Traders at Investment Banks?

From Maverick:

"I like to think of quants as someone who makes 100% of their decisions from statistical analysis of some sort. In other words, they never deviate from the data and let their own ideas or opinions influence their decision."

If we are to use your definition of a "quant" from above, then I am at a total loss for anyone on this board showing disdain for equity-derivative guys at Susquehanna.

As I said before, LTCM may have been "model-driven" and in your view 100% quant, but the disdain and outright jealousy of investment bank derivative traders by people on this board escapes me . . .

As I recall, this thread began with a question regarding Sandler O'Neill and Susquehanna International Group.
 
I was trading my own account as a "local" in New York on the NYFE trading the stock-index futures on the NYA.

While I would agree that there were locals such as myself and others that had some very good days and a GREAT MONTH in October of '87, I would also argue that no one had the capital to sell S&P Puts near the lows with an expectation that volatility would come in.

Your comparison is like apples and oranges.
They are both fruit, but not very similar at all.

:)
 
Quote from waggie945:

Why do these supposedly great firms still believe that academics make a great trader?

Quite frankly, I am at a loss as to why there are people on this thread like Mecro, Maverick, and Canuck who have such an "ignorant" disdain for traders that have "quant" backgrounds.

Do you guys just think that the traders at the equity derivatives desk of an investment bank simply wake-up the morning of options expiration, let alone "triple-witch" and shoot from the hip?

Do you really think that these desks that are in the business of "facilitating" trade ( that means taking the other side of an order ) with customers are carrying positions that are anything but COMPLEX???

Wake-up.
More...


Can you say Long Term Capital?

The ultimate example of academics vs actual trading knack and experience.

I never said they are bad traders, I'm just still amazed that big house still equate academics to good trading, particularly quants. It's also interesting to see how ALL of these houses consider the markets a super complex entity that can only be comprehended by ones with book smart brains and Ivy League backgrounds. These are the same people that consider those who trade for themselves nothing but gamblers.

I know all about their option positioning models and many of them are very interesting and clever, but in real application over time, not all that great at all. My point is that their view is that only quants and academics will set the base for a good trader and that is absolute BS and has been proven so for decades. Quants or no quants, most option strategies take barely a HS education to execute and plan. I know people who are horrible at math and they can grab the concept well enough to make money.

Oh and I have a very good math/calc grasp. I never even had to take calc in college since I placed out back in HS. It definitely helps, especially with options, but it is nowhere near the key factor.
 
Quote from waggie945:

From Maverick:

"I like to think of quants as someone who makes 100% of their decisions from statistical analysis of some sort. In other words, they never deviate from the data and let their own ideas or opinions influence their decision."

If we are to use your definition of a "quant" from above, then I am at a total loss for anyone on this board showing disdain for equity-derivative guys at Susquehanna.

As I said before, LTCM may have been "model-driven" and in your view 100% quant, but the disdain and outright jealousy of investment bank derivative traders by people on this board escapes me . . .

As I recall, this thread began with a question regarding Sandler O'Neill and Susquehanna International Group.
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No there isn't any jealousy because I do not want to be with Susquehanna at all. I have an interest in what they do but I would not like to work there.

What I do think is sad is the whole academic/quant view these guys take in their hiring. I'm sorry, but in today's computer age, these strategies can be taught very very very quick to any bright prospect who really has the interest and drive to learn and succeed to be a trader, regardless of his/her academic background.

Every top trader says that academics do not make a good trader. So if these Susq guys are so good, why are they putting such an overwhelming weight on academics?

P.S. Once again I'm not passing judgement on whether they are good or not, I honestly do not even know.
 
Wags,

In my view a quant background/understanding is a valuable skill in trading complex fixed income derivatives. I'm not talking about options but rather structuring corporate pricing against hedging with treasuries'. These spreads may have bizarre multi variable driven implications.

It's only been ten years since I sat on the desk of a primary dealer on Wall Street, and I've never even heard of half the shit that's now traded. The notion of a guy from Brooklyn going from the mailroom to the trading floor of Lehman or Solomon is now so quaint and antiquated.

However I agree with Maverick that anyone can learn options pricing, and to take the "fruit" analogy a step further, plenty of uneducated OEX MM's were pummeling vol. the week of the crash. It doesn't take a quant to figure out when someone is stuck and then turn the knife.
 
Quote from waggie945:

I was trading my own account as a "local" in New York on the NYFE trading the stock-index futures on the NYA.

While I would agree that there were locals such as myself and others that had some very good days and a GREAT MONTH in October of '87, I would also argue that no one had the capital to sell S&P Puts near the lows with an expectation that volatility would come in.

Your comparison is like apples and oranges.
They are both fruit, but not very similar at all.

:)
More...

This is false. Do you want a list of how many locals at the CBOE made millions the day of the 87 crash? Please.
 
Oh please!

Don't try and even begin to tell me that locals on the CBOE had more capital and staying power than the equity derivative desks of a Deutsche Bank, Goldman Sachs, or a Morgan Stanley.

Since you seem to have a hard time understanding "volatility" trades, they usually last for more than ONE DAY.

Apples and Oranges?
Duh. . .

Not even close!

:p
 
From Mecro:

"Every top trader says that academics do not make a good trader. So if these Susq guys are so good, why are they putting such an overwhelming weight on academics?

Mecro, first off LTCM was a "model-driven" firm based upon pre-conceived notions regarding "convergence trading". The only problem with convergence trading is that you don't have a time scale. You say that eventually things will come back together, yet, when is eventually???

Thus, the "model" produced the derivative trades and strategies, not the quants because they had no say in the FINAL decision to execute a trade. As a result, you cannot even begin to compare Susquehanna to an LTCM.

In contrast, a Susquehanna or any derivatives desk of an Investment Bank is primarily involved in risk management. The betas, vegas, deltas, thetas, and rhos are simply tools to help the traders understand the amount of risk they are taking on. And in the end, it is the TRADER ( and his quant-background ) that pulls the trigger and not some quantitative model simply spitting out buy/sell signals.

Again, if anyone thinks that traders on an equity-derivatives desk come into the week of Triple-Witch shooting from their hip, I would suggest that you are sadly mistaken.

There are hundreds of trades on the books from facilitating trade with customers in the BKX, BTK, SOX, XOI, OSX, not too mention all sorts of volatility plays involving futures and futures options, index-arbitrage, etc. that need to be unwound via a mathematical premise. That premise is a thorough understanding of the markets based on volatility.

No one says that you have to be an "academic" or have an Ivy League degree. Those degrees are simply merit badges and are somewhat helpful in identifying someone that will undoubtedly have a much easier time understanding option pricing and volatility than the average joe.

A firm like Susquehanna simply takes people with a good understanding of mathematics and statistics and shows them how to use those tools to "measure risk" in the financial markets and profit from the use of those "quantitative" tools.

In the end, the trader of an equity-derivatives desk of a Wall Street Investment Bank pulls the "trigger" with the use and understanding of those "tools". Not some "quant-driven" model.

There's a difference, and many here fail to understand that DISTINCTION.

:)
 
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