# Full time Option trader



## jet-r (10 July 2006)

I recently saw a job ad for graduate derivative traders, it sounds very interesting and seems to be a highly paid job. 

Does anyone here know whats like to be a full time option trader? how stressful is the job? any good or bad things about being a trader as a career.


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## happytrader (10 July 2006)

Hi jet-r

What an excellent job if all you have to do is follow someone elses system with someone elses money. If your only responsibility is to do what you are told, I can't see much of a stress factor other than boredom. A trader who can be replied upon to follow instructions would be the closest thing to getting a robot to do the job. Sounds like a license to print money. Thats probably why the pay is so good.

Cheers
Happytrader


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## Realist (10 July 2006)

Sounds pretty boring actually.

What is the pay?

What would you be doing 10 years down the track?

Always look for a career not just a job if you know what I mean.


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## jet-r (11 July 2006)

It would be a career change for me as I have already done years of accounting. I heard the burn out rate for that job is very high. Thats probably they want young grads who can take the hit. That reminds me of high stress jobs like investment bankers, who get high base salary and minimium of 50% bonus.


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## wayneL (11 July 2006)

jet-r said:
			
		

> I recently saw a job ad for graduate derivative traders, it sounds very interesting and seems to be a highly paid job.
> 
> Does anyone here know whats like to be a full time option trader? how stressful is the job? any good or bad things about being a trader as a career.




By trader, do you mean you would be working as a market maker?

Cause that is high stress for some personality types and *highly* mathematical.

Some cope quite well.


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## wayneL (11 July 2006)

I once took a test they use to screen out all but those with Einsteinian type brains. (This was for market makers)

Ahahahahaha, it blew the top of my head off. I went away very humbled.

Cheers


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## Magdoran (11 July 2006)

jet-r said:
			
		

> I recently saw a job ad for graduate derivative traders, it sounds very interesting and seems to be a highly paid job.
> 
> Does anyone here know whats like to be a full time option trader? how stressful is the job? any good or bad things about being a trader as a career.



Hi jet-r,


This kind of role could vary widely - remember the NAB options traders who faced court recently - that is one example - some roles involve hedging, some are speculative, as Wayne says there are market making roles, there are floor traders in exchanges, the list goes on...

Most of these require qualifications in derivatives, often some kind of license if required, and a working knowledge of the market you are to operate in would be advantageous.

Have a read of Brian Price's comment in "Masters of the Market" by Hughes, Wilson and Kidman.  This will give you an idea of how aggressive floor traders can be.


Regards


Magdoran


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## Realist (11 July 2006)

wayneL said:
			
		

> I once took a test they use to screen out all but those with Einsteinian type brains. (This was for market makers)
> 
> Ahahahahaha, it blew the top of my head off. I went away very humbled.
> 
> Cheers




Sounds interesting, can you remember any of the questions??


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## wayneL (11 July 2006)

Realist said:
			
		

> Sounds interesting, can you remember any of the questions??




They were basically mathemetical problems. It's not that I wasn't able to solve them, it was the time give... a matter of seconds, so they had to be done in your head very quickly.

I can see why. A market maker has to make split second decisions with a mere few seconds time frame, with great gobs of cash on the line and it's all mathematical.

We retail traders can sit and fiddle with payoff diagrams, work out our sums, wait for a move, whatever, or decide not to trade that day.

It is a different world altogether. The market maker prime goal is to get FLAT with an arbitrage profit in hand.


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## jet-r (21 July 2006)

Realist said:
			
		

> Sounds interesting, can you remember any of the questions??




Guys I've found a simulation test for those insane interview questionaries. I only managed to score 20%....  

http://optiver.com/pages/workingwithus/testme.asp


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## spitrader1 (21 July 2006)

happytrader said:
			
		

> Hi jet-r
> 
> What an excellent job if all you have to do is follow someone elses system with someone elses money. If your only responsibility is to do what you are told, I can't see much of a stress factor other than boredom. A trader who can be replied upon to follow instructions would be the closest thing to getting a robot to do the job. Sounds like a license to print money. Thats probably why the pay is so good.
> 
> ...




only someone who has no idea would write this....you do not follow someone elses system. yes you have guidance from a senior trader and you are required to use there black box, but at the end of the day you have to make the decisions on youre big positions...and if you dont make money, then you dont get payed....in no way is MM'ng a licence to print money. Boredom-HAHAHAHAH....how does managing ure greeks on a 20 million dollar portfolio sound, working 7am untill 7pm every day, and knowing that coming into the stocks dividend time 2 cents either could make you or break you for the month....


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## spitrader1 (21 July 2006)

wayneL said:
			
		

> They were basically mathemetical problems. It's not that I wasn't able to solve them, it was the time give... a matter of seconds, so they had to be done in your head very quickly.
> 
> I can see why. A market maker has to make split second decisions with a mere few seconds time frame, with great gobs of cash on the line and it's all mathematical.
> 
> ...




Exactly wayne.....the questions might not seem that difficult when sitting home with 20 minutes spare, but when u are caught short in a moving market with 3 phones ringing and some broker annoying you asking you for a qoute on a 3 legged spread, even though you might have a machine, trust me, it aint that easy.


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## swingstar (21 July 2006)

What's the typical salary for MMs? 

Sounds like a lot of effort.


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## spitrader1 (21 July 2006)

swingstar said:
			
		

> What's the typical salary for MMs?
> 
> Sounds like a lot of effort.




swingstar that is a hard question....a grad who is in his first year trading small cap stocks may get 75-80 with a 15, 20 bonus. it all depends on if you make money or not. it tends to be if you make alot of cash you will either run the MM desk or move on to a soley cash trader.  you have to remember traders get payed ususally over 50% of there years pay in a bonus.


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## happytrader (21 July 2006)

spitrader1 said:
			
		

> only someone who has no idea would write this....you do not follow someone elses system. yes you have guidance from a senior trader and you are required to use there black box, but at the end of the day you have to make the decisions on youre big positions...and if you dont make money, then you dont get payed....in no way is MM'ng a licence to print money. Boredom-HAHAHAHAH....how does managing ure greeks on a 20 million dollar portfolio sound, working 7am untill 7pm every day, and knowing that coming into the stocks dividend time 2 cents either could make you or break you for the month....




Hi Spitrader1

You're comments are duly acknowledged. However, I would quite happily hire an obedient option trader who has no qualms with following my system  anyday over someone with all the right bits of paper and the wrong attitude. 

I am also quite sure that there are little groups of these quiet achievers around the traps already hitting the markets. They could well be those teenage nerds across the street.

Cheers
Happytrader


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## spitrader1 (21 July 2006)

happytrader said:
			
		

> Hi Spitrader1
> 
> You're comments are duly acknowledged. However, I would quite happily hire an obedient option trader who has no qualms with following my system  anyday over someone with all the right bits of paper and the wrong attitude.
> 
> ...




the point is there is no point in just hiring someone to follow a system. MM's dont just input levels and off they go. They make trading decisions just like you and I.  THeres no such thing as obedient option trader becuase everyone, no matter what level they are, have to make critical trading decisions at some point. Teenage nerds across the street, well maybe, the likes of optiva have already proved that MM'ng has changed, you dont have to have the contacts and relationships once required in trading to make money.


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## jet-r (21 July 2006)

Surely, there must be certain policy and procedures to follow. You still need to make your calculations and judgements to trade. from what I have heard, you will have about 3-4 screens to look at simulaniously, you are required to be fully focused when the market is opened. these ppl pull around 70k base plus 50%+ bonus. Its abit like Investment bankers.


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## spitrader1 (21 July 2006)

jet-r said:
			
		

> Surely, there must be certain policy and procedures to follow. You still need to make your calculations and judgements to trade. from what I have heard, you will have about 3-4 screens to look at simulaniously, you are required to be fully focused when the market is opened. these ppl pull around 70k base plus 50%+ bonus. Its abit like Investment bankers.




there are procedure to follow as in you input levels into a machine and it tells you roughly wat ure bid offer should be but at the end of the day the MM still has to come up with the price, and 90% of the time its not what the machine tells you. yes you are required to be focused 100% of the time when the market is open and yes, for a juinor MM that is about the cash...but you can forget the bonus if you dont make money


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## wayneL (21 July 2006)

jet-r said:
			
		

> Guys I've found a simulation test for those insane interview questionaries. I only managed to score 20%....
> 
> http://optiver.com/pages/workingwithus/testme.asp




Obviously no-one has scored much better otherwise they would have posted.

I did shockingly bad as well - 30%... its the pressure of the time Ahhhh!


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## ice (21 July 2006)

One of life's little ironies. 

I find those questions childishly simple but cannot for the life of me remember people's names even 10 minutes after I've been introduced.   
Believe me, that's more important out in the real world.   


ice


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## happytrader (21 July 2006)

spitrader1 said:
			
		

> the point is there is no point in just hiring someone to follow a system. MM's dont just input levels and off they go. They make trading decisions just like you and I.  THeres no such thing as obedient option trader becuase everyone, no matter what level they are, have to make critical trading decisions at some point. Teenage nerds across the street, well maybe, the likes of optiva have already proved that MM'ng has changed, you dont have to have the contacts and relationships once required in trading to make money.




Hi spitrader1

The actual job featured is for an optiontrader. And yes teenagers make excellent traders - less baggage to get their bearings from and lots of training on those computer games.  As for critical decisions or incidents, an excellent system covers all that. Works well for McDonalds and system based businesses.

Cheers
Happytrader


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## spitrader1 (22 July 2006)

happytrader said:
			
		

> Hi spitrader1
> 
> The actual job featured is for an optiontrader. And yes teenagers make excellent traders - less baggage to get their bearings from and lots of training on those computer games.  As for critical decisions or incidents, an excellent system covers all that. Works well for McDonalds and system based businesses.
> 
> ...




an excellent system will never cover all things....i personally know over 80% of the MM's on the ASX, and consider myself to be good friends with at least 50% of them...trust me, these are not people that just input numbers into a machine.


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## StockyBailx (22 July 2006)

Excuse me for asking but what have the kiddy's got to do with option trading?


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## sails (22 July 2006)

spitrader1 said:
			
		

> an excellent system will never cover all things....i personally know over 80% of the MM's on the ASX, and consider myself to be good friends with at least 50% of them...trust me, these are not people that just input numbers into a machine.



Hi Spitrader1,

Been reasing your posts with interest, and just wondering if you have been an options MM yourself?  If so, I have a few questions I would love to get some answers to...   

I have heard quite a bit from a few US ex-market makers and the insight has been really helpful, but have never been privileged to talk to one from Aus.  My belief is that MM's are extremely highly trained and we are dealing with some of the brightest minds in the business.  

Anyway, one of my questions is that a full service broker told me that they could usually get a better fill from a MM than I would be able to get with an online broker (justifying their excessive brokerage).  It doesn't make sense as I don't understand why the MM would give away profit just because the broker is nice to him?  Is there any truth in this? 

Many thanks in advance!


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## spitrader1 (22 July 2006)

sails said:
			
		

> Hi Spitrader1,
> 
> Been reasing your posts with interest, and just wondering if you have been an options MM yourself?  If so, I have a few questions I would love to get some answers to...
> 
> ...




gday sails...i dont wish to get into my past jobs...sorry....on to your question though!

Of course you will get a better fill from a full service broker. If an online broker rings a MM, especially a retail one, usually the MM will give you whatever the screen tells him, and not care. However if a full service broker calls a MM there is an established relationship. Most MM's have preferred brokers around town and will give better quotes to certain brokers. Especially if they are mates, or there is a lunch put on by the broker every now and again. Whats in it for the MM with and online broker?? NOTHING.......thats why they usually add a bit of fat onto there quotes with people like etrade....


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## happytrader (22 July 2006)

spitrader1 said:
			
		

> an excellent system will never cover all things....i personally know over 80% of the MM's on the ASX, and consider myself to be good friends with at least 50% of them...trust me, these are not people that just input numbers into a machine.




Spitrader

I'm talking about option and derivative traders, not market makers. Two completely different roles. No need to make the simple difficult. A system covering, stock selection, timeframe, entry, profit, loss and exit is all thats required. 

Cheers
Happytrader


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## sails (22 July 2006)

spitrader1 said:
			
		

> gday sails...i dont wish to get into my past jobs...sorry....on to your question though!
> 
> Of course you will get a better fill from a full service broker. If an online broker rings a MM, especially a retail one, usually the MM will give you whatever the screen tells him, and not care. However if a full service broker calls a MM there is an established relationship. Most MM's have preferred brokers around town and will give better quotes to certain brokers. Especially if they are mates, or there is a lunch put on by the broker every now and again. Whats in it for the MM with and online broker?? NOTHING.......thats why they usually add a bit of fat onto there quotes with people like etrade....



Thanks spitrader1.  But aren't the MM's potentially giving away a lot of money in return for an occassional lunch or just for a mate? Let's say they fill a 100 lot order for a cent better than an online order - that's $1,000.  If they did that a few times, that would cost them more than few lunches   

Could it be that when the broker phones with the order, the MM has time to get his hedge in place without the risk of it being cancelled or another MM firm filling the order?


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## spitrader1 (22 July 2006)

happytrader said:
			
		

> Spitrader
> 
> I'm talking about option and derivative traders, not market makers. Two completely different roles. No need to make the simple difficult. A system covering, stock selection, timeframe, entry, profit, loss and exit is all thats required.
> 
> ...




i disagree happytrader....there are many different trading roles at investment banks (derivative traders, facilitation traders, index arb traders, prop traders) the list goes on. I know for sure that not one of these traders use a system that you just plug info into. It just doesnt work like that. Yes they have systems that give them guides, but they hardly ever soley use these systems to trader. Its a guide only so they dont wildy missprice something.


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## spitrader1 (22 July 2006)

sails said:
			
		

> Thanks spitrader1.  But aren't the MM's potentially giving away a lot of money in return for an occassional lunch or just for a mate? Let's say they fill a 100 lot order for a cent better than an online order - that's $1,000.  If they did that a few times, that would cost them more than few lunches
> 
> Could it be that when the broker phones with the order, the MM has time to get his hedge in place without the risk of it being cancelled or another MM firm filling the order?




there not losing money....they make the prices worse for online qoutes, not better for brokers if that makes sense.


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## wayneL (22 July 2006)

spitrader1 said:
			
		

> there not losing money....they make the prices worse for online qoutes, not better for brokers if that makes sense.




So that means despite the facade of apparent tranparency, by having visible quotes, the Aussie options market is not transparent at all.

A trader can jump the queue, as it were, simply by having the right connections?

This is not a fair market then.  

This is completely at odds with how I understand it to be in the US market where MM's/brokers et al will slit each others throat if there were a few cents (x a gazillion contracts of course) in it.

Note: brokers NEVER claim to be able to get a price than what's on line over there. It is just not an issue.

Cheers


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## spitrader1 (22 July 2006)

wayneL said:
			
		

> So that means despite the facade of apparent tranparency, by having visible quotes, the Aussie options market is not transparent at all.
> 
> A trader can jump the queue, as it were, simply by having the right connections?
> 
> ...




nothing to do with transparency...the original question was can you get better qoutes on option prices through a full service broker...nothing about jumping queue, etc..at the end of the day the prices that are qouted have to be put into the screens anyway, they have to give the market a chance to participate..but to answer the original question simply, the answer is yes, no all of the time, but whether you like it or not relationships are important in the asx market.


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## wayneL (22 July 2006)

spitrader1 said:
			
		

> nothing to do with transparency...the original question was can you get better qoutes on option prices through a full service broker...nothing about jumping queue, etc..at the end of the day the prices that are qouted have to be put into the screens anyway, they have to give the market a chance to participate..but to answer the original question simply, the answer is yes, no all of the time, but whether you like it or not relationships are important in the asx market.




Now I am confused.

Seems contradictory to me. Not that it matters, I don't trade asx :


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## happytrader (23 July 2006)

spitrader1 said:
			
		

> i disagree happytrader....there are many different trading roles at investment banks (derivative traders, facilitation traders, index arb traders, prop traders) the list goes on. I know for sure that not one of these traders use a system that you just plug info into. It just doesnt work like that. Yes they have systems that give them guides, but they hardly ever soley use these systems to trader. Its a guide only so they dont wildy missprice something.




Hi spitrader1

Thanks for clarifying your position. I now see where you are coming from. I am actually talking about the growth in small groups of traders pooling their strengths and trading the bosses or a common fund of money and system. Similarities to The turtles traders model. The ability to consistently and respectfully follow the rules is the qualification. Understandable since trading is all about following rules - period.

Cheers
Happytrader


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## sails (23 July 2006)

spitrader1 said:
			
		

> there not losing money....they make the prices worse for online qoutes, not better for brokers if that makes sense.



But then aren’t they discouraging a lot of people from trading ASX options as many don't want to use full service brokers?  I know of many Aus traders who trade US options and refuse to touch the ASX options market because of liquidity problems and the subsequent frustrations of not getting filled at fair prices – so technically the ASX MM’s are missing out on far greater order flow by making it so tough for traders with discount brokers. 

It seems the MM's are only attracting a small market share and a much larger share could become possible if the conditions were friendlier.  

There have been some occasions when I have put in a bid (offer) going above (below) the mid price, but the MM’s do not fill the order - even after moving it even further in their favour.  So, if it looks like the MM is simply going to wait until the market moves so my order hits their offer or bid price, I cancel and go and find another opportunity – so they have again missed out on some easy money that was there for the taking.  Is there any logical reason why they might do that? 

However, I must say I am surprised because when I asked the original question, I honestly believed that it was a myth that full service customers may get a better deals - but thanks for telling it as it is - much appreciated!


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## sails (23 July 2006)

wayneL said:
			
		

> Now I am confused.
> 
> Seems contradictory to me. Not that it matters, I don't trade asx :



Wayne, I doubt that any exchange is totally squeaky clean (have read some not so complimentary posts at elitetrader re some of the US exchanges), however, I would rather know how our system works here in Aus and so appreciate spitrader1's imput for that reason.  

Interestingly, our first order for covered calls was with a full service broker  (about 3 years ago) where we purchased 7,000 NCP shares which were bought on the offer around $11.50 and 7 calls which were sold on the bid – obviously I could have done that on my own - then were charged $875 in fees for those 2 transactions on this small order.  Even if there had been a 1c or 2c better price, that would only have been a saving of $70 or $140 – so the discount broker still wins hands down in that case.   

 Needless to say, we didn't stick with that broker for too long as I actually found it very rare to get a better price - that is why I thought it might have been a myth...


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## wayneL (23 July 2006)

sails said:
			
		

> But then aren’t they discouraging a lot of people from trading ASX options as many don't want to use full service brokers?  I know of many Aus traders who trade US options and refuse to touch the ASX options market because of liquidity problems and the subsequent frustrations of not getting filled at fair prices – so technically the ASX MM’s are missing out on far greater order flow by making it so tough for traders with discount brokers.
> 
> It seems the MM's are only attracting a small market share and a much larger share could become possible if the conditions were friendlier.
> 
> ...




Hi Margaret,

I have often thought the same thing myself.


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