Interviewing Options Traders
I’ve been interviewed juniors for an options trading role for the past 2 months and I've noticed a pretty clear pattern. Most can explain Black-Scholes, list the greeks, talk about delta hedging in theory.
But then you ask something basic like what happens to a short strangle when skew steepens aggressively, or what rolling short premium does to margin during a vol spike, and it gets quiet. Yes, I know that in a perfect world you’d look at audited P&L etc. But most juniors don’t have that, and screenshots don’t mean much... can be easily cherry-picked and hard to bverify.
The CFA doesn’t really isolate options mechanics... FRM is just broader risk. I’ve seen a few candidates with the CFOA (options-focused exam) who handled these discussions better, which was interesting, but aside from that I’m not sure there’s a broadly recognized benchmark or tell for options mechanics.
If you were hiring for an options-heavy seat, what would actually make you comfortable that someone understands the mechanics? Mechansics and strategy, not theory.
Based on the most helpful WSO content, here’s how you can assess a candidate’s understanding of options mechanics and strategy beyond just theory:
Scenario-Based Questions:
Dive into real-world scenarios that test their ability to think critically about options mechanics. For example:
These questions force candidates to demonstrate practical knowledge and their ability to connect theory with real-world trading dynamics.
Stress Testing Knowledge:
Ask about the impact of extreme market events on specific strategies. For instance:
This helps you gauge their understanding of risk management and margin mechanics.
Trade Construction and Adjustment:
Have them construct a trade based on a specific market view and explain how they would adjust it under different conditions. For example:
Practical Exercises:
Provide a simple options chain and ask them to calculate key metrics or explain the implications of changes in volatility, skew, or time decay. This can include:
Behavioral Insights:
Ask about their past experiences managing risk or handling unexpected market moves. Even if they don’t have audited P&L, their ability to articulate how they approached challenges can reveal a lot about their practical understanding.
CFOA or Similar Certifications:
As you mentioned, candidates with the CFOA (or similar options-focused certifications) seem to handle these discussions better. While not a perfect benchmark, it’s worth considering candidates who have pursued specialized education in options trading.
Technical Depth:
Test their understanding of advanced concepts like:
By focusing on these areas, you can better assess whether a candidate truly understands the mechanics and strategy of options trading, rather than just reciting theoretical concepts.
Sources: https://www.wallstreetoasis.com/forum/asset-management/sales-trading-interview-guide-gekkos-guidance-part-2?customgpt=1, I'm currently an equity derivatives/vol trader: Q&A!, Behavioral and Fit, Licensing For Dummies, Sales & Trading Interview Guide - Gekko's Guidance Part 2
WSO has gone to shit with these ads
bro it is an ad disguised as informative post if you read it again. trying to discredit two certs in favor of the other
Im an undergrad 3rd year with a good GPA and I know nothing about all of that. Getting worried
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