Please help me, option market making risk return, thanks

76132 said:
So hedge funds are the way to go? My career counselor has mentioned the same thing about prop shops but then I was thinking trading was dying 5 years ago and it's still here.

OMM shops like IMC, Akuna, Optiver - probably won't be around in 10 years?
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What year are you in B-school, did you work in banking before school, and are you going to a top 10ish school? If the answer to the second two questions is no, then it's going to be a very tough road to a buy side job. But , if you're first year (unlikely since it sounds like you're already there?) an internship is slightly easier to get and that gets you an in to a job next year. I know of folks who have done an internship after graduation as well, so might be an option.
 
destriero said:
Why would you want to be an automatic? Get a analyst job with a small fund.
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I just want to work with better technology to complement broker driven flow. I know I can do this, just looking for a shot. Even if the industry last 5 more years I'll take it. Additionally would like to manage sheets differently.
 
Sig said:
What year are you in B-school, did you work in banking before school, and are you going to a top 10ish school? If the answer to the second two questions is no, then it's going to be a very tough road to a buy side job. But , if you're first year (unlikely since it sounds like you're already there?) an internship is slightly easier to get and that gets you an in to a job next year. I know of folks who have done an internship after graduation as well, so might be an option.
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My school has a pretty good pipeline into iBanking firms, you are pretty much gauranteed plenty of face time with current bankers and mixers. I just don't fit the culture so changed my mind. And I find quant finance more interesting than accounting and corporate finance.

I'm going to school part time and even part time gets opportunities. Ft from what I hear is basically gauranteed if you join certain clubs. Not necessarily with top firms but from what I hear around 90%
 
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As others said...forget about it dude. It is as if you were asking for a job as NFL quarterback. Analyst position seems a good place to get your foot in the door and to gain experience.

Starting your own shop...gooooood luck^^
 
76132 said:
My school has a pretty good pipeline into iBanking firms, you are pretty much gauranteed plenty of face time with current bankers and mixers. I just don't fit the culture so changed my mind. And I find quant finance more interesting than accounting and corporate finance.

I'm going to school part time and even part time gets opportunities. Ft from what I hear is basically gauranteed if you join certain clubs. Not necessarily with top firms but from what I hear around 90%
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I think it's a whole next level to go direct to buy side if you don't at least have an internship under you belt. The whole field is big into "paying your dues" with shitty 80 hour a week jobs before you can get into the good stuff, stupid as that is.
 
ETJ said:
Depends on your job - a multi stock OMM with good two sided paper will be afforded a ton of leverage at OCC if you are well hedged. So let's say your cash on cash is 5% - with leverage that can become 50% to 100% depending on the paper, how many exchanges you stream too. That's gross before all costs and one you've built the technology you want as much feedstock as you can get. Keep in mind you don't "trade" - you make markets and depending on where you stream too the technology will adjust your quotes and size. So a lot of it is autopiloted - especially in the deeps and the cheaps. Citadel just hired a crew from Point 72 who were all single stock folks.
Cost of money is critical because of the leverage. Just for a benchmark think of simple reversal/conversion return and leverage it up.
What are the two biggest lies of OMMs? I'm hedged and I'm perfectly hedged.
Most days 3 MM shops are about half the volume - gives you a sense of the competition and tech costs.
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Thanks for the response. So what's the best way to determine that figure? I can provide an aggregate monthly cost figure such as software, technology support, salary/benefits, that the desk uses, etc... - basically overhead costs - basically the amount we need to cover before we start getting into profit split territory. But as for how much firm capital I need, for the market making business, I do not know.

I'd also assume it could be tough to determine since we trade on three exchanges (don't stream unfortunately), and there was recently some drama with our clearing firm, Basel III, and certain exchanges forcing our capital requirements to be huge, and thus we have to stop trading one exchange. But maybe other firms don't have these issues.

I would love to be able to stream as a complement to OTC flow. But first, if I can just get some technology that can better act on paper orders on the screen, I'd be happy - as that's where the most improvement can be made right now IMO.

I should be able to manage all broker flow, most electronic paper orders, and all clerical duties by myself at least within 3-5 expirations. If electronic quoting, I would probably need another trader's help. And if managing further out, I would need additional help as well. And eventually some quant analysis would be great. I am just hoping to get a shot.

There's so many ways I can think of to improve and ideas, but I am stuck. I'm sure top shops have a way to read broker IMs and based on language automatically adjust quotes on the screen, etc... If not, I can try to implement something like that.
 
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Sig said:
I think it's a whole next level to go direct to buy side if you don't at least have an internship under you belt. The whole field is big into "paying your dues" with shitty 80 hour a week jobs before you can get into the good stuff, stupid as that is.
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I'm 100% committed to trading and if that doesn't work, maybe I'll look into some quantitative finance related role. I don't mind working 80+ hour weeks for the right shop. It's not the hours that's my problem. It's how to pitch myself since my biggest weakness is networking and interviewing, a couple skills that I'd pretty much given up on developing. I plan to try something new i.e. getting myself in front of people and pitching through cold calling/emailing. Career wise I am stuck between "experienced" and "junior". I am looking to pitch myself as experienced and the only hang up is the hard numbers, which I don't have access too unfortunately. I guess I could always ask, but it would be a strange question to ask out of the blue.

I would like to run a market making desk first before I decide to go buy side as I don't have much research skills under my belt. And my school is not located in NY unfortunately.
 
ETJ said:
Depends on your job - a multi stock OMM with good two sided paper will be afforded a ton of leverage at OCC if you are well hedged. So let's say your cash on cash is 5% - with leverage that can become 50% to 100% depending on the paper, how many exchanges you stream too. That's gross before all costs and one you've built the technology you want as much feedstock as you can get. Keep in mind you don't "trade" - you make markets and depending on where you stream too the technology will adjust your quotes and size. So a lot of it is autopiloted - especially in the deeps and the cheaps. Citadel just hired a crew from Point 72 who were all single stock folks.
Cost of money is critical because of the leverage. Just for a benchmark think of simple reversal/conversion return and leverage it up.
What are the two biggest lies of OMMs? I'm hedged and I'm perfectly hedged.
Most days 3 MM shops are about half the volume - gives you a sense of the competition and tech costs.
More...


There is zero discretion at shops like Optiver. I don't know what you're talking about.
 
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