Leasing A Seat At One Of The Exchanges!

Hi Meteoxx.
The style would probably be position trades like long calendars (maybe some directional bias) when vega are on the low end of the range of instrument. Credit spreads when skews are big. Vol spreads before earnings. Position trades lasting 1-2 weeks and a some outright bull/bear spreads when stock stops getting whacked like TYC,HD a few weeks ago. As a former local in futures options, I would like to do the same thing off-floor (get an edge then hedge) but I guess the exchanges initiated rules to make that 'game' impossible off-floor. Thanks

 

What game is impossible off the floor?

 

Buying on the bid/selling on offer,get a theoretical edge then hedge the underlying, doing it enough times during the day to generate decent , stable returns.

 

It is still possible; just can't make a two sided market ...

 

So you can attempt to buy on bid, get hit, hedge, then flip and sell on the offer, get hit , hedge . Rinse lather and repeat as long as you are not BOTH on the bid/offer at same time?

But can you be on bid at exchange 1, be on offer at exchange 2? so in effect you are market making albeit at 2-5 diff exchanges.

Furthermore, if locals are not making $ as evidenced by seat prices-can non-locals do it? I would think not. That is why I try to stick to position trading of options rather than the aforementioned 'game plan'

 

Yes.

Gray area; but yes in my opinion.

Yes, not limited to pit location and you don't have to make a two sided market.

 

last month it cost $1400 to lease a seat at the options exchange.

 

arb groups are alive and well in the trading pits. Hall trading group is now with goldman sachs, arbitrade is now Knight trading, La roque is now optimal trading, timber hill is still the best and there are numerous groups that are much smaller that trade on and off the floor. These guys arb S&P options at the merc and cboe and oex options with the s&p future being the hedge. Timber Hill is the only firm that trades indexes options verses equity options on a regular basis.

 

I think he was feferring to Bandit traders in the option market; if not there are a lot of arb groups ...

 

Timber is more of what I would call a hedge fund. I am aware that many groups have merged (consolidated) to try an compete on a larger scale. Susquehanna is another one.

I was talking of the groups of traders off floor that were pick-off artists. Locking free positions by using multiple accounts.

e.g. Some would always do the long butterfly for free. Using multiple floors and multiple accounts to hide the game.