OK Don, you pulled me out on this post. I've stated this on ET countless times, so what will it hurt for me to say it again. There is no such thing as a successful strategy, only successful traders. Even with your pair trading model, put a bad trader behind the mouse and try to execute it and I imagine they don't make a dime. Don't scare guys away from options Don, they are a far superior trading product to equities and futures. The only problem is very few guys will ever understand them. That is not because of the lack of edge though.
I agree to a point, in that trading equities is easier than learning options well enough to make good money. You know that we get a lot of new people through here, and some want to trade options...we let them, under certain parameters of course, but most haven't taken the time to really learn the nuances of options trading. Hey, I'm a big fan of options...without our options trading "back in the day" we wouldn't be where we are now. All the best, stay warm in Chicago my friend! Don
Hey Donny boy, I appreciate your concern over our cold weather here. This global warming thing just has not panned out the way I was hoping. I guess I just have to put up with the cold. As far as the options goes, my response was primarily due to the edge comment you made not your firm's decision to let traders trade options. Quite frankly I agree with your firm's stance not to let guys trade options unless you guys are 100% dedicated towards it. However I will say this, equities are far easier to learn to trade and provide better income over the short term but I believe the options guys have far longer longevity in this game then equity guys. Equity guys usually are gimmick players. In the late 90's it was internet stocks. After 2000, it was bullets. After 2003 it was pairs, etc. Option guys usually don't have to re-invent themselves every 2 or 3 years or look for a new edge.
We try to steer our guys away from the "gimmick" stuff, and we required traders to get permission to trade Internet related stocks, and we still get "thank you's" for having done so. Education and "time in the saddle" is required for all trading, and I agree with your point about "good traders" vs. simple "good strategies." And, if it helps, it was 34 degrees on my way to work this morning, LOL. Don
I'm reopening this old post in hopes that someone (Maverick / Don!) could help update the list of options prop firms that are still open to new accounts. The original poster mentioned Simplex and Vtrader. But I looked up Simplex, and seems like the company is one of those salary trader type of place (as oppose to requiring a capital contribution). There MUST be other firms out there other Vtrader. Come on guys, can you list some names here for options prop that allow overnight positions. Most other equity prop shops that "allow" options trading seem to only let you hold the position intraday. This is, of course, going against the whole philosophy of a negative gamma / vol trader.
Not much out there if you are not a market maker. Think about it, who wants to make commissions on a fixed lot position every month while you simply sell gamma and leave them holding the bag? Not saying that is your plan, but there is a reason why nobody is in this space.
Thanks for the reply, Mav. I hope it's not too corny to say this... but it's quite an honor to get a response from you. You are truly one of the best on ET! Now, 2 questions, if you don't mind: 1) Per your comment "there is a reason why nobody is in this space"... if this is the case, then why does VTrader stay in the business? I would imagine that if Vtrader can do it, then there must be others. 2) The reason why I'm looking for an options prop shop is leverage + knowledge. I think this is a good way to take my options trading to the next level (I currently trade retail). To this end, would you recommend becoming a Market Maker? How do I go about becoming one? And isn't MM a dead breed due to the narrowing of spreads? Thanks in advance for your comments.
Most the firms in this space are market making firms. They started on the floor and eventually they built upstairs operations. But they have a market making mentality. VTrader also started in the market making business and is still in that business. If we only dealt with accounts that were guys coming in to put on a spread for a month and sit on it, we probably would not be in business either. We also have diversified into stocks and futures which helps. The reason non option firms don't get into options is that you really need to have the risk management in place to do this. It's very complicated and most equity shops simply don't want the hassle. The market making game has changed dramatically. It's now remote market making upstairs vs being on the floor and you have to compete against Citadel who is the biggest player in the business. There is money to be made, but small money. It's more of a grind. It attracts guys who made markets on the floor because they understand the business and don't want or can't become directional traders. It's really not advisable to get into that if you already don't have the floor experience or experience already from another firm. The guys that do it now have it down pat and the monthly nut is high. You may not survive the learning curve.
I can't help but wonder if the few human market makers left in the business will eventually be replaced by machines. I've seen so many job postings for quants and developers who can build automated options market making system. It seems like a natural progression to move the whole MM function to some algorithmic trading platform where the computers do the buying/selling & hedging away delta risk. Anyway, Vtrader is definitely a firm I would consider joining. I just wish I had other firms to compare with. Besides, the capital requirement at Vtrader is pretty steep. I assume the guys trading there are not your typical fresh-out-of college crew that you find at most equity prop shops? Anyone out there currently trade at Vtrader? I'd love to hear your take on the company & people at this great establishment.