A 20-Year Veteran Reveals the World of Options Market Making
EP 002 QuantPy Insights Podcast | Anonymous Guest
Welcome back to the second episode of QuantPy Insights, where we dissect the complex world of quantitative finance and break it down for you!
📈 About This Episode:
Today, we have a very special guest who has spent over two decades in the fast-paced realm of options market making. We dig deep into the intricacies of market making, from how firms make their money to the challenges and opportunities that new quants face in this dynamic industry.
🔑 Key Takeaways:
- What is market making and how do firms profit from it?
- The ins and outs of trading, risk management, and portfolio optimization.
- Expert advice on how to differentiate yourself and make your mark in the market-making world.
🎯 Who Should Watch?
If you're a university student intrigued by a career in quantitative finance, or a seasoned quant looking to diversify your skill set and advance your career, this episode is for you!
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Natenberg - Options Pricing & Volatility John C Hull on Options Above two mentioned in the video, I would personally also recommend Options Market Making by Alan Baird --> A little old and outdated but still worth a read by everyone
oh wow thanks i was trying to figure out what they were saying
Would you recommend books on spot currencies marketing. Thanks in advance
Hi, I am from Malaysia how can I contact you
awesome intro, one reccomendation for viewer retention, create a slide of stockphoto/vids to splice together instead of the call transcript. I knew after second 1 that i was watching this from start to end, but for others this might help retain attention and thus viewership.
Great videos! can't wait for what you have next!
True. There are so many algos to cover the trades, even there are many model allowing you to do market making to cover horizontal and vertical spread with zero risk to exposed funds with minimum capital investment to run.
Absolutely loved this of all the material there is on youtube about how quant pays this and that, finally a guy who has lived through the markets and loves them and tells us what it is really all about.The best part was he did'nt shy away from going into nitty gritty. I am a student from a non target who loves the markets and wants to work on the street.I did not get an internship for the upcoming summer and had started entaining the idea of quitting on the impossible but this shows that the hard work will be worth it. Thanks for this.
You can always build some projects yourself to showcase on your resume. Work in a non-academic group project to build something. Also, this is really out of the blue, but consider Japan for quant roles since it and IT are underemployed. I received two software engineering offers in Japan without speaking Japanese and I don't even have a CS degree (Information Systems).
Good one!
Quality content here
Hey, guys. Can you explain what is the difference between buy-side and sell-side quants?
please more interviews!
Can you put the book list in the description?
great infos
10min in and wow what a great interview if you are trading options discretionarily you have to know how guys like this think they are your opponent. you heard him taking directional bets against him isn’t gonna win in the long run. you can both win if you trade volatility because majority of retail will trade directional who knows how long this will last take advantage while you can
Amazing
Really good interview. Thanks for posting. Im an individual algo trader running algos trading stocks, futures and options. I do my own backtest, strategy development, coding and trade post mortem and its a very time consuming process but love it.
Hello my friend! Generally are you profitable in long term or all fat ago strategies are rat race without profit?
Yes. I have an edge that i programmed into my algo with consistant performance. I will not get rich quick from it.
Please make more videos 👍
amazing video
Well done! Next time maybe you could ask about 0dte index options and their affects (if any) on the overall market/movements and other elements of the markets that may be affected such as $ViX etc. Great mirroring btw, keep up the great work 🙏
Can i have the name of the recommended book please?
what is the quant python youtube channel he mentioned?
50' minutes where are the chaptersss :)
Nice listening to this while paper testing my option algo
It won’t work.
✨
Sad to hear that making one-sided markets are frowned upon. I MM both sides, but I quote higher asks, maybe a standard deviation or two higher due to drift. I'm really just a hobbyist quant with a software engineering background, so it's a new world. A new world where math is actually necessary unlike the folks who say math isn't necessary in programming, until it is lol.
Anything worthwhile actually requires a lot of r/d and work, not like the game of TA traders , "focus on psychology "
Wasn't this the same tactics explained in an AMM documentation published by Barclays a few years back? It even went as far like a public admission to manipulation by outlining how well it worked due to the surge of inexperienced traders entering the market with the popularisation of RobinHood
Pretty much. But despite the Hype surrounding degenerate 0dte traders from Wallstreetbets, market makers bulk trades come from instructional investors.
Could you please suggest the link of AMM documentation? Thanks.
@@xianhuazhang2430 Hi i think links in comments are not allowed. But a Google search of the title "Barclays US Equity Derivatives Strategy Impact of Retail Options Trading" will help. It was published 14th September 2020
similar yes barclays realized you can sell garbage which are 0dte to traders who have no idea what they’re doing it’s free lunch for who knows how long
Pog champ
I wish you could have asked them what the net P/L % these firms make per year on their books.
Good recommendation, next time. Although, remember this is public information for the big firms : look up the big public firms and look under annual reports for market making activities
Minimum anywhere from 40% to 100% on capital every year. Ps. Im in the HFT industry.
The math is not that hard really. The most important lesson is to learn the logic behind it. Then develop a math equation that you will be able to understand and use it as your compass to define your risk or your edge. Instead of backtesting a strategy why don't you develop an abitrage equation (ability to calculate all possible outcome) to determine its potential risks look for outcome that the market haven't discount it yet.
If you were to outline a complete curriculum of books and in what order to go from one to another for someone that wants to become a quantitative analyst in trading and wants to self learn everything how would this look like? Thank you!
@@encapsulatio step 1 = you must be a professional gambler first and understand the concept of value betting or the ability of developing an edge in a random distribution in a zero sum game. The key is to understand the logic behind it and not trying to out smart the consept because is impossible. For a book that I can recommend ( THEORY OF GAMES AND ECONOMICS BEHAVIOUR by Von Neumann ) step 2 = you must understand the mechanics of the financial markets I mean all types deravatives and how they connect to each other in clearing process. You must understand the workings of market markings and develop the math models or equations of specialist on how he will provide liquidity. Unfortunately there is no a book for this stage but you have to relay on your creativity just develop eny math formula that you will use but you must make sure that it obey the laws of gravity. But don't be in a rush just make sure you are so good at step 1 then the rest will flow like a river.
Just do option spread trades, its the only safe way to trade
Nassim taleb is the best
really apricate the insight but it pretty clear he is a failed MM trader . and got outpace by better and new traders over time hence why he left and then came back
Can you elaborate how you come to such conclusion? I also had a weird feeling when listening the interview but have no grounds to criticize
@@junal27one thing you have to keep in mind is there are out side mm and in side mm . I bet the interviewed mm is the outside one. Which explains why he hedge like a normal trader . The in side mm there have special type of deravatives that is not available for the public helping them to hedge there position of which the one who takes the opposite of there trade moves market in his fevor but makes sure is in line with fundermetal factors such away they don't get suspected that they existed in the first place.
@@paulnyaginiwhat does that mean if you’re gonna say things like inside vs outside MMs can u expand on this with sources and special derivatives yes we need some evidence
@@AM-du2sw the information is not public available. If such evidence was available it could led to sue.
@@paulnyaginii’m glad traders like u and @alboss exist so market makers and advanced retail traders like me can take your money all day long. i love competing against people who don’t understand how any of this works
This is called in a simpler way: "Legal Theft" "Legal .....Lawfull Theft". The world will start to develop and move forward and grow economically when all Financial markets are closed and so does currency exchanges. And when there is only one currency in the world.
Wtf are you talking about
Agree but market investing ,, trading is a game you play with money. Simply put, it’s like playing a game of monopoly…. Winners win with an edge.. losers lose.
I am not sure why we accept that these guys should blurt out as much jargon as they can as quickly as they can, but anyways I don’t like it.
slow down the playback and take notes brotha
You may feel this way because you don’t know what he’s talking about 🤔
I think you just need to put in some more time reading and studying markets