Trading FX futures vs FX options
Currently doing systematic futures trading (I'm a QR) at a big 4 pod. It seems that a lot of the really cool ideas for trades come in the vol space, but there's really no scope for me to get into this since my PM doesn't know anything about vol trading.
Is it just me feeling like the grass is greener or is there some benefit to trying to get into vol related products? It just seems there's more flexibility to pursue ideas on an options team rather than a team that just trades futures.
Based on the most helpful WSO content, your observation about the flexibility and creativity in the vol space is valid. Trading FX options, especially in the vol space, often allows for more nuanced strategies compared to systematic futures trading. Here's why:
Flexibility in Strategy: Options trading provides a broader toolkit, including strategies like spreads, straddles, and gamma scalping. This allows for more creative trade ideas and the ability to express views on volatility, not just direction.
Volatility as an Asset: As highlighted in WSO threads, trading vol is about trading expectations of market movement, which can be intellectually stimulating and offers a different dimension compared to directional futures trading.
Coding and Quantitative Skills: FX vol desks often leverage coding and quantitative skills to develop models for pricing, risk management, and trade ideas. If you have a strong technical background, this could be a great fit.
Exit Opportunities: Experience in vol trading, especially in FX options, can open doors to roles in hedge funds or other buyside opportunities where such expertise is highly valued.
However, it's worth noting that transitioning to vol trading might require building a new skill set and understanding of options pricing, Greeks, and risk management. If you're serious about exploring this path, consider resources like "Options Volatility and Pricing" by Natenberg or "Exotic Options Trading" (recommended in WSO threads) to deepen your knowledge.
Ultimately, whether the grass is greener depends on your interests and career goals. If you find the vol space intellectually appealing and aligned with your skill set, it might be worth exploring opportunities to transition.
Sources: Career Advice Question for Options/Vol Trading: Rates vs FX at BB, https://www.wallstreetoasis.com/forum/trading/what-are-the-top-volatility-trading-desks-at-jpm-gs-and-what-differentiates-them?customgpt=1, Spec Futures Trading, For love of the game, Q&A: ex-bank trader now running crypto hedge fund. questions?
Not a vol trader myself. I've always been in futures and swaps. I see these vol traders like Ron Ozer or Doug Schadewald crushing it, making hundreds of millions. But again, these guys are making big bets. Doug is exploiting inefficiencies trading options in the Indian market. I feel like there is definitely more room to exploit options given that the retail market on options has exploded with IV typically trading in mean reversion relative to taking directional bets on outright or trying to trade the diff or arbs and having to know the fundamentals in the underlying priduct.
Exactly - always seems like it's either vol guys making big bucks or fundamental L/S guys. Linear products making big money seems much less heard of, although I'm happy to be proven wrong.
Yes, using options can allow for additional types of trades/dimensions to your ideas and therefore additional ways to generate money. So yes, using FX options may allow you to lever up some of your ideas. However, I think there is probably more money to be made vol trading in fixed income/equities (maybe also commodities, but I don't think there is major liquidity).
Unfortunately, don't have any advice on how to navigate your situation (i.e. the person you work for doesn't have exposure in that area). Is it a case of you not being allowed to trade vol within your team's mandate? To learn the basics of the products, you can probably talk to people in vol teams around you (if the shop allows that?), otherwise read sellside primers/do a teach in/attend a sell side crash course. Maybe then when you have some ideas you can pitch them to your PM...
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