| Topic Name: |
Options and Futures |
| Message Name: |
Also ... |
| Date Posted: |
04/22/2000 |
| In Reply To: |
Hey, I'm just finishing up school here in Chicago, and will be working for an options market maker this summer at the CBOE. From what I gather, a lot of firms specialize in options trading or futures trading, but not both. If you want to get into the business, I would suggest looking at an options market maker. Some of the big firms that I know of include Wolverine, Archelon, CTC, and Hull (which is now part of Goldman Sachs).
Essentially, the way into a trading spot involves working as a clerk or assistant for a year or two, and getting an actual trading position. In terms of pay, I got a package that is very competitive with what I would have gotten with I-Banking. However, the bonus portion of the pay is relatively larger, which makes sense. Like institutional traders, guys on the options floor get the bigger payoffs when their P&L sheets grow.
I think there are a number of things that you have to consider when looking at trading options. First, do you think you can handle the lifestyle of trading? Your hours will be a lot shorter then IB (about 55-60), but a lot of those hours will be very intense. As a market maker, you want to remain close to, if not delta neutral in your overall position. That basically means that you want to keep the risk on your position very low, and make money off edge. To remain delta neutral requires constant focus on your position, since the market will constantly influence the parameters you have in your trading and pricing models. Also, realize that the options and futures markets may be completely computerized within a couple of years. The CBOE, Merc,and CBOT will all become server rooms sooner or later. In the options markets, there will continue to be the need for the market making function to ensure sufficient liquidity. However, the firms that remain in the game will be the ones with the best technology and greatest amounts of knowledge. There are a lot of "copycats" in the industry that are currently successful. In the trading pits, these guys simply copy what the people "in the know" are doing, skimming off some of the order flow as a result. If everyone is trading at a screen, a lot of these copycats will not be profitable and thus leave the game. At the same time, those that truly understand options will see greater opportunities by not having order flow skimmed off. Oh yeah, you should also be ok with living in Chicago, since this is where a vast majority of the opportunities are.
In terms of job flexibility, I would think that it's there to at least some extent. I'm sure that you could move into a S&T floor, but IB would not be a strong possibility. So, you could quit options trading if you got sick of it, but then your strongest alternatives would be in trading as well. So, this is my $0.02. |
| Message: |
... don't forget to mention Susquehanna as
one of the big options trading firms. They
are king of the exchange floors.
In addition to
market making they also do things like
statistical arb.
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