A 20-Year Veteran Reveals the World of Options Market Making

Рет қаралды 38,020

8 ай бұрын

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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Пікірлер: 74

@sanketkarve2341 8 ай бұрын

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 A little old and outdated but still worth a read by everyone

@SylvaineTropea 8 ай бұрын

oh wow thanks i was trying to figure out what they were saying

@haiderrizvi4739 3 ай бұрын

Would you recommend books on spot currencies marketing. Thanks in advance

@muhammadazeemkhan1762 2 ай бұрын

Hi, I am from Malaysia how can I contact you

@haiderrizvi4739 3 ай бұрын

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.

@arkeezy 8 ай бұрын

Great videos! can't wait for what you have next!

@QuantApplicantMattKulis 8 ай бұрын

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.

@shagungarg7628 7 ай бұрын

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.

@kWYQ1337 6 ай бұрын

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).

@actionclanton Ай бұрын

what KWYQ1337 said, think outside the box. I studied education and philosophy in undergrad. built a few personal projects and got an offer to join an energy desk down in Houston. In hindsight i would have studied something more quantitative like math or physics. keep in mind that a lot of ppl on the street dont even know the difference between a bond coupon and ytm. nowadays mm quants are the hype but there are quant researchers/developers and so forth. but the real secret is learn how to code/program -- that will take u further than any specialized knowledge

@mohamedkane8820 8 ай бұрын

Quality content here

@gerasimpalachorov2486 8 ай бұрын

Good one!

@philip9537 8 ай бұрын

great infos

@AM-du2sw 7 ай бұрын

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

@123austinpower 8 ай бұрын

Amazing

@josephwehby9313 8 ай бұрын

amazing video

@philipfiguerres6132 8 ай бұрын

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.

@Greek532 8 ай бұрын

Hello my friend! Generally are you profitable in long term or all fat ago strategies are rat race without profit?

@philipfiguerres6132 8 ай бұрын

Yes. I have an edge that i programmed into my algo with consistant performance. I will not get rich quick from it.

@denisplaj6498 8 ай бұрын

Hey, guys. Can you explain what is the difference between buy-side and sell-side quants?

@QuantApplicantMattKulis 8 ай бұрын

please more interviews!

@_d0ser 8 ай бұрын

Can you put the book list in the description?

@saneworld9418 8 ай бұрын

Please make more videos 👍

@robforth7253 15 күн бұрын

This is really, really good. Thanks!

@esInvests 20 күн бұрын

Awesome conversation man, thanks for the discussion

@devo5942 8 ай бұрын

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 🙏

@kWYQ1337 6 ай бұрын

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.

@vehctor8893 3 ай бұрын

Anything worthwhile actually requires a lot of r/d and work, not like the game of TA traders , "focus on psychology "

@sebastianlueneburg9396 8 ай бұрын

Nice listening to this while paper testing my option algo

@LilConniePromotions 5 ай бұрын

It won’t work.

@general956 8 ай бұрын

Can i have the name of the recommended book please?

@bayestraat 8 ай бұрын

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

@borat3746 8 ай бұрын

Pretty much. But despite the Hype surrounding degenerate 0dte traders from Wallstreetbets, market makers bulk trades come from instructional investors.

@xianhuazhang2430 8 ай бұрын

Could you please suggest the link of AMM documentation? Thanks.

@bayestraat 8 ай бұрын

@@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

@AM-du2sw 7 ай бұрын

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

@FXNorm Ай бұрын

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@--2455 8 ай бұрын

50' minutes where are the chaptersss :)

@theurbanegentleman4550 8 ай бұрын

I wish you could have asked them what the net P/L % these firms make per year on their books.

@QuantPy 8 ай бұрын

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

@cldude9 8 ай бұрын

Minimum anywhere from 40% to 100% on capital every year. Ps. Im in the HFT industry.

@vankram1552 8 ай бұрын

Pog champ

@mmm-cake 2 ай бұрын

✨

@hongsm24 3 ай бұрын

what is the quant python youtube channel he mentioned?

@TommyBaphamet Ай бұрын

😂😂

@polok890 4 ай бұрын

Just do option spread trades, its the only safe way to trade

@paulnyagini 8 ай бұрын

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.

@encapsulatio 7 ай бұрын

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!

@paulnyagini 6 ай бұрын

@@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.

@sadaqathhussain4014 6 ай бұрын

Nassim taleb is the best

@Bledi838 6 ай бұрын

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.

@ball-is-life6477 4 ай бұрын

Wtf are you talking about

@mmm-cake 2 ай бұрын

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.

@SzTz100 Ай бұрын

Did he say $300K out of college ? blimey.

@alboss5868 8 ай бұрын

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

@junal27 8 ай бұрын

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

@paulnyagini 8 ай бұрын

@@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.

@AM-du2sw 7 ай бұрын

@@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

@paulnyagini 7 ай бұрын

@@AM-du2sw the information is not public available. If such evidence was available it could led to sue.

@AM-du2sw 7 ай бұрын

@@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

@aboutthebook5275 22 сағат бұрын

The way he talk 70% similar to Elon Musk.

@ribeye1062 Ай бұрын

This is all very fluffy info. Nothing here that will make you money. Also Shelly Natenberg is not a trader. He only discusses theory. If you want to experience real pain go buy some upside calls and sell futures delta neutral against them during a trend day up. You’ll be given no chance to scalp. And by the end of the day you will have lost on your calls and lost big on your futures. While the market maker, who had zero idea where the underlying was going, wins and wins. I’m not saying it isn’t possible to make a lot of money. It is. You have to become an expert is managing risk. This is your edge.

@ribeye1062 Ай бұрын

And btw, the best traders on the planet learned their risk management skills by trading the underlying. And not by predicting direction. Nobody can do that with any level of consistency. Options market makers only understand their Greeks and how to manage their risk. A very skilled futures or stock trader will use market makers for what their purpose is. Risk offsets. And, > this is the most important part, parlays. Options give a skilled trader incredible opportunities where you can go from flat to short 200 futures below a line that you can convert and now you’re riding long 200 futures up 10 points with very defined risk. This is very doable way to make $100k a day. And with 0DTE these opportunities exist every day of the week.