From an average prop trading firm to a prestigious one
If one were to end up at an average prop trading firm, would it be hard to transition into a more prestigious one later? Or would there be no point on moving if you succeed at your current firm?
To my knowledge, the most prestigious prop firms deal with options market making while the lesser known ones make directional bets on equities. So would it be considered irrelevant skill sets?
I have also read that some partners at the most prestigious prop firms make 7-8 figures a year. How is this possible? Is it all from market making or do they take huge directional bets? How much money do they manage? Is it possible to make such figures at lesser known prop firms?
unknown error;
If you have to ask how this is possible as-if it is mind blowing, you don't understand what they are doing in the first place to be honest. As a market maker, you're trading for edge and many of these products have absolutely massive futures where a single tick may be $10-12.50 or so. You may be doing dozens of trades a day and more experienced people are likely doing large size per trade. It can add up really quickly, especially with two sided, more liquid markets. It doesn't require huge directional bets by any means, though I'm sure it can happen. If you're worried about prestige, then working for pretty much any prop shop is likely not for you because I doubt any of your friends and family are going to have ever heard of where you work.
I don't think you ideas about lesser known prop firms are very valid either. Shit, some people here act like Timber Hill is some unheard of company.... there are probably 2 dozen firms at least you've never heard of with quality talent and substantial capital.
what firms constitute lesser and which constitute greater?
Market makers prefer to just make markets and print money but the way volume has dropped sometimes the action can be very one sided so directional positions have come more into play. 7-8 figures make sense for 2008 but I'd be surprised if many options market makers are bringing in that much this year.
And yeah, those two skillsets don't overlap much... you wouldn't be able to just show up at an options market maker after daytrading equities for 3 years and know what to do.
Question: Why would anyone choose directional bets over a market making career? Wouldn't you have more certainty in making money as a MM (considering the guaranteed edge) than prop trading (profits come from dumb luck according to EMH / random walk its basically gambling).
First lesson: EMH is rubbish. You're welcome.
Mate, I cannot agree with you here. Attributes of human behavior factor considerably into price movements.
As to your second point, no not everyone can do "those option formulas" properly. They are pricing models, a living being that need to be constantly tweaked to represent reality. Not all banks have the same models (particularly true in the exotics space), which will cause more significant deviations in prices among firms that you might expect.
I assume by member firms, you're talking about equities, and to be fair I don't know as much about that space, but I have never heard about collusion on spread widths... I'm not even sure that's legal. You'll know if your spreads are off through customers (they'll often let you know if you make a bad rate) and the broker market. This isn't OPEC, we're not buddy-buddy with other banks, they're our competition. Btw, I'm aware how a MM works, I am one haha.
I do agree with you about the edge a MM has from flows, and (you hope) ability to buy below actual value and sell above. It's not always a good thing though, a client can come in, do a trade in size and what do you know, they did the same trade with the a bunch of other banks. Now everyone is the same direction as you, and it makes it harder to unload risk. It's not hard to get run over.
Most traders I know are out to make $$$, bonus is what they focus on. Prestige is a banker/consultant game leading to politics on day.
Traders just care about P&L, don't matter where you are you just need to make it rain.
A good trader does not sit around and say "man I have to work for GS, since they will get me into HBS in 3 years". A good trader just cares about getting paid.
you must work at SMB Capital lol
If you think the MMs are working together, go take a look at any of the saturated and liquid markets. There is little to no edge left (except edge in selling, which will exist with the current demand anyway).
And how do you expect somebody to make markets without seeing order flow? Not that it particularly matters, since market makers aren't the ones front running orders (hint, that is what firms who have brokerage wings tend to do) and have to take the other side anyway. And if you are planning on leaning in that direction, you're likely to fuck yourself anyway since you're presuming it is correct.
Seriously dude, go jump off a cliff.
question moved to a separate thread.
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