2-3 years ago I was your standard poker player looking to transition. Like many others I thought trading could be a good path. I PMed my resume to a trader on this forum on a whim, got lucky to be given a shot, crushed a grueling interview process and now have an amazing job working with some of the smartest people I've ever met.

Looking to pay it forward, AMA (within reason)!

Do you stick to a certain sector? Whats the thought process on if it's situation worth MM?

I’m not limited to any sector, although I do avoid certain sectors

Just like in poker, you go where the action is. The most active stocks at any given time are pretty well known, and those tend to take most of my focus

Do you trade tesla options? If so where do you the think stock will be in 6 months.

What do your typical days/weeks look like?
Why can't bots do your job better than you?

I don’t trade Tesla, no opinion on where it’s going. Fun story to follow

I come in about 45-60 minutes prior to the open. Get caught up on news, emails, and figure out what I need to react to throughout the day. From the opening bell to the closing bell I’m completely focused on the screen, when it’s busy it’s much more intense than any poker grind. Once the market closes the rest of my time is up to me. I can review my trading, do some research, work on projects, whatever I think is +ev. Usually leave about 2 hours after the close.

Second question is tough. After all, Theres almost nothing a bot can’t do better than humans in theory. In the trading world I expect options to last the longest. You are trading something that is not directly observable, where historical data can lie and even after the fact you can’t necessarily know what was right. Throw in a heavy dose of game theory.

People still trade on the floor, after all.

commodity futuresbro here who is an options moron

- how long does your average trade last?
- when you take on a position, whats the most common route for you to close your position? assuming you're "onsides" on the notional value of the option but you aren't ITM
- where do you think your edge is, broadly speaking? i realize getting into specifics is massively counterproductive.
- most fun trade?
- when you say market maker are you mostly scalping/providing liquidity with implied risk or are you more looking at arbitrage?

Cool, thanks.
How many trades do you do per day on average?
What type of information makes you think you've spotted a potential trading opportunity?
What methods do you use to calculate the expected value of your trades, and how do you set them up?

What kind of software do you use? Are you entering all your trades directly, or is it (semi) automated?

What markets do you trade?

I was an options market maker back in the 80's and 90's on the floor of the CBOT (30 year Tbond options). I know lots of things have changed with the shift from floor to screen.

What do you trade? Equities?

Do you take a delta neutral approach? This is how we did it back in the day. Option market making was simply trying to accumulate as many small edges as possible and hedging them in. I never speculated on direction but we would speculate on volatility getting longer or shorter vega as the market dictated.

Do you ever gamma scalp? I always thought this was a fun way to trade although all of the stars had to be in alignment for it to work well.

From what I know from talking with guys who made the initial shift to options market making on the screen it seemed to be an arms race as far as software was concerned. Is this still the case where if you don't have the ultimate program you will miss a lot?

Do you primarily just adjust the program to raise or lower vega for balance as your position gets longer or shorter vega?

Do you get many RFQs (request for quote) on some of the more involved spreads? That would seem to be the place where the human interaction is most important. This is why options are still fairly active on the floor at the CME since computers don't do custom spreads well.

I'm sure I will have more questions. I really miss those days of mixing it up in the pit

Thanks for doing this, you didn't have to. Giving back to people interested in the community is very generous act.

- Have you looked into crypto? Do you own any btc? What's your opinon about young single poker players who are heavily invested in and hodling? Seems a norm.

- Industry you'd look into getting if not for the trading job opportunity and considering $ as the #1 factor? Ps - Zero ego problems to do anything (would be garbage trucker if there was where the highest hourly was), or move anywhere in the world. Risk taker.

- Skills to invest to transition out of poker? Taking last question in mind...

- Assets no brainer to own? (bought some fslr after reading your 2+2 post and researching)

- Top books/podcasts/ppl/resources to max ev individual networth?

- Are you active in twitter/reddit/any other social media? Would love to follow, only know about your YT gym logs besides 2+2..

- Top 3 movies?

- Your dogs breed and trait you like most?

To answer both your first questions, one of the reasons options are interesting is because there are 100s of products (in the option chain) that are heavily related. So if I buy a 20 strike call in a $10 stock and then 10 minutes later sell a 21 strike call, both of my positions are still open but my net position might be negligible. In that sense my book is never really closed, but always managed.

Haven't heard of onsides as a term, could you clarify? Maybe my first answer helps.

As a market maker I trade so much that I'm never going to be as perfect as someone who might spend weeks researching one trade. Fundamentally, my edge comes through the bid-ask spread. Of course, there is no intrinsic profit there because any time you trade there is someone who thinks they are getting the better side trading against you, so that can't be your only edge. But if you take my trade list and add half the spread to each price I doubt I'd be making money.

A couple cycles ago TLRD reported earnings and jumped up 10%. I bought a huge number of way out of the money puts for 20 cents, below the stock price prior to earnings. Within 5 minutes the stock was suddenly down 20%, and I had just booked one of my biggest wins without hardly having noticed. The most fun wins are the ones you were never expecting

I do take on risk, the opportunity for pure arbitrage in options does exist but is rare.

Can't really talk about software, but its nothing really that would be available or even interesting to a retail trader.

I can stream quotes directly to the exchange and I can manually enter order. My actual volume is a mix.

That’s awesome, I read your Oct 19 thread (my birthday, actually). Pretty crazy how different the world was back then. It seems like things have gotten harder, but that might be a bit deceptive because the top guys then also didn’t have all the knowledge we have now.

US listed equity options

I definitely try to trade without any delta opinion, if anything I would say I am -ev at picking stocks If you just try to trade stock to get to 0 delta all the time though you will get crushed, were able to do that in your day? I would say even without transaction costs that could be suboptimal. The risk is on my book, so it’s my call if I want to speculate on vega, delta, etc. I’d better have a good reason if I want to do that, since someone who regularly builds up risk on hunches probably won’t last long.

Any time you are long an option you are either gamma scalping or taking a delta position I suppose. However, I don’t think gamma scalping as a strategy makes sense. The BSM theory doesn’t hold up to reality. If you’re long gamma, every time you trade stock by crossing the spread you are trading at a stock price closer to the last stock price. This inherently decreases the realized volatility implied by your stock trades. So you could buy an option implying 30 vol, the stock could realize 35 vol, and your stock trades might have only realized 25 vol, so you end up losing.
Software definitely matters a lot, but I don’t think it’s too different from poker for anyone that played post 2012. If you’re on the outside, and neither invest the money nor put in the work, it seems totally unfair. But the truth is everyone who makes it puts in the work, nothing comes easily. And I also believe that anyone who puts in the work will make it. There’s no one who is incapable of being a successful winning trader today.

I’ve never really been a position where the vega of my inventory has been too big for me to handle. I think an important part of trading is never getting into that position in the first place, because then you are suddenly forced to make a –ev trade just to manage risk. Or even worse, forced to skip out on a great trade to not increase risk. Anticipating where your risk is going to be an positioning yourself to always be able to trade comfortably is a huge part of the game.

I mostly trade the screen. I think the older traders are better at doing those off the cuff custom trades, because they’ve developed heuristics for how to win at those that aren’t necessarily captured in modern modeling/literature.
Would have been cool to be a live trader, but I doubt that ever happens for me. I don’t think I can yell loud enough

Vega seems to be the thing that market makers are most concerned with, especially when its going one way. When vol was on the rise what was the edge 2 minutes ago is now underwater if you have only hedged with the underlying rather than another option. After any trade you are exposed to vega risk even if delta neutral until you can spread it off against other options.

So I guess my question is do the programs automatically balance vega exposure of do you have to continually tweak vega inputs so you don't get too long or short vol? A "dumb" program could be real risky giving way too much exposure if it kept selling into a rising volatility market (or visa versa). In the pit we could always just put our hands in our pockets but the machine may just keep barreling in. Kind of wondering how smart the programs are and how much management the trader operating them has to do to keep the risk acceptable?

The whole idea was to get whatever edge you could and eventually flattening it out completely through boxes/conversions/reversals. The risk was always the time between the initial edge and the next edge while exposed to that vega risk. And that risk was only really around when vol was moving quickly.

Don't know if I can say precisely but if you ever trade options in a stock that I trade there is a very good chance you have traded against me

I have a responsibility as a market maker to provide liquidity to the market. So effectively I am forced to trade. The analogy I like to use is buying and splitting a cake. Everyone has been in the dilemma where you can't decide you gets to cut the cake in half. The resolution among friends is usually one person cuts and the other chooses. That's not a good solution for a functioning market because why would you ever be the cutter. A better solution is for the cutter to cut the cake in half, and then shave off a small piece. The chooser chooses his piece and the cutter gets the other piece plus the saved piece. If the cutter isn't good at cutting in half the chooser still wins. If the cutter shaves off too big a piece the chooser will find someone else to split a cake with

I'm not sure how much techno babble to get in to, but a good place to start is the black scholes model. It turns out that if you accept certain assumptions, you can calculate the fair value of an option (when traded together with the stock) using only the stock price, the strike price, the time to expiry, the interest rate, and the volatility of the stock. If you input those 5 parameters and find out an option is worth $1, but you can buy it for 90 cents, your ev for that trade is 10 cents. I think the second half of your question is more relevant for a hedge fund, see the above paragraph.

I had a bunch of btc back in the day on SWC. Nothing know. I'm far from an expert but I really don't buy into bitcoin. I don't view it as 'revolutionary'.

For generations we have been transitioning into a society that is as trust independent as possible. blockchain is taking the next/final step in that evolution. However, I'm not convinced that its practical, necessary or desirable. As a practitioner I also know how not unready our world is for immutable trestles infrastructure.

Honestly I think I have the best job in the world. As mentioned I don't think there is anyone that can't make it - assuming they work hard enough. Poker was pretty good too. The standard options for people who are very money motivated would be

Entrepreneur
I banking
PE
Hedge fund
Consulting
Trading

Of course for the biggest money you have to reinvent the wheel.

I think it depends what skills you had coming into poker. I was already very quantitatively minded, so developing my soft skills, particularly teamwork and communication were my biggest challenges. Also waking up in the morning

For many people education could be good, or work experience to get your foot in the door. I spent some time working in Risk (VaR) at a bank between poker and trading. My skillset was overqualified but my resume was under qualified. I think it helped a lot.

Unfortunately for me I'm probably as good a stock picker as a chimp I find it hard to believe that anything other than SPY is a no brainer. Trying to think of a pick to recommend just for fun but I feel strongly about nothing. A poker stable built 5-10 years ago would be an ROC goldmine, but that door may be closed by now.

Whatever you do, do it deliberately. Doing the optimal thing haphazardly is far worse than doing some strange things carefully. So it really doesn't matter what philosophy you subscribe to. I'd always marvelled in poker how a fish could take one line, an average reg another, and a top reg the same line as the fish. It was possible to take the exact same actions, but the top reg crushes while the fish gets crushed.

Thinking fast and slow was a defining book in my life.

Outside of my H&F thread, nothing. I don't think the social media life is my calling!

[QUTOE]
- Top 3 movies?
[/QUOTE]

1. Gladiator
.
.
.
.
2. Robin Hood men in tights

no number 3

He's a bernedoodle (bernese mountain dog x poodle)

His athleticism/balance is amazing. Went hiking in whistler, and as I was carefully inching up the icy hill he was sprinting up and down having the time of his life

If you follow me on IG I only post dog pics

Well stock is barely a hedge against an option, its basically the easiest quickest dirtiest way to offload some risk. If you aren't able to hedge options with options you're going to have a tough time.

If you just want to take what the market gives you, watch your vega levels and adjust parameters to close inventory that is sort of the traditional market making model. I'm sure it still exists but if you look at how many market making firms have shut down or scaled back operations over the past few years I think you can make the argument that the market isn't 'giving' anybody anything these days.

I got pretty lucky to work at a really sharp firm. We take a more holistic view to options that I think, while harder, is way more fun, challenging, and sustainable.

I'm fully in control of every decision that is made. Like you point out a machine trader will end up getting run over when it (inevitably) misses the right spot to reload or back off. That kind of goes back to one of my previous posts. Bots will take a while to fully take over options because options are really really hard. Machine learning may be good at defined games and image classification, but this is still a different world (for now).

It's interesting because we speak the same language, but what makes sense to you seems sort of backwards to me, and I'm sure its the opposite for you

I'm sure your points are pretty much right though and if we hashed it out over a beer we would find out we are thinking the same things.

I'm new to this, as a beginner what are some of the better sites or tv programs to read/watch throughout the week.

what assumptions?

so lets say you are buying a 20 strike call in a $10 stock and the stock jumps to $13. the inherent value of your call has increased, so I'm wondering if you wanted to effectively close that positing/hedge 100%, is the way to do that by a means of selling the right to the call at a higher price for what you bought it ( and you sell it in the open market), or do you hold the call until expiration and hedge via buying/selling some other instrument.

if its the former that makes a lot of sense to me as a futures scalper, but if its more the latter then that gets into some **** that sorta goes over my head.

I'm guessing it's the latter and it's probably not as complicated as you think. Ibavly will wait until a motivated market player comes into the picture who will cross the bid/ask on some option, for instance the 15 strike price calls, and take that trade to leg into a short 15-20 call spread. Of course he still has risk on, but not nearly as much risk as being naked long the 20 calls, and generally speaking hell capture a lot more edge than he would if he were only trading the 20 calls (because he's executing both sides of the trade at good prices).

Ibavly feel free to obliterate me if this is a bad explanation

if you were unemployed, could you make a living as a retail trader trading options with a $1mill bankroll?

Market makers don't think about one trade. It's just one big inventory trying to buy the bid and sell the offer on virtually every order and every strike price that comes in. Not sure about Ibavly but I would trade 100's if not 1000's of options per day and hold a large inventory position. This inventory position would be mostly neutral meaning no directional bias (delta) with manageable risk exposure to vega (volatility), gamma (velocity of delta) and theta (time decay). The money is made by accumulating all of those bid/ask edges and synthetically hedging the risks out locking in those edges.