If I have a gamma of 10 and a delta of zero, how much money do I make if the stock moves 10 points? (hint : f' is delta and f'' is gamma). I will go into good detail about this in a later post... Answer at the bottom of the post. the Taylor expansion is great for calculating in your head...
Trainee Class
Yesterday, a trainee decided that trading / sales is not for him. He has left the company, but is happy to have made his decision so early. He was a great guy, and by no means unable to get the job done, but this particular work did not suit his more social nature. Though Optiver gets people who study all sorts of subjects, an MBA in management is one of the less likely fields to enjoy sales / trading.
Corporate Meeting
On Tuesday, September 11th Optiver had a river cruise / corporate meeting / dinner. Like all good prop houses, Optiver is secretive about its strategy and market presence. I can say this: the developments, growth, and brand are headed in a positive direction. Offices in Sydney and Amsterdam are in a great position, and the Chicago office sounds like a good place to be.
Company policies are in flux do to the growth. It was hinted that the department might become "more professional." I am not sure if this pertains to the attire of the trading department, but the attire seems to be casual. At this time, it is about 50% business casual and 50% straight up casual.
For chicago trainees: your salary will be paid by the chicago office. It is very easy to set up all the paperwork by contacting the office in Chicago. I suggest doing this before you get to Amsterdam. There is enough to do while you are here. :)
If Training is slow...
- Technically, you are not allowed to sit with the traders while you are supposed to be studying Natenberg. If you have studied options before, you might have A LOT of extra time. You should think about making friends with the training class ahead of yours and watching them trade. There is a ton to learn on the screen. Even if you understand everything about finance and options, applying that, for example, to the rhythm of scalping or the precision of near arbitrage (buys and sells better than theoretical values [careful, this is not an accepted phrase. I made up this expression]). Watching really helps you get the experience that you need...
- Optiver has a library of Finance and Options books. Some of these are great, and some are really not that useful... If you have not read Hull, you can pick it up to understand how models approach the problem of finding theoretical values for different kinds of options. All traders should have a feel for why the models are adjusted and in which cases they are sensitive to their inputs / adjustments.
- There is always something to model on the computer, but that can get boring.
- The risk analysis guys are helpful to understand some of the more long term projects in place.
Bring a TI-83 to training. It will save you a ton of time and head aches. Also, daily compounding is impossible on the clunky calculators they let you borrow and you can't ceck your answers if you use simple interest.
Later this week:
-I will also post something that will make your Optiver training easier, the Taylor expansion. Though this isn't covered, many math people know to use it.
-How you could potentially, though I am in no way telling you to do so, download a bunch of finance, trading, options, and math ebooks. Though this is free and awesome, it is illegal for you to do this and for me to imply that you should. That's why you shouldn't, but I will post how anyway.
-If I have time, I would like to discuss the very controversial topic of when you should hedge positions. I will emphasize acceptable risk and bid-ask.
-I really want to think about the concept of dimensonless risk measures in derivatives.
Write me at igor.schmertzler@gmail.com
ans: .5*10*(10)^2=500
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