12 options trader interview questions. Learn about interview questions and interview process for 28 companies.
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What does over-bought or over-sold mean? What does average down mean? Averaging down means, buying more at lower prices, which brings your total average cost down. What strategies do you deploy the most? Also, how do you look for opportunities what indicators?
My bread-n-butter strategy right now is Iron Flies and Iron Condors. What options strategy should a rookie learn first? Covered calls are the gateway drug to options trading ;. What are your thoughts on AMD? Earnings burn! How do you manage and define risk within your options trades? Lots to unpack here with this question. I very rarely will trade naked short options.
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So risk is clearly defined in most positions. Please share with us how you evolved into a butterfly trader. What was your path? This would take a blog post or podcast episode to give it a full and proper treatment. MaxPain seems worthless-and so does O. Sounds like a conspiracy theory ; Though, I believe there is some weight to nearby high OI strikes on expiration day. How long can a stock such as PBYI be halted? As long as the regulators or powers that be deem necessary. Not a situation you want to be involved in if you can avoid it. Where did you trade? I was in 10 year and 30 year options and several pits at CBOE.
But, for a time I did rent a booth above the Dow pit.
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What is your strategy to make money? Therefore, I like to identify stocks with relatively high IV and sell premium there, hoping to buy back cheaper later. Can you change strike price? Not sure I understand the question? If you change one strike price, you change the characteristics of the trade. What are your top 3 most profitable plays and whats the best time to use them? I use Iron Flies, Iron Condors, and vertical spreads almost exclusively and I apply them to stocks with high implied volatility. Please recommend your top 5 books that helped you become a successful options trader.
Also, I have found optionalpha. Not a game I play, but I like the idea. I only buy to open. Buying ATM options is swimming upstream. Best advice is to quickly find a mentor, then just get started.
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The best way to learn is by doing. I am looking for solo cheap option trading account. I would recommend opening an account with thetastyworks. Cheapest retail commissions for an account your size. If you do, please use my referral code? How do you manage risk on options? Specifically, a risk and portfolio management strategy. The beauty of options trading is you can always define your risk via the purchase of long options. How do you feel about futures?
Not the options aspect.
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Just wondering if you feel RR risk:reward is there? Futures are a great product to trade if you have a clearly defined strategy. If it works for you, do it!
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It's almost like having risk management built into each trade. I still use stop losses, but it's always good to know what your risk is. They don't concern me much when it comes to options. However, we do have to adjust our time frames a bit.
Trading is all I ever wanted to do. I really haven't thought about doing anything else since I graduated from college. Many traders complain that there is too much information to deal with. How do you filter out the noise and figure out what's important? The constant headlines can make for some wild intraday moves, but since so much of my strategy revolves around earnings and events, I can really tune out the noise and just focus on the setups. Come up with a game plan for the day and week. I read it when I first became interested in trading, and the lessons have stuck with me throughout my career.
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The insights from top guys like Paul Tudor Jones are amazing, and they're as useful today as they were 30 years ago. I love strangles on earnings and other events. Options In Play is tailored to options traders looking for outside the box ideas. As I said, I focus heavily on catalyst trades earnings, major events.
But I also like swing trades with a multi-week to multi-month time frame. Options in Play offers 2 new trade ideas per night, plus intraday updates when it's time to switch up a trade. Click here to sign up! Tell us about yourself! I especially like to capitalize on earnings season, when we get volatile price swings. How did you first get involved with the markets? How has your approach to options trading changed over time? When I first started trading back in , I was equity only. One of the largest differences is that BBs have clients and the MM's do not. BBs generally handle larger size due to the client side of things, where they have to take down a lot of risk and then manager.
MMs are more concerned with trading on the screen and in the broker market, so as a BB trader I will often times trade vs MMs in the broker market. Really boils down to where you think your edge comes from. At a BB you can get into positions at a fairly good level from clients, at a MM you try to really find smaller inefficiencies and its a bit more like scalping from what i gather, but someone else who has worked here will have to chime in. But with known events the vol sort of follows a predictable path, so vol squeezes into the announcement obviously, and then drops off after it comes off.
But yes it is tricky because you cant give a ridiculously wide pricer obv can be a bit wider but lets say implied is 25 and realized is 18, do you buy that hoping the earnings move is big enough to offset the decay you pay on every non earnings day? European screens for options have such small size and are sometimes so ridiculously tight because people put bids and offers in 5 lots, that any computer that auto prices will be getting picked off.
For example a Dec13 second rate german name might be Therefore you need humans to price. Hull is a bit pointless because it scratches the surface of a lot of topics, Natenberg is a bit better, but honestly the best exercise to learn how to trade options is to take some blank paper. Then for each of the following strategies: call, put, callspread, putspread, risky, strangle, butterfly, calendar spread, draw out what happens to your delta , gamma, theta, vega, rho,borrow risk, dividend risk as spot changes, as vol changes and as time to maturity changes.
Bit more of a straightforward process in terms of applying. I also dont think i could have passed the mental math tests Optiver has haha. Also starting at a BB I think is a better move unless you are really confident you can make money at a prop shop. It exposes you to a lot more things, a lot more people, you get a much better sense of how the business works.
You can network with people across the floor which is so important. You might after 6 months trealize you actually want to trade a different product etc. Also client trading really teaches you how to manage risk you dont want. When a client requests comes in you only have a couple minutes to price it, and it might be about something you dont really have an opinion of and havent analyzed. In a prop sense, you analyze trades and rteally build an argumnt for why you want to get into a position, its very proactive, whereas flow trading can be much more reactive, and you really learn how to dodge bullets that can blow you up, which is an ability that is useful if you would like to move to be a prop trader later.
Cant talk about pay. I didnt really have a quant background, just economics. The need for a quant background is very overstated, what you need is an ability to work with numbers. The onlytime I do actual math is when im loooking at new ideas, and they might be a bit more complex, and so there are times where my desk is covered in equations.