Trading Desk Structure

So I'm thinking about getting into trading and want to learn wha thte possible roles are on the desk. Besides the trader I've heard about strategists and developers / programmers. Are there any other roles? What do these guys do? If any one knows what I"m talking about. PLease help me out.

 

So flow trader or market makers can sort of be split up into three broad categories:

1) the sellside bulge bracket trader

This is a client facing trader. So for example an options trader at a bank sits on a book of thousands of different positions, and he is there to service client needs. Now too many people think only in terms of cash equities, so straight stocks, thats a very very small fraction of flow traders at IB's, but if you take products that are a step above in complexity, for example options, where there are so many different strikes and expiries, there just isnt liquidity to just high frequencey trade the electronic markets. A large client will come in 100x the size thats on the bid and offer, so you as the market maker give them a price at which you will take the opposite side of the trade. Now when the client trades with you, you have got the oppsotie side of that. 90% of the time you wont get out of that exact position. You will look at your different risks from that trade and try to manage it into a position you do like. Lets say that a client bought a lot of 105% calls from you in Dec13 in 100k vega. Lets say you earnings are within Mar13 and you are worried it might have a big move, so you might decide to buy some Mar13 gamma, or you might buy the downside because you think skew is cheap etc etc, and you sort of have to build this thought process when you price, so you can skew the price efficiently. The point is that you are making prices but you take a lot of risk, which is essentially prop risk that is forced upon you.

2) the small prop shop market maker

These guys just mess around on screen and in the broker market, mostly active in options. for example this is like Optiver, Flow Traders, ALl Options, Susquehanna etc. They deal with smaller size than IBs, and generally they provide liquidity for the sell side banks in the broker market. They dont really have nay clients, they just kind of hang around the market adding liquidity and getting paid for it. Decent model if you can get into psoitions with a bit of edge.

3) the high frequencey ,market maker

Just standard computers automatically making prices on exchange.

 
derivstrading:
So flow trader or market makers can sort of be split up into three broad categories:

1) the sellside bulge bracket trader

This is a client facing trader. So for example an options trader at a bank sits on a book of thousands of different positions, and he is there to service client needs. Now too many people think only in terms of cash equities, so straight stocks, thats a very very small fraction of flow traders at IB's, but if you take products that are a step above in complexity, for example options, where there are so many different strikes and expiries, there just isnt liquidity to just high frequencey trade the electronic markets. A large client will come in 100x the size thats on the bid and offer, so you as the market maker give them a price at which you will take the opposite side of the trade. Now when the client trades with you, you have got the oppsotie side of that. 90% of the time you wont get out of that exact position. You will look at your different risks from that trade and try to manage it into a position you do like. Lets say that a client bought a lot of 105% calls from you in Dec13 in 100k vega. Lets say you earnings are within Mar13 and you are worried it might have a big move, so you might decide to buy some Mar13 gamma, or you might buy the downside because you think skew is cheap etc etc, and you sort of have to build this thought process when you price, so you can skew the price efficiently. The point is that you are making prices but you take a lot of risk, which is essentially prop risk that is forced upon you.

2) the small prop shop market maker

These guys just mess around on screen and in the broker market, mostly active in options. for example this is like Optiver, Flow Traders, ALl Options, Susquehanna etc. They deal with smaller size than IBs, and generally they provide liquidity for the sell side banks in the broker market. They dont really have nay clients, they just kind of hang around the market adding liquidity and getting paid for it. Decent model if you can get into psoitions with a bit of edge.

3) the high frequencey ,market maker

Just standard computers automatically making prices on exchange.

thanks a lot, that was quite elaborate. appreacite it

 

Hey asshole. The kid was looking for trading ideas, i.e. long yen/short usd. Additionally, investing in gamma, etc.

Hey buddy, ignore the above. Trading should be taken in strides. Trading ideas come from a knowledge of the fundamentals and an ability to put it into the context of the data you have in front of you and the ways you can figure out the time horzion and half-life of your ideas.

i.e. think about an idea for trading the Japan thing right now. Perhaps you could post up a trading idea first and we can respond; an idea on the Japan situtation that is.

 
G.M.Trevelyan:
Hey asshole. The kid was looking for trading ideas, i.e. long yen/short usd. Additionally, investing in gamma, etc.

Hey buddy, ignore the above. Trading should be taken in strides. Trading ideas come from a knowledge of the fundamentals and an ability to put it into the context of the data you have in front of you and the ways you can figure out the time horzion and half-life of your ideas.

i.e. think about an idea for trading the Japan thing right now. Perhaps you could post up a trading idea first and we can respond; an idea on the Japan situtation that is.

What is wrong with you?

 

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