Full time Option trader

[happytrader]

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

 

[spitrader1]

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

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.

 

[StockyBailx]

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

 

[sails]

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!

 

[spitrader1]

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!

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....

 

[happytrader]

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

 

[sails]

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?

 

[spitrader1]

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

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.

 

[spitrader1]

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.

 

[wayneL]

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

 

[spitrader1]

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

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.

 

[wayneL]

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 :

 

[happytrader]

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

 

[sails]

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!

 

[sails]

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...

 

[wayneL]

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!

Hi Margaret,

I have often thought the same thing myself.