1 Week Finished

Why gamma of a call is equal to gamma of a put.


Optiver
From talking with some friends, I have decided that the way Optiver trains its traders is different from the way other firms train. Here are some notable differences:

1. The recruits have a wide range of experience. This makes a big difference in the type of options problems we can solve easily. Finding the formula, plotting curves, and taking derivatives are easy problems for any engineer / mathematically trained person. Explaining intuition, having financial intuition, and financial passion are entirely different. You might say, the second is more important than the first, and you might be right, but then again, you might be wrong.
2. Most young traders hedge their positions before they 1) go home or 2) especially before the weekend. I've noticed it's very easy for traders to get a good night's rest and it's easy to start with a fresh head every day.
3. Recruits come from all over the world (eg. Turkey, India, US, Italy, Netherlands), but the common language spoken in the company is English. It's a big advantage to be a native English speaker because you are able to explain what you understand, read books in English, and communicate what you do not understand.
4. Strong feeling of camaraderie. Unlike the BS that you may get fed at a Goldman type of place, traders really help each other out. The big guys look out for the little guys, and the little guys end up making money for the big guys. It feels great to be encouraged to do what you love to do / are good at.
5. Training is fast! (Actually, I cannot stand how slow the training is, but for engineers / others, this speed is incredible). To learn about Black-Scholes in one day, to understand gamma and vega in the third day, to sum in your head how much you make on gamma if a stock moves, to estimate delta for puts and calls just from looking at some strikes is some pretty serious stuff. All of the recruits did this within their first week!
6. Learning costs money. The trainee's are expected to make many mistakes. Those that do very safe total arbitrage trades all the time are perceived as too risk averse. A good trader isn't afraid of variance when the odds favor him / her (there aren't many her's around).
   

Life in Amsterdam
Amsterdam is a very open place. What strikes me most is how little waste is produced here. First of all, I have never seen a garbage truck. Yet, I never see garbage. People care very little about the type of transportation you use (that is, in terms of fashion). All in all, the feeling is very relaxed. This may be the best place to be in this time of my life.

Mathematics and Finance
For each post from now on, I have decided to have a question or thought about options.

1. If I have 0 delta, 10 gamma, and no other position, how much money do I make if the stock moves by 1 point? How much if it moves by 2 points? Does it matter if the stock goes up or goes down? Why? Can you think of a formula for this?
2. What is an argument for volatility increasing when the stock price falls?
3. Between gamma and vega, which is more sensitive to a)implied vol and b) realized vol

Please email me at igor.schmertzler@gmail.com with your thoughts / charts / graphs etc. I will post the best discussion of every week.