Trading Interview Questions

garachen

garachen

I thought as a final post it would be fun to discuss some interview questions that I and others use when seeking to hire new traders.

I want to make clear that these questions are for people with NO EXPERIENCE usually right out of school and that the interview process for someone with experience would be quite different.

Also, I want to caution, I haven't been on the receiving side of a trading interview for quite some time so, while I use some questions that I have been asked in the past, my data points there are stale.

Final caveat, I'm not implying that you need to know all these topics to make money trading and there have been very few people who give good answers to all the questions - but if you are seeking a job out of school (one that pays a salary) you should know 80% of this.

1) Technical finance stuff (measure how well they payed attention in school)
a) What is a stock, what is a future, what are the differences
b) Describe the underlying of a bond future
c) Describe the underlying of a EuroDollar future (not Euro!!)
d) What are the major assumptions of Black-Scholes
e) What is the process for deriving Ito's Lemma
f) Given Ito's Lemma derive the Black-Scholes equation
g) What is the purpose of the Fokker-Planck equations
h) Given a basket of bonds what are ways to go about building a yield curve

2) Math (mostly linear algebra)
a) What is an eigenvalue/vector. Describe intuitively
b) What is a Martingale
c) What is Linear Programming
d) What is Principle Component Analysis
e) What is the Kalman Filter
--if you are a Math major--
f) Define 'compact'
g) What is a group, ring, field
h) What is the Cantor set
i) What problem did the Lebesgue Integral solve

3) Programming (basic - NOT for a programming position)
a) How many bytes in the basic data types
b) How would you represent market data in a database and why
c) What is reflection.
d) What challenges are inherent in parallel programming
e) Test writing of some basic (sorting) algorithms

4) Options
a) Define all the greeks
b) Long a call means _____ gamma. Long a put means ____ gamma
c) If a bank sells a call with a strike of 50 and the underlying rises to 60 how does the bank make money
d) Strike 50, underlying 50, 2 weeks to expiration. What is approximate delta?
e) strike 50, underlying 50, 1 day to expiration. What is approximate gamma?
f) put/call parity
g) long gamma = ____ theta

5) Personality and Trading aptitude questions
-- not relevant here --
 
no, you should know 100%

maybe not on day 1

but give me 30 days

when I was a kid I was like a sponge

if I didn't know it, I wanted to know it really bad

and I can think of a lot more questions

I don't think they teach that stuff in school

you have to find it out for yourself

nobody should ever be able to ask you a question you don't know the answer to, and if they do, tell them you will get back to them in a few days

man, that's all I did was read

if someone wrote it, I read it

and I just pestered the heck out of experienced traders, there was no end to the questions I asked

you got to want it really bad

but otherwise, I would make a really bad employee

anybody that hired me would have been sadly disappointed

big difference between a good employee and a good trader
 
Quote from garachen:

I thought as a final post it would be fun to discuss some interview questions that I and others use when seeking to hire new traders.

I want to make clear that these questions are for people with NO EXPERIENCE usually right out of school and that the interview process for someone with experience would be quite different.

Also, I want to caution, I haven't been on the receiving side of a trading interview for quite some time so, while I use some questions that I have been asked in the past, my data points there are stale.

Final caveat, I'm not implying that you need to know all these topics to make money trading and there have been very few people who give good answers to all the questions - but if you are seeking a job out of school (one that pays a salary) you should know 80% of this.

1) Technical finance stuff (measure how well they payed attention in school)
a) What is a stock, what is a future, what are the differences
b) Describe the underlying of a bond future
c) Describe the underlying of a EuroDollar future (not Euro!!)
d) What are the major assumptions of Black-Scholes
e) What is the process for deriving Ito's Lemma
f) Given Ito's Lemma derive the Black-Scholes equation
g) What is the purpose of the Fokker-Planck equations
h) Given a basket of bonds what are ways to go about building a yield curve

2) Math (mostly linear algebra)
a) What is an eigenvalue/vector. Describe intuitively
b) What is a Martingale
c) What is Linear Programming
d) What is Principle Component Analysis
e) What is the Kalman Filter
--if you are a Math major--
f) Define 'compact'
g) What is a group, ring, field
h) What is the Cantor set
i) What problem did the Lebesgue Integral solve

3) Programming (basic - NOT for a programming position)
a) How many bytes in the basic data types
b) How would you represent market data in a database and why
c) What is reflection.
d) What challenges are inherent in parallel programming
e) Test writing of some basic (sorting) algorithms

4) Options
a) Define all the greeks
b) Long a call means _____ gamma. Long a put means ____ gamma
c) If a bank sells a call with a strike of 50 and the underlying rises to 60 how does the bank make money
d) Strike 50, underlying 50, 2 weeks to expiration. What is approximate delta?
e) strike 50, underlying 50, 1 day to expiration. What is approximate gamma?
f) put/call parity
g) long gamma = ____ theta

5) Personality and Trading aptitude questions
-- not relevant here --
More...

very humorous.
 
I am only in my 40's, and I don't deal with this crap.

the job would have to pay 400k for this type of interview.

this is typical mentality to try to create some "elite" atmosphere and where the interviewee is happy to feel challenged. but, in reality, it's some fraternity-style worthless tool. you're not smarter by creating these questions, it just means you are out-of-touch with reality. it's like the fat girl who spends 100 hours to find an error on a resume.....and then yells it to everyone for 3 weeks.

how would I do it?

I wouldn't make the kid feel stupid, or smart....so I would have him sit down with a live trading account (5k only) AFTER I liked his resume and just talking to him....and have him trade a 1 lot during the session. and judge by that.....he could lose and I might still hire him, but that would tell me more.
 
Quote from BlueTurtle:

I am only in my 40's, and I don't deal with this crap.

the job would have to pay 400k for this type of interview.

this is typical mentality to try to create some "elite" atmosphere and where the interviewee is happy to feel challenged. but, in reality, it's some fraternity-style worthless tool. you're not smarter by creating these questions, it just means you are out-of-touch with reality. it's like the fat girl who spends 100 hours to find an error on a resume.....and then yells it to everyone for 3 weeks.

how would I do it?

I wouldn't make the kid feel stupid, or smart....so I would have him sit down with a live trading account (5k only) AFTER I liked his resume and just talking to him....and have him trade a 1 lot during the session. and judge by that.....he could lose and I might still hire him, but that would tell me more.
More...
I could just ask "What's the difference between a future and an option?"
 
Quote from oldtime:

I could just ask "What's the difference between a future and an option?"
More...

I don't even know and I trade them both.....LOL

one is a derivative ... nah, both are derivatives.

ok....one has time value and intrinsic value...the option.

option can be American or European....

future trades about 100% the underlying

option...well, depends on the delta. and gamma.

but you can get a future with a expiration date of next year....not sure if they go tick for tick...

options can be in the money, out, or at.....futures doesn't deal with that stuff.

then you have contango.....oil futures. not really relevant.

let me think...

def. different margin requirements....since option...1 contract is 100 shares. futures 1 bond is 100,000 for the 30 year...

then I would roll my eyes and say......ah, whatever....
 
Quote from BlueTurtle:

I don't even know and I trade them both.....LOL

one is a derivative ... nah, both are derivatives.

ok....one has time value and intrinsic value...the option.

option can be American or European....

future trades about 100% the underlying

option...well, depends on the delta. and gamma.

but you can get a future with a expiration date of next year....not sure if they go tick for tick...

options can be in the money, out, or at.....futures doesn't deal with that stuff.

then you have contango.....oil futures. not really relevant.

let me think...

def. different margin requirements....since option...1 contract is 100 shares. futures 1 bond is 100,000 for the 30 year...

then I would roll my eyes and say......ah, whatever....
More...
ok, you're hired
 
Quote from oldtime:

ok, you're hired
More...

this is GREAT... What did I win???

you win the opportunity to give us your money....

$10,000 for a PRO level account....

$500 a month to sit next to real traders....!!!!!!

$200 a month for lunches

$500 a month to use our software

and we have the right to never give your money back, ever.

now you can really make what you are worth!!!!!!

LOL
 
Quote from garachen:
c) Describe the underlying of a EuroDollar future (not Euro!!)
More...

Excellent question, I recall hearing some years ago (2008,9?) that a junior order entry bod had been told to sell 10,000 EuroDollar futures and had instead worked the order in the CME Euro currency futures, causing some short term mayhem and a loss for the firm when the position was liquidated later that day.

A nice example of when asking that question of new hires would have been useful!

For your departing post, we have a nice example of some of your reasons for leaving. Few things as disappointingly predictable in the human experience as arrogance, pride, and bad manners. All who have retorted to garachen with incivility and deliberate attempts to detract from the value of his posts and any interesting discussion ought to be ashamed of themselves.

Folks who are serious about this business will no doubt find your list useful for learning which skills employers are interested in. Hint: not charts, indicators, a plethora of casino front-ends, or your ET post count.
 
Quote from Blotto:

Excellent question, I recall hearing some years ago (2008,9?) that a junior order entry bod had been told to sell 10,000 EuroDollar futures and had instead worked the order in the CME Euro currency futures, causing some short term mayhem and a loss for the firm when the position was liquidated later that day.

A nice example of when asking that question of new hires would have been useful!

For your departing post, we have a nice example of some of your reasons for leaving. Few things as disappointingly predictable in the human experience as arrogance, pride, and bad manners. All who have retorted to garachen with incivility and deliberate attempts to detract from the value of his posts and any interesting discussion ought to be ashamed of themselves.

Folks who are serious about this business will no doubt find your list useful for learning which skills employers are interested in. Hint: not charts, indicators, a plethora of casino front-ends, or your ET post count.
More...

Looks like I've got the right people on ignore because yours is the only comment I've seen. I'm pretty sure you have my email address if you ever want to chat.

You'd also be surprised how many people missed the whole 'cheapest to deliver' concept when they studied bond futures.
 
You must log in or register to reply here.
Back
Top