally, you will be assigned a Trading Mentor who will guide you in your new career. Our mentors provide coaching and feedback, while helping you acclimate to life at Optiver.
What you’ll do:
• Make markets in equity, commodity, or fixed income derivatives
• Provide prices and liquidity to global electronic trading platforms
• Improve current electronic trading algorithms, as well as innovate and implement new ones
• Optimize and automate trading processes within a framework of sound risk management
• Manage the risks of a diversified portfolio of financial instruments
• Process the flow of information from multiple capital markets simultaneously
What you’ll need:
• Bachelor’s or Master’s degree in a quantitative or technical fields
• Internship experience in a related field or role
• Excellent quantitative and logical reasoning skills
• Ability to accomplish individual and group tasks
• Passion and eagerness to learn on a daily basis
• Experience with programming or scripting
• Legal authorization to work in the U.S. is required. We will not sponsor individuals for employment authorization for this job opening.
What you’ll get:
25 days paid vacation; paid commuting expenses up to the maximum allowable amount; attractive bonus structure; training opportunities; generous 401K company match; fully paid health insurance premiums; breakfast, lunch, snacks and beverages provided daily; weekly in-house chair massages; casual dress; game room; annual company trip; in office barista and more!
Title: Derivatives Trader
Location: Chicago
Start Date Options: February 2018 and August 2018
Who we are:
Optiver’s story began over 30 years ago, when we started business as a single trader on the floor of Amsterdam’s options exchange. Today, we are at the forefront of trading and technology as a leading global electronic market maker, focused on pricing, execution and risk management. With over 1,000 employees globally and over 200 in our Chicago office, our mission to improve the market unites us.
We work in the fast-paced, high-tech financial markets. Our Derivatives Traders require sharp analytical and quantitative skills to complement their quick decision-making abilities. Using our proprietary and automated trading systems, our traders identify and capitalize on market opportunities and partner with our Development team to build out long term solutions that impact our firm’s profitability.
At Optiver, we believe our people are our greatest asset and invest in their continued development. As a new Derivatives Trader, we provide you with a comprehensive theoretical and practical training program, so prior experience in the financial markets is not required. Throughout this program, you will learn derivative theory, algorithmic trading practices, and the technical skills needed to improve Optiver’s current trading strategies and develop new ones. Additionally, you will be assigned a Trading Mentor who will guide you in your new career. Our mentors provide coaching and feedback, while helping you acclimate to life at Optiver.
What you’ll do:
• Make markets in equity, commodity, or fixed income derivatives
• Provide prices and liquidity to global electronic trading platforms
• Improve current electronic trading algorithms, as well as innovate and implement new ones
• Optimize and automate trading processes within a framework of sound risk management
• Manage the risks of a diversified portfolio of financial instruments
• Process the flow of information from multiple capital markets simultaneously
What you’ll need:
• Bachelor’s or Master’s degree in a quantitative or technical fields
• Internship experience in a related field or role
• Excellent quantitative and logical reasoning skills
• Ability to accomplish individual and group tasks
• Passion and eagerness to learn on a daily basis
• Experience with programming or scripting
• Legal authorization to work in the U.S. is required. We will not sponsor individuals for employment authorization for this job opening.
What you’ll get:
25 days paid vacation; paid commuting expenses up to the maximum allowable amount; attractive bonus structure; training opportunities; generous 401K company match; fully paid health insurance premiums; breakfast, lunch, snacks and beverages provided daily; weekly in-house chair massages; casual dress; game room; annual company trip; in office barista and more!
you can't market make effectively on a single exchange. NBBO prevents you from trading when the trade is good and you need access to all major liquidity pools. the main advantage of MM is lower fees if you can transact the volume which I'm sure is mostly negated by IB's value added fees.
This only touches obliquely on the topic, but seems relevant, nevertheless.
Do market maker often "run over" each other? When the spread moves, does one market makers bid hit a slower MM's ask and fill, or is there some mechanism in place to prevent this?..I mean, they can't just keep pinging shares off each other and both take rebates...
And, do market makers try to maintain a certain target amount of shares? I.e. Use a penny spread if balanced, and a two penny spread favoring the move towards towards balance (outside the spread on the ask if under target, on the bid if above)?
As much as I watch them, I basically take for granted that they work that way, rather than why.
Do market maker often "run over" each other? When the spread moves, does one market makers bid hit a slower MM's ask and fill, or is there some mechanism in place to prevent this?..I mean, they can't just keep pinging shares off each other and both take rebates...
And, do market makers try to maintain a certain target amount of shares? I.e. Use a penny spread if balanced, and a two penny spread favoring the move towards towards balance (outside the spread on the ask if under target, on the bid if above)?
As much as I watch them, I basically take for granted that they work that way, rather than why.
They most definitely do. A good price is a good price... usually when there's a system failure and quotes freeze, a competitor market maker does update their quotes and eventually hits the others. But it will depend a bit on spread etc. Also, if there are stale/frozen quotes... they will usually appear when the underlying moves in one direction... the risk for other market makers is then, if they hit all of the frozen quotes, they will have a significant delta position and likely can't get out of that so easily. Sometimes this happens and markets makers let it go, they might get called by the exchange and forfeit the trades. All market makers are competitors, but also colleagues... so in the end there's no point really to hurt others. At one point in time, you yourself might need a favor... and it's better to have some decency than to f%$k someone else over.
Yep. Usually you quote around your theoretical value, which is derived from your Implied Vol which is your main parameter to adjust pricing. But, if you have a large number of options in a specific strike, you can quote slightly towards the opposite side to maybe get lifted more quickly... downside is that that way you also price it lower, and therefore eventually on paper have a lower value... so bookvalue will start to be lower as well, or so it should.
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