Truck Driver to Prop Trader
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Member @Knightshade shares his winding road to working at one of the top proprietary trading shops in the world. We cover how he continually took on a lot of risk and bet on himself. What he did when he was unemployed for months at a time - more than once in the first few years out of school - and how he prepared for the tricky brainteasers and mental math that can rattle even the most polished candidates.
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WSO Podcast Transcript:
Patrick (CEO of WSO): [00:00:06] Hello and welcome. I'm Patrick Curtis. Your host and chief monkey, and this is the Wall Street Oasis podcast. Join me! As I talked to some of the community's most successful and inspirational members to gain valuable insight into different career paths and life in general. Let's get to it. In this episode, remember, Knightshade shares his winding road to working at one of the top proprietary trading shops in the world. We cover how he continually took on a lot of risk and bet on himself. What he did when he was unemployed for months at a time, more than once in the first few years out of school, and how he prepared for the tricky brain teasers and mental math that can rattle even the most polished candidates. Enjoy. Good night shade! Thank you for joining the Wall Street Oasis podcast!
Knightshade: [00:01:03] Yeah, thank you for having me.
Patrick (CEO of WSO): [00:01:04] It'd be great if you could just walk the listeners through your background.
Knightshade: [00:01:09] Yeah, yeah, so my current role right now is, I guess you can give it a few names traitor, portfolio manager, market maker of options So we were trading the implied volatility of options on fixed income products. I know on the website you guys like to distinguish whether to buy side or sell side rule. So technically this would be a bilateral. And so the function of my job in my business is to provide liquidity on exchange traded products. And again, we're in the fixed income portion of the of the merge. So, yeah, cool.
Patrick (CEO of WSO): [00:01:44] And so did you go to school for this? How did you kind of how did you do an undergrad and then how did that kind of proceed to you getting this job?
Knightshade: [00:01:56] Yeah. So, you know, I went to UIUC University of Illinois, studied economics and got a minor in informatics, which is kind of like computer science ish. And I, you know, I had buddies in college that, you know, they were they had always been talking about finance and trading and all that. But to be honest, you know, I didn't really know too much about financial markets. I just knew that, you know, coming out of college, I wanted, you know, I wanted to create the best life for myself, and I knew that finance and trading was something that I can. Definitely, you know, you can make a little bit money quicker than everybody else. So I kind of just I stuck to the idea of becoming a trader, and that was kind of
Patrick (CEO of WSO): [00:02:34] So it's kind of it. It was mostly like friends kind of telling you about it. You feel like or like upperclassmen or something. Or were you trading in your own accounts and stuff
Knightshade: [00:02:43] Like in high school and college? You know, their parents were more like the finance world. Now that's kind of like the kid on the side, you know, listening classes. So, you know, I took their passions and kind of made it my own.
Patrick (CEO of WSO): [00:02:55] So but it was your was your family, not in the finance space at all, like your parents?
Knightshade: [00:03:00] No, not really. My mom's a teacher. My dad works for an engineering firm. So got it. I really had no no connection in besides just like my friends talking about it.
Patrick (CEO of WSO): [00:03:08] Ok, so you get to you get to college. You're kind of like, you're, you know, you kind of want to go into finance right from the get go. Right. You're just not too sure about what specifically or you're thinking trading side.
Knightshade: [00:03:20] Yeah, I mean, even even throughout college, I hadn't, you know, Econ Major, that's kind of, you know, tickets to any kind of, you know, it's very broad. So I could have done, you know, business consulting, whatever, right? And then you hit senior year and you're kind of like in this existentialism or it's like, you know, what am I really going to do with my life? So, you know, in those six months up until graduation, that's when I really kind of buckled down and figured out, you know, what are my skills? What am I getting? What do I value? And where do I see myself? So, you know, do I want to do I want to be emailing back and forth all day and going to meetings? Not really. Do I want to do stuff that's analytical and math based? Probably more so. I knew I was good at math and stuff like that, so I kind of just took a guess and it ended up being what I like.
Patrick (CEO of WSO): [00:04:05] So that's Interesting. So like when you were waiting, kind of. Did you have internships kind of going through school like trying to figure that out as well? Or like you felt like it took all the way till senior year to really hone, like, were you doing trading internships and stuff?
Knightshade: [00:04:18] Yeah, that's a good question. So, you know, I wasn't really, you know, I wasn't trading on any like brokerage accounts. I wasn't doing anything on the side like that. I was really interested in it. And like freshman sophomore year, I was driving a truck. Funny enough, so I was delivering like bags of ice. And then, you know, I had interviewed for a job, an internship at the exchange. So a senior group. I did have a slight connection there. You know, my stepmom happened to have worked at the exchange and like market regulation or something many years prior. So she kind of just, you know, emailed someone for me and it ended up landing me an interview and I didn't even get the job right away. It was like mid-summer. They ended up calling me saying that the guy that got my position quit and that they needed someone to fill the gap. So I was sitting in my truck and they're like, and I accepted the job offer.
Patrick (CEO of WSO): [00:05:05] So hell yeah. So you run there, right? Like just to get that on your on your resume?
Knightshade: [00:05:10] Yeah, that's huge. Yeah, I got the. I got the experience of working in some sort of financial institution, it was, you know, its operations at an exchange. So really all I got to see was how, you know, cash balances between the prime brokers and get it out on the exchange level. And so just being able to talk about that in any interview going forward to, you know, it was just it was something that made you sound smart and it was finance related. So it was automatically kind of like a foot in the door.
Patrick (CEO of WSO): [00:05:39] Got it. And it gave you a couple of good bullets for the resume. I assume, right, that we're focused on trading. So like once you did that, were you like, this is definitely what I want to do, but like obviously more on the actual trading side and less on the operations.
Knightshade: [00:05:53] Yeah, I just remember like sitting in college, reflecting back on my summers in the internship, and I remember the corporate culture was just something I didn't really gel with. You know, people were, I don't know, it's just something I felt like I needed to do more something more risk taking a little more adrenaline filled after a couple of months of staying in the office at the exchange, I just knew I wasn't for it. So, yeah.
Patrick (CEO of WSO): [00:06:15] So tell me kind of how what proceeded next? So that was your after your sophomore year. That was like yourself.
Knightshade: [00:06:21] Summer, yeah, sophomore summer and junior summer
Patrick (CEO of WSO): [00:06:26] Signing did it, yeah. So tell me how then like, OK, you get to senior year, you don't have a full time offer. You're a little nervous. Existential crisis. Like, what am I going to do? Kind of thing.
Knightshade: [00:06:35] Kind of, yeah. So, you know, I did have an offer at the exchange. I was I think the offer was, you know, sixty five k, which isn't bad at twenty two years old. And part of the package is like, you know, they're going to pay, they're going to pay for your master's degree if you want it and you can climb the ladder there. But you know, I started asking around like people that I had met, like my friend's parents that were like one of my friend's parents with an MD at a bank. Yeah. So I asked them, like, you know, what would you do in that situation? You know, I want to be a trader. I don't really want to pigeonhole myself into a job in an exchange. You know, and his advice was, you know, you got to just take the job offer that you have. It's always easier to transition after you have a job and you're starting to make money, right? But you know, I tend to find, you know, I have my own opinions and I tend to I tended to make the right decisions throughout my life, it seems. Yeah, I don't know.
Patrick (CEO of WSO): [00:07:31] Know you're stubborn. In other words.
Knightshade: [00:07:33] I guess. I guess the word is stubborn. Yes. So even though I'm an M.D. at a top bank would tell me to take the job. I was like, Yeah, thanks, but no thanks. So I declined the offer and it just kind of went, Oh yeah, no, let me let me backtrack. Sure. After declining that offer, I was like, All right, well, now what do I do? So I was like, All right, well, who do I know that could potentially get me into trading? I didn't really want to ask my friends because it's kind of like that gray area. You don't want to step on people's toes. So I remembered a conversation in high school I had with a girl, and she was telling me about how her dad was a trader. And I remember like going to a party at her house and her house is really big. I was like, oh, what'd you? How do you know of mine? So I messaged her on Facebook and she ended up connecting me with her dad. Like, this is, you know, totally out of left field, and I ended up having a phone conversation with him. He sent me over getting the number to a guy that he used to trade with. I talked to him, walked into the office, basically said, Hey, you know, I'll work for free. I really want to be a trader. Like, I'll do anything it takes, you know, kind of shot the shit with him. But he was like, you know, I think you should keep, keep perusing and come back to me if you don't find anything. And I didn't find anything. After a month, and so I once, once I graduated, I gave him another call said, Hey, you know, I don't have a job offer now. Do you mind if I come work for you for free walk back in the office? They gave me my training jacket and I got introduced to the trader I was going to work for.
Patrick (CEO of WSO): [00:08:57] What does that mean? Trading jackets Sorry. If I'm totally clueless with trading, what does that mean? Trading jacket
Knightshade: [00:09:02] Yeah. Yeah, sure. So he's like, Yeah, we'll pay ten bucks an hour. Will? You can. You can. You can be an intern. Let me find you a trader that you're going to work for. So they if on one of the guys that was pretty profitable under their group. He was kind of like a stand alone trader. Yep. Trading on the floor. So you need, you know, you need a jacket to be on the floor. Got training jackets. Got it. The jacket that you hold, all your trading cards in and all that stuff.
Patrick (CEO of WSO): [00:09:26] So you're still on it. You still ended up on the on the floor, but it was at least doing the actual trades, not as operations, not like clearing right stuff.
Knightshade: [00:09:35] Exactly. So ten bucks an hour to not do operations and kind of in the that I wanted. But hey, I wasn't even trading. I was I was a clerk, you know, so I just, you know, I talked to this guy when he wasn't on in the actual pit, he would just come in and say, hi to me. I'd ask him questions. I'd read this book called Option Volatility and Pricing by Schellenberg. So I kind of like obsessed over that and a couple of other books and just we just picked this guy's brain and then I would like run and get him coffee and lunch and then like clear his trades. And then, you know, after five months, I was as good as anyone my age, you know?
Patrick (CEO of WSO): [00:10:12] Did you feel like did you feel like this is something you'd be doing after graduating with a college degree? Like, did you expect this? Or it just was like, whatever I was going to do, what I have to do was that the mentality? Or I'm curious to kind of like, Did you ever look up when you were kind of reading those books, fetching coffee, running around like and think, Oh my gosh, I can't believe I'm here? Or it was like, were you appreciative or were you like, disappointed? I'd love to get a little insight there.
Knightshade: [00:10:38] Yeah, yeah. So yeah, I definitely I didn't come from a wealthy background at all. So just being able to be on the floor and see the culture and like just being in that room and seeing who's the guy that's always on CNBC that's screaming, What's the name? Oh, Rick, Rick Santelli? Yeah, I saw him. So, yeah, I was I was more than appreciative. It was probably, you know, it was kind of kind of a dream come true in a way like even though I wasn't getting the, you know, I wasn't making the money, I was there, you know? Yeah, I was around it. So no, it was. It was. It was awesome. I remember just having extreme like bursts of adrenaline and like euphoria when I was reading these books and like helping this guy out and like, you know, you could tell that he was actually, like, generally impressed with my work. Like, I was asking all the right questions within a few weeks. Like you could tell that I was understanding options trading pretty quickly, which is, you know, it's not an easy thing, you know, reading these like textbooks, it's super dry. And then to understand it right away, it was pretty impressive in its own way. So I was proud of myself.
Patrick (CEO of WSO): [00:11:34] Yeah, and so he was he was impressed by, you know, within a couple of months you were asking well, within a couple like a month or so, you were asking the right questions. You're reading and you're kind of seeing how all the theories being applied actually on the floor.
Knightshade: [00:11:46] Exactly.
Patrick (CEO of WSO): [00:11:47] Got it. Ok. So what made you wear this because you were just so interested in it? It was it because you were just like, Hey, I want to become an actual. The only way I become an actual traders, if I if I, you know, master this, what was the motivation behind that? Was it money? Was it just trying to survive?
Knightshade: [00:12:05] Yeah, I guess it was a culmination of things, you know, in my mind is like, you know, this is kind of my one shot. You know, there was only a few jobs you can get given my GPA, given my degree that are going to pay you. You know, quickly, six figures at twenty two, twenty three, twenty four years old. Otherwise you're in a desk job, you know, so you could get it and you can get into investment banking, but that's a lot of work. And quite frankly, I'm a little lazy when it comes to certain things. The, you know, the options trading is very cerebral and it was very math based. And like the theoretical side of it was just like, cool to think about, like how you how you look about look at like, you know, I don't know, like the bell curve, like normal distributions and like how those things change, given like certain assumptions like, I don't know, like I had somewhat of a stats background, somewhat of a programming background. So it just felt like it just made sense for me to get into and like I could apply it and it would. I just saw myself being good at it. And I guess another reason was a lot of people would compare trading like that adrenaline rush and that decision making. They compare that a lot to like video games. I guess as cheesy as it is like, you know, EA Sports is becoming super big right now. Some guy in the news the other day just made three million bucks for winning a tournament. I saw that kind of I just I just remember, like, you know, growing up, I was big into Halo and like all these different like video games and I was I was extremely good at those, you know, when I was 15 years old, I put a video online as me going, you know, thirty one kills, zero deaths in Halo, and I got like 30000 views pretty quickly. And like, I never even I never even like logged on to my YouTube account and like, I just loved it. Oh, wow, that's pretty cool. So I just knew that I had like I was. I was quick at decision making. I loved adrenaline and I knew that I had my opinions tended to be right at certain times when they seem to be. So I just knew that trading itself was something I knew I could be good at. I kind of just went with it.
Patrick (CEO of WSO): [00:13:53] Yeah. Curious, do you play poker at all?
Knightshade: [00:13:56] Uh, you know, I play a little bit, but now is nothing I got super into, I get too impatient after an hour. I just want to like, go all in.
Patrick (CEO of WSO): [00:14:03] Yeah, you want to gamble? Yeah. Got it. Ok, so in terms of the progression and so you're there, you're kind of you're an intern. I assume they eventually make you a traitor. How does that work or how long do you are you expected to be an intern as or communication around that? Are they telling you like, Hey, if you do a good job for a year, there's a there's a chance we'll make you, you know, full time or whatever. How does that work?
Knightshade: [00:14:26] Yes. So this is definitely tricky. And it it's kind of a contentious thing that happened after a few months. So, you know, he would say, like, hypothetically, you know, I could pay you 50 grand to be like a full time clerk and like, learn to actually trade on my account and you can start making some trades. And he would say that like hypothetically, but he never actually gave me the offer. So then after five months, I was like, Hey, listen, I'm like, I'm sick of getting you coffee and stuff like, Can I? Are you going to give me a pay bump? So we ended up. He gave me a pay bomb. You know, he offered me to do all those things, but it wasn't a dollar amount he he had been talking about for those past few months. So I kind of felt blindsided. It was not like disrespected in a slight way. Was he?
Patrick (CEO of WSO): [00:15:06] Was he trading? Was he trading you? He was arbitrage. The labor. Your labor?
Knightshade: [00:15:12] I mean, it's classic trader move saying one anchoring me to one level and then like a different level of knowing that I'd probably take it. But now, when he gave me that offer, you know, the time you know, I was so gung ho about like making stuff happen for myself, or I just immediately walked out of the room. I was like, Thank you. I appreciate it. Thank you for your time. I'll talk to you later. Yeah, I walked out and then that was kind of that was kind of it. So then I was back to square one again, like, what do I do? But now I had the resume that had all this trading experience. And I knew, like after these five months obsessing over it, like I was more hirable than pretty much anyone that would walk into like an entry level trading position. So even if there was no
Patrick (CEO of WSO): [00:15:49] Backup for saying, even as a clerk, you felt like you could talk about the trades on such a level because you'd kind of been picking his brain for almost half a year, you felt like you were ready kind of to go into it.
Knightshade: [00:16:00] Interview OK. Exactly. Yeah. It was like six months and it was it was literally the only thing I thought about day and night. So like at the end of those six months, I knew exactly his business model. I knew how he traded. It was, you know, it was kind of like second nature to talk about. So, you know, if they if they got a guy from an Ivy League school to come in for a trading assistant role at a top firm interview. She would probably sound smart because he'd have a bunch of credentials like, oh yeah, you know, I went to Stanford, I have a computer science degree, right? I also know a little bit about finance. I have a background, you know, I've been doing trading on my brokerage account or there's this guy from UIUC who took on all the risks in the world by declining offers and working for free. Basically, who knows everything about actual market making. So when they talk to me in an interview that ended up working out well, but so but the trick is like, how do you? You have to have a resume that's built to get you that interview in the first place again. I had zero connections, but I, you know, I built my resume up to look somewhat perfectly. So like, you know, the top bullet points were, Hey, I worked on the trading floor for this firm. I have this experience with these, with these numbers. And then below it had all my I knew all the buzzwords at that point. Now I knew they were looking for people with engineering backgrounds, programming background stats, backgrounds. So I hit all those buzzwords. It's not like, you know, I had that experience in college. It wasn't my major, but I definitely could expound upon the fact that I have experience in our stats programming in Python, right? And things like that.
Patrick (CEO of WSO): [00:17:24] So you were you were comfortable enough to put it on your resume where you felt like an interview. If they challenge you on it, you could at least talk about it and you would be completely lost.
Knightshade: [00:17:33] Exactly. So yeah, as long as you could talk about like the application of like, yeah, I can do like financial modeling and python on a basic level, I can work with data structures, but I understand more so that like if I can do these things, what am I going to do with that? Like, can I can build a volatility pricing model with like a little bit more complex stuff than like the average floor trader? I don't know. That was valuable. So after a few months, I did start landing interviews.
Patrick (CEO of WSO): [00:17:59] Tell me about that process, you said after a few months, you walk out of the room. What's the first thing you do after you say no, call somebody invent?
Knightshade: [00:18:09] Yeah, yeah. I probably called one of my buddies to like, do this a bunch of bull crap. Yeah. Then I get home and then I hop on a computer kind of like doctor at my resume a little bit better. And then just, I'm on LinkedIn. Look for all the easy applies. So like you put in trader and then it's like it'll bring up a bunch of different job job, whatever that people are looking for. And you find the ones that said easy apply and put your resume on it and you click all the easy replies that you can. It's a big time. No, again, I don't really care what firm I'm going for right now. I just know it needs to be a firm that has enough people where it's like, you know, they're trading more than one market because the guy I was working with before he was a stand alone guy trading beans, which. You know, I need to take that experience and go work for like an actual an actual firm that has multiple deaths and multiple.
Patrick (CEO of WSO): [00:18:57] So how did you? Did you do a did you like a filter on your on your LinkedIn search like employees, 50 employees or more or something like that?
Knightshade: [00:19:04] Exactly. Yes, I did a filter. I want anything trading related, anything like an analyst. Related.
Patrick (CEO of WSO): [00:19:11] But did you have to buy like a premium LinkedIn premium to do that? Or is that that built into like the standard LinkedIn standard LinkedIn? Ok.
Knightshade: [00:19:19] Those are the standard LinkedIn, OK? Yeah, I mean, after doing that and then also doing like the nitty gritty applications, you have to put in all your information. It's tedious, but you've got to do it anyway. You know, maybe I apply to like 50 different firms that I could got a few interviews. And then so step one is like, you know, you talk to HR on the phone and they kind of just go to your background. And that's where it's easy because now that my resume is built and it has this training experience, this lady in HR, like she's just doing her job. Clearly, this guy has training experience, so we're just going to move him along, right?
Patrick (CEO of WSO): [00:19:49] And so just as long as you don't sound like a complete psycho on the phone or weird?
Knightshade: [00:19:53] Right? Yeah, right. Yeah.
Patrick (CEO of WSO): [00:19:56] Got it. Ok, so you're basically like, at this point, you got the right resume, at least for an entry level trading role, right? You didn't feel like how you had you seen other people kind of go and become a clerk and then try to join a firm like this. How did you know that specifically, this was a path?
Knightshade: [00:20:16] And actually, I was told that this definitely was not the past.
Patrick (CEO of WSO): [00:20:20] Right, right. That's what I would have said. I would have been like. That's kind of a weird like you want going onto a floor and then going, trying to apply to like prop shops and stuff like that. It's just weird to me.
Knightshade: [00:20:29] Right? Well, because if you have no connections and you don't have a stellar resume, you're never going to get to interview at Chicago Trading Company or emcee or observer. You're just not going to get that interview. There's guys that are applying with 4.2GHz extracurricular ton of project experience, all from Ivy League.
Patrick (CEO of WSO): [00:20:46] So what made you so confident walking out that door like you just felt like there were other training shops that maybe it wasn't the top prop shop so you could get a job at or something?
Knightshade: [00:20:54] Yeah, I mean, so there's smaller firms like, I don't know, like there was spot trading was actually like, that's actually a tough one of the other top firms. It's no longer in existence, but that's one I apply to. You know, like maybe 50 people, 30 people in the organization, those are the kind of things I targeted. Ok. And so you know that there's. I think the word is like there are like wedo firms, I don't know. They're just not top firms, but I knew that given my experience, that they're at least going to entertain my background. Right? That's right. So after getting the interview, then you you talked to HR and they put you on the next segment, which is like, maybe like a math test, OK,
Patrick (CEO of WSO): [00:21:29] Before you before you go into that recruiting thing. Can you tell me what to look out for? Like the types of? There's a lot of gray area in these prop shops, like some of them want you to trade, like bringing your own capital. What should people look out for, like if the listeners are interested in this type of job? I know there are a lot of shops out there, like boiler room shops where they'll just take your money. So can you tell the listeners what to look out for?
Knightshade: [00:21:53] Yeah, I mean, if I ever saw something where it was like a like a draw or like you had to put in capital to trade, you just don't want to do that. Because first off, if you if you're entry level and you don't know how to trade, then you're literally just going to like it just doesn't even make sense. Those types of organizations are for if you have trading background and you know that like, let's say you've been trading on a brokerage account for six years and like, you know, for a fact that you that you can make money, you proven it to yourself and you really want to take that risk. You can go work for a firm or they'll give you capital backing and then you kind of like split the P&L. But again, the issue with those is that they don't have their technology is not sophisticated at all. So like, you know, I don't know much more beyond that. It's just it. Just that is not the type of trading that I would recommend or even entertain as a as a profession, because like, there's so much randomness out in the markets like, yeah, it's just it's just it's just doesn't make sense. So what you do need to look for is, you know. Go to the firm's website, see, you know, see what they're saying, make sure they have like a strong, like kind of like recruiting segment of their website, like do they have a bunch of job postings or other job postings? Do they have some sort of progression like an internship program? Do they appear at school like top target schools? Like are they going to Michigan, UPenn at MIT, stuff like that? Are they appearing there? So that's, you know, it's a good firm because they're putting in the effort to go meet new talent. And if they're grabbing new talent at 22 years old, that means they're trying to grow the firm. But they're also not giving these people immediate like large responsibilities. Got it. So that says that that's a real company.
Patrick (CEO of WSO): [00:23:33] That's great advice. Yeah. So public service announcement for the other firms. Yeah. Ok, great. So continue. So the recruiter. So you start you sort of sending out these resumes. You start landing some interviews. Are they decent shops or are they kind of mediocre medium like? And then what are they? What are the interviews like?
Knightshade: [00:23:52] Yes, I mean, they're decent shots again, I didn't really care as long as it kind of fit that criteria where I knew it was a real firm, like I knew that they had capital at risk and that I would be. And it wasn't. I wasn't. I wasn't interviewing for trading roles. It was trading assistant. But Trading Assistant kind of goes with the notion that you're going to become a trader after a year or two. It was all trading roles I was applying to. So yeah, you talk to the lady on air and they shove you through like kind of like his mass tests or like cognition tests.
Patrick (CEO of WSO): [00:24:19] Is that all online or you have to go on site for that?
Knightshade: [00:24:23] Um, it's either online or over the phone with the HR lady. Got it. Ok. Or it's with like an entry level trader that just hopped on the phone after like a second phone call, like a day later or something.
Patrick (CEO of WSO): [00:24:36] Can you give me an example of that type of like a question they would ask you?
Knightshade: [00:24:44] I don't know. Expected value of a dice roll. It's three and a half. And or like what's thirty one times? Thirty three? How fast can you do that? The answer is ten, twenty three. So they want to know how quickly you can one they want to know. Like, can you keep your composure under a stressful question? And two, are you accurate? But even if you're not accurate, it's like how you compose yourself after you get it wrong. Got it! Maybe there's like a little bit more complex of a question that they have to like help you walk, that they walk you through, at least if you can show, show them that the light bulb went on at some point throughout that conversation, you might have a chance at moving forward. Got it. But more interestingly, it was like kind of the, you know, the cognition test, the online test. So maybe it's like 30 questions is on either multiple choice like math stuff or just kind of like pattern recognition and like. I don't even know how to explain it, but I took one the place I got hired at ended up getting hired. There's like a cognition and speed test and I scored ninety nine percentile, which I thought was pretty cool. Proud of myself for that myself.
Patrick (CEO of WSO): [00:25:49] That's pretty bad ass.
Knightshade: [00:25:51] Yeah. Yeah, it's actually really cool.
Patrick (CEO of WSO): [00:25:53] Like pattern recognition, like one of those IQ tests like that that like they'll have like a pattern here. You have to match it from like the other side or something like that. And it's complex. So it's like, yeah, spatial and it's testing like your spatial intelligence. You're OK. Cool.
Knightshade: [00:26:07] Right, right. I think it's actually
Patrick (CEO of WSO): [00:26:08] That doesn't surprise me that you scored 99th percentile if you were getting 30 kills on Halo back in the day with no
Knightshade: [00:26:14] Death without dying.
Patrick (CEO of WSO): [00:26:16] Yeah, you got to imagine like your spatial and like, I don't know, just hand-eye coordination, like whatever it is, it's just off the charts for to be that good at those video games. But yeah, go ahead. Did you play sports, by the way?
Knightshade: [00:26:29] I mean, like growing up when I was young, I did like baseball, maybe helped a little bit. Right, OK. I was more nerdy college in high school and college.
Patrick (CEO of WSO): [00:26:36] It's all good.
Knightshade: [00:26:38] What planet
Patrick (CEO of WSO): [00:26:38] Nerds here?
Knightshade: [00:26:41] Yeah, so I guess after that, then they kind of if you pass these, you know, the math test, the cognition test talked to air, they know you're not crazy, then they'll pass you on to a full final round in person or maybe not final round, but you're still going in so they can meet you. Mm hmm. And so this this I got ended up getting hired at, you know, they put me in a room with seven guys who have no clue who they are. So they introduce themselves, like if you like their first names, they'll save their role at the company. Hey, I'm so and so I trade crude oil. Right now, I'm a portfolio manager of this product, blah blah blah. So this whole process is super intimidating. Like. I maybe it was just me, but I can't stress enough how intimidating it was because, you know, you're dealing with people that clearly know exactly what they're doing and they know everything that you want to know, but you don't know it and they know you don't know it. So they'll ask you questions that are like, kind of again, they want to see how you deal with stress and how you deal, like, maintain composure even when you don't know things. But yeah, so they would ask me again, like math questions or like, you know, if you could stack for if you had a stack pennies all the way to the height of the Sears Tower, would it be able to fit in the small room? And then you have to walk them through that. So you said obviously the answer's yes. When you talk about the square, the square inches of the penny and how it would fit within like, you know, a couple of square feet in the office, I don't know. So you have to walk them through that. And then they would ask me questions on trading like, you know, you know, put call parity. You know, right? They asked me the missile of the trader I worked with on the floor. Things like that. So yeah, I mean, obviously, like the interview went well, I got hired.
Patrick (CEO of WSO): [00:28:22] So, so you you're jumping for joy, doing cartwheels when you got that offer, how did that tell me how you felt when you got that call?
Knightshade: [00:28:29] Yeah, yeah. So I walked into my dad's office, which was like right down the street. And we were I was just like telling him how the interview went and then I got a phone call. This was like 30 minutes after the in-person interview and be like, Hey, like, we'd like to give you an offer. And I just, you know, I sat on the chair and just like exhaled because I've been holding my breath for a good six months. Yeah, or a year or whatever, and I finally got the offer.
Patrick (CEO of WSO): [00:28:51] So how long between when you walked out of that room to when you got that offer? How long were you unemployed?
Knightshade: [00:28:58] Uh, so it's from it was November of 2014 is when I left the trading floor and I got hired in March of twenty fifteen.
Patrick (CEO of WSO): [00:29:05] So yeah, it starts getting stressful at around that time.
Knightshade: [00:29:09] Yeah, yeah. Because the new hiring season starts, you got kids that you're younger than you now that are being looked at, so your window is shrinking.
Patrick (CEO of WSO): [00:29:16] And so did you feel like it was a structured process, given that this is, you know, a well-respected prop shop? Or do you feel like it was like they were looking to kind of get more training assistant in there because they had lost somebody? Like, was it an off cycle type of hire or was it something that like was alongside other candidates?
Knightshade: [00:29:37] It was alongside other candidates because I had seen other people waiting to be interviewed
Patrick (CEO of WSO): [00:29:41] And like, how many seats were they giving out and how many people were like in that final round or if you had to estimate.
Knightshade: [00:29:48] And for that final round, maybe like five or 10, obviously they had slicing through a bunch more through the phone process, but you have maybe five or 10. And I was the one that ended up hiring two people, actually. So a guy from University of Chicago that had like a master's in math and then me. So I was a little a little intimidating getting hired alongside this other guys. Yeah.
Patrick (CEO of WSO): [00:30:10] No pressure.
Knightshade: [00:30:11] Yeah, no pressure. Yeah, no. I was definitely confident myself. I knew I was. I had some sort of unique ability that it could be of value to guys. But yeah, so so this firm was, you know, I was I was at this firm for three months. And of course, lo and behold, they ended up going, I don't think the right word is bankrupt, but they ended up closing the entire office in Chicago. So after three months there, so from March 2015 to July, twenty fifteen or whatever, I worked there and then I was without a job again.
Patrick (CEO of WSO): [00:30:39] Oh my gosh. So you're like back to square one. But again, now you've gotten hired by respectable prop shop. And it's not your fault that the office closed. So you're still kind of OK, now I've got to go through this whole cycle again. But but you're still kind of in a good spot resume wise.
Knightshade: [00:30:56] Exactly. So now I'm even more refined. I got four months on crude oil options. I'm actually like sitting and watching them decision making. I would sit in on meetings for like risk. Mm hmm. Kind of like the partners of the firm. So I totally, you know, and I'm applying what I learned on the floor and seeing it like comparing the differences. And like, I don't know, it was definitely a unique experience. So, yeah, so the last day at that firm ended up being my first day at another firm I had been interviewing getting looked by a lot of firms, you know, even top firms like CTC Caliber.
Patrick (CEO of WSO): [00:31:28] How long did you have when they said, Hey, we're closing this office, how a couple of months.
Knightshade: [00:31:32] I had one month, one on Monday.
Patrick (CEO of WSO): [00:31:34] Not a lot. And so you had already been you had already been kind of getting calls and stuff from other top firms.
Knightshade: [00:31:41] Yeah, yeah. I'm sorry, I put my resume out there again, and I was getting hit left and right. But you know, again, you know, at that time, I'm twenty two years old. I want to have money to go hang out with my friends. So I took, you know, I took the next job I could. So it was it was an equity options trading firm. They were definitely renowned in that space. They were heavy in the VIX products they had. Guys have been trading VIX options for 20 years. There was, you know, the largest players in VIX. And I just thought that was pretty cool because VIX options trade differently because it's already it's already a volatility derivatives product like the future on a VIX product is
Patrick (CEO of WSO): [00:32:16] Like the derivative of a derivative derivatives. Volatility is even crazier or whatever.
Knightshade: [00:32:22] So it was it was definitely cool to learn from these guys. And then I got to talk to people that were trading equity like baskets of equity options. So like anything from Apple stock to Tesla stock, all that stuff like learning how options trading works in tandem with like short selling as part of your hedge and like hot, like the hard to borrow stocks like stocks that are super heavily short and like how it's not easy to actually get a hedge off. If that's the case, I don't know so much like intricate things I learned at the shop, and I might have met a bunch of good people, and it's just fun to be around these smart people. But again, it was, you know, this wasn't a full time trading gig, so I was just, you know, stressing out like, Hey, like, you know, I'm now
Patrick (CEO of WSO): [00:32:59] You're still an assistant and you're still a trading
Knightshade: [00:33:01] Assistant. Yeah. So I'm a year, a year and a half out. I have all this experience, but I, you know, what am I going to actually get my footing? So then. Uh, I interviewed for a trading role at that firm, and unfortunately, they gave it to the guy who had been interning there for three years. You know, it's not like I interviewed that, but you know, either the guy that's been interviewing or interning there three years or the guy that just showed up a month ago.
Patrick (CEO of WSO): [00:33:24] So that's tough. That's tough. So you felt like you had the job. It didn't happen. They gave it to another guy. And then so you had to keep interviewing. And so why were you interviewing? You just felt like you weren't going to get the trading job at this second firm. They weren't going to promote you any time soon.
Knightshade: [00:33:39] Um, I think I was just getting impatient, so while I was training while I was a training assistant at that firm, I was like, Hey, you know, I want to I want to move up the ranks. Can we can I interview along alongside this intern that's also gunning for this role? Mm hmm. So they let me, they let me interview. And then after, you know, they're like, Hey, like, you know, we're not going to give you the off the type thing. You ended up being kind of like a not an awkward situation because, you know, I got the job offer in the first place at this firm because I had a friend that worked there. So it's kind of it's kind of more of a favor like it was kind of just, you know, no hard feelings like, yeah, we're just we're going to give the guy that's been here for three years the job, not, you know. So, you know, this was September 2015. You know, I talked to the lady that hired me was like, Hey, I'm going to see what else I can do. She's like, Yeah, feel free to stick around for another month if you need time. Good luck on the rest of your stuff. So I stuck around for months.
Patrick (CEO of WSO): [00:34:30] Wait, so you're saying because you were a training system you interviewed to try and get a promotion, you didn't get it. You had to be like, Leave the firm now. It's just because it's like awkward, that's way it works, like if you're not getting promoted, you're kind of out is that?
Knightshade: [00:34:43] Yeah, like it was, you know, there was really not much of a need for me at that point, you know, because the track is your trading assistant, you go to trader.
Patrick (CEO of WSO): [00:34:51] It was just, yeah, but you'd only been there for like how many months
Knightshade: [00:34:54] I was there from July to September.
Patrick (CEO of WSO): [00:34:57] Yes, it's like three months. And then that's enough for it to be like, OK, that's it, OK? And it's a different world. I don't get it. But OK,
Knightshade: [00:35:05] Yeah, no. It was definitely kind of an interesting situation. But so now it's like, All right, so I've been at three firms now I have all this trading experience. Am I diluting myself? I'm not a trader yet like it was. Trust me it was. It was a very stressful time. It's like, Am I making the right decisions here? But obviously I had, you know, I had a goal in mind, and I think that's extremely important is to have, you know, you need to know what you want to some degree. So then you can talk about your journey and sound smart about it as you're talking about it.
Patrick (CEO of WSO): [00:35:34] Your story? Have your story down.
Knightshade: [00:35:36] Yeah, yeah. Your stories don't. So Yes. And then from September 2015, I'll wait till February of twenty sixteen. I was just interviewing and I was getting hit, but it was it was post hiring season. And again, like the barriers to entry are super hard. If you mess up one math question on the phone interview, you're not getting on to the next round. If if the guy didn't like one remark on the phone interview, you just thought, you know, if you say something wrong, that's brutal.
Patrick (CEO of WSO): [00:36:02] That's what seven months of interviewing.
Knightshade: [00:36:05] It was. It was another five months, five months interviewing.
Patrick (CEO of WSO): [00:36:08] Yeah, that's insane. So, so at what point did you think, Hey, I'm just this is not going to happen. I mean, because there's so few seats out there, right? There's only whatever, like a whatever, 30 40 prop shops out there that are like respectable, right? At least ones that aren't super tiny. And so did you feel like, hey, this is just not going to happen for me? What was that month for? What was your thought process of like, you're getting enough hits where you're still staying positive?
Knightshade: [00:36:35] I was getting enough is to say slightly positive. Yes. Secondly, it's just it was a big mental game. It was just like, you know, again, yeah, there was definitely times where I was super discouraged. I was like, This is never going to happen. Like, there's guys that are, you know, not way smarter but are just way more qualified. You know, they're a year younger than me now. They're coming out of Ivy League schools. These are these are the people that are getting hired like it's never going to happen. But at the same time, I just knew in the back of my head, like, I know the experience I have and I know the things that, like my superiors were saying to me, they're like, Yeah, you're actually really good, like it were oppressed, things like that. I don't know, and I just don't really take no for an answer. Again, I'm stubborn and I and I just I just knew that it was going to work out. I just kind of had face.
Patrick (CEO of WSO): [00:37:17] So what you where do you think that comes from, like your stubbornness or is it like a family trait or is this something you just kind of grew up being like that?
Knightshade: [00:37:26] By. I think it's, you know, maybe it's a family trait, I think maybe my mom has it, but yeah, I've kind of been that I've been that way, kind of my. And my whole life, I don't know. And like, I just I, you know, again coming from kind of like a poor background, like not having not having much. Like, I don't know and like and I was smart and all my friends were kind of rich. So like, it was like the societal pressure of like being able to like, have enough money to go, hang out with my friends, you know, like they're going on like yachts. And, yeah, you know, going on vacation and like doing all these fun things like, well, I at least want a good job to talk about. So it was more than just like having a good job. It was like I needed it, like I needed it for, like my my existence, you know? So that's what really drove me.
Patrick (CEO of WSO): [00:38:09] It was like, Yeah, because you were friends with people who just came from, you know, from more, you know, they had more wealth. And so like, they were doing all these things. So it was like even more of a motivating factor because you're like, Man, I want to I really want to do all these things with them, but I can't like, I can't go take the trip. I can't do this. Ok, so that makes a lot of sense. So you're you're kind of like, Hey, I just even if you didn't have that much money to like more of a societal thing, like you said, were you having that job would at least allow you to hold your head up high, right?
Knightshade: [00:38:37] So it was something it was something cool to talk about, something you'd be proud of. I don't know. Yeah. So that makes total sense. Was a bigger driver than anything else, I would say.
Patrick (CEO of WSO): [00:38:46] So you're stubborn, you're continually to interview like, are you getting to the point where you've kind of applied everywhere? That's like,
Knightshade: [00:38:55] You know what I mean? You'd be surprised. You'd be surprised. There's always another firm. But yeah, I mean, I definitely applied to most places, that's for sure,
Patrick (CEO of WSO): [00:39:02] Because you ended up at a great place. Yeah. So I'm surprised that like you were interviewing for that long and then ended up where you did so. Can you tell me a little bit about like, how that happened?
Knightshade: [00:39:14] Yeah. So when I was when that firm was going down that second term, when it went bankrupt or whatever the word is I had, I had gotten a hit from this top firm. And so the interview went well with I'm on the phone. I had talked to some of the traders there. Mm hmm. And you know, the feedback from HR was like, Yeah, these guys are generally pleased we'll get back to you. But they never they just never got back to me. And that's just kind of how it goes sometimes. So it was ended on a positive note. I just hadn't heard anything. So I reached I reached out again. It had been seven months or whatever. So that kind of it made sense given the time that it passed to reach out again.
Patrick (CEO of WSO): [00:39:50] You didn't. So after the initial phone interview that they said, Oh yeah, I was great, you didn't reach out again for seven months.
Knightshade: [00:39:56] Ask a good question. Come on,
Patrick (CEO of WSO): [00:39:59] That doesn't sound, that doesn't sound very stubborn.
Knightshade: [00:40:03] Honestly, I mean, you know, it's fun. Probably. Yeah, I probably
Patrick (CEO of WSO): [00:40:09] Probably once or twice. And then it was just radio silence. So you like, you just let it sit.
Knightshade: [00:40:13] Yeah, yeah. Yeah. And eventually, you know, they just end up getting back to me saying, Hey, we have a new role in Eurodollars and it's a trading role. It's it's for the European shift. It be an overnight role. What are your thoughts on that? And I said, yeah, I'd be happy to interview. So the kind of the kicker there is that it's overnight, no one. You know, people that are entitled, they don't want to work. The overnight rolls your pool of candidates kind of shrinks pretty quickly, I'm sure.
Patrick (CEO of WSO): [00:40:42] So what are your hours?
Knightshade: [00:40:44] So my hours are whatever like 11:00 p.m. or midnight to 7:30 a.m. like that brutal which again, like, you know, I don't really care, like it's not to me, it's not a big deal. Just being able to have this experience might be something I'm proud of. Was it was enough. So yeah, they say, you know, I did another phone interview with HR. You know, you could you could just tell the difference in an employee quality. I hate to say, but like even just talking to the lady in HR, you can tell she's dealing with, you know, a lot more, you know, people with higher credentials. You know, this lady is also hiring, you know, head of fixed income, head of commodities, head of equity.
Patrick (CEO of WSO): [00:41:23] She knows she knows what she's talking about. It's not like some just random H.R. person. It's like she actually understands trading. Yeah. Got it.
Knightshade: [00:41:31] Yeah. So everything about this process is definitely more intimidating. You can feel that it's way more refined. So, yeah, so they did go. It was either Wall Street, Oasis's website or some other forums, and I read up about the specific interviews at this firm. I read every single post on the internet about that firm. There wasn't a single post I didn't read.
Patrick (CEO of WSO): [00:41:54] So surprisingly, a decent place to find out about prop shops. It has its own little kind of micro community.
Knightshade: [00:42:01] Yeah.
Patrick (CEO of WSO): [00:42:02] But yes, OK, you read everything you could absorb, everything you could. But it was still like, how else did you prepare? It's just like, Did you were you like practicing mental math going into it? Or how did you, I guess
Knightshade: [00:42:14] Practicing my math and then like having conversations in my head kind of like a crazy person like, you know, like imagining a question being asked to me and then like thinking about my response and then like rethinking about that response. And just I was obsessive. It was very it was very obsessive mentality, but it was so my thought process became so refined after a year and a half interviewing. And like all this experience that like, I was able to respond kind of in a well thought out smart way.
Patrick (CEO of WSO): [00:42:40] Did you ever think of getting a mentor or doing mock interviews more like with friends that were in the business?
Knightshade: [00:42:46] To be honest, I didn't. Even I didn't even know that it existed. But had I, I definitely probably would have. Yeah. You know, speaking to someone in the industry that's not interviewing you, but that can tell you all these good things is probably the biggest advance. I'll give you
Patrick (CEO of WSO): [00:43:00] Honest feedback like or give you honest feedback like, Hey, that story is good, your story is good, but this this part's a little weak. You know, let's tighten that up. Cool. Ok, so you you're doing well, you're like, oh man, you can feel this is like a much more legit shop just through the conversation with air. She passes you on what happens next.
Knightshade: [00:43:21] So then I get a phone interview scheduled hits with these two guys that trade the product. So yeah, it was basically everything I read on the forums in terms of like types of questions they might ask me. So the very first, you know, they introduce themselves and then the very first question they asked me is, you know, after going through my background on my resume, I talked about that a little bit. It was like, so the first question was, I can't remember. It was like, add up your telephone number and then multiply all the numbers and then something else, some sort of mental math using my telephone number. And I had literally just done that problem 20 minutes prior and memorized the answer. Even though I had just gotten a new phone number, oddly enough, that is when they asked me that question, I answered it right away. I did do the mental math in my head, so, you know, I don't feel totally dishonest, but I knew the answer ahead of time. But, you know, I answered it right away to the point faster than these guys even calculated it. They probably asked me. And then, you know, get it on a calculator like, wrote it down real quick. But by the time they even wrote it down or whatever, I had already answered it in my head. So that was basically, you know, that was it like, that was my the very first thing I did from that on, they were already impressed. And then they asked me about my thoughts on Janet Yellen and Fed policy moving forward and like how your dollars implied vol shit should behave given certain scenarios. Talk about that for a little bit.
Patrick (CEO of WSO): [00:44:39] How did you? Were you ready about? Do you feel? Do you feel like you're actually well versed in macroeconomics and interest rates and movements across those? Like, did you prepare for it knowing that it was your dollar?
Knightshade: [00:44:51] Um, you can prepare for it. No, I don't think I had really a deep understanding of macroeconomics, but I did know that like, just like basic stuff that like if you like an interest rate product goes up, that's yields going down, right? So just just just because I knew that I was able to like back onto to you. Yeah. Back into Holick puts behave given that reverse scenario and then like talking about like, I don't know, we're talking about like the Fed dots. I guess I had read some articles about like the future projection of of rates like this is kind of like a big thing that was being talked about in 2016 because this is when they first started to raise rates. So there was definitely stuff easily searchable, easily showing up on Google, where if you had just read the Wall Street Journal articles or MarketWatch or things like that, you have, as long as you're paying attention, you're making an earnest effort at understanding these things, then you would you'd be able to talk about it.
Patrick (CEO of WSO): [00:45:47] Ok, so continue. So yeah, so they're impressed right away, because is this something the whole phone number thing? Was that something you had like? Read about somewhere, so you knew it was potentially coming, or was it something you just did like? Where did you how did you get so like, that's kind of lucky bad, right?
Knightshade: [00:46:02] Like I am telling you, that is the luckiest thing that happened in the whole process. I mean, so yeah, it was definitely it was in a forum. I read the problem did it in my head while I was like stressing out at sitting in like some office in my dad, like a spare office in my dad's office. I was like going over these weird problems and the phone call started, and that's when it happened. So it was kind of just like sitting in my my, my, my mental ramp. It was kind of bizarre. The answer was already there. Yeah. So yeah, it was super lucky. But yes, then I get off, you know, I get off the phone. You know, you could tell it, they were impressed because of the way I answer these certain questions. Then, you know, air got back to me. They're like, OK, everything went great. We'd love to bring you on site. Great. So, yeah, I love that.
Patrick (CEO of WSO): [00:46:44] Yeah, I'd love to hear about that. Yes, you go on site now. It's like, OK, almost like a final round, right? So you're
Knightshade: [00:46:49] Yeah. Yeah, this is the final round based firm in your best room in Chicago. I am. I am sweating. You could visibly see all my fittings, everything you know, this is, you know, so much adrenaline. My hair's falling out and like that. Oh my gosh.
Patrick (CEO of WSO): [00:47:04] So you're like, was it the summer or something? Or are you just so nervous?
Knightshade: [00:47:09] I was just, no, it was. It was what was January, so I was just nervous. You just
Patrick (CEO of WSO): [00:47:14] Never.
Knightshade: [00:47:15] So, yeah, I walk into the office. The first people I talked to is the lady on air and then the two guys I talked to on the phone for the phone interview and it was kind of more of the same. It was just cool. That kind of like after they were already impressed. It was just nice to like, meet these people, shake their hand. And then like, from there, it's more of like a body language thing like they want to know, Do you have a firm handshake? Is the way you speak? Is it authoritative, right? Can you look me in the eye? It'll look like you have a deep gaze where there's something going on behind your eyes. You know you're smart.
Patrick (CEO of WSO): [00:47:47] It's more like it becomes more behavioral once that you pass that crazy technical. Yeah, got it. Make sense.
Knightshade: [00:47:53] You know, these guys, you know, these guys don't have to sit next to you every day, so they want to know that they like you and that you're like, I'm the same mental wavelength, right? Cool. That was kind of big. Yeah. So then they went, they went over like, you know, your dollar trading strategy and like, kind of like basic stuff, but like something that no one would know unless you actually traded the product. So they wanted to see how quickly you can learn something in an interview. And so when he went over those things, you know, I understood it pretty quickly. And so like it was, he asked me, like one question, it was either this or that I forgot exactly what the answers were, but I said, You know, 50 percent, you have to get the answer right. I got it right. So and he was like, All right, well, that's enough. And so after that, they brought in the partner. So this guy is the was the head of Eurodollar trading. So this guy is, you know, this guy's big time. He knows exactly what he's doing. They're very intimidating, very smart. Like, seriously, even if I didn't get a job, it was just cool to like, speak to this person. Yeah, but you know, they kind of explained the trade like the general thesis behind their book, the way they trade these options. And then they wanted to see like kind of the questions I can regurgitate after they explained it. So just to see how you synthesize what they talked about and you know how you think. And so that went well enough. And then again, he did a mental math question that the partner did the question of thirty one, thirty one times thirty three. I answered that pretty quickly. And so that was enough. And you know, there was there was a need for someone to work the overnight shift and it was down to maybe five candidates, the four candidates that didn't get hired, you know, they were all again, they were all Ivy League guys like Stanford, Princeton and stuff like that. But they just didn't quite have, you know, they didn't have the knack and they didn't answer the telephone question faster than me. So they hired me.
Patrick (CEO of WSO): [00:49:35] Oh, my gosh, that's amazing. That's just amazing. So that's got to feel pretty good after that launch search. Cool, man. So tell me a little bit about how it's been there and what's it like you? You've been working the overnight shift for how long now?
Knightshade: [00:49:51] Yeah, yeah. So to be clear, I'm not that firm anymore. Okay. Funny enough. So yes, I was there for two years and I took that experience because, you know, I'm impatient and stubborn and I want to keep climbing. So now I'm at a start-up trying to like, grow a business, which is pretty cool, but I can. I can definitely talk about my experience trading your dollars. Sure. So, yeah, I mean, my first day on the job, you know, this is. You know, this is when Yellen's starting to raise rates and like, you know, just no comparing the sizes, you know, when you're trading options, it's not like the amount of sizing you're doing like, you know, maybe on the floor in the veins that they're trading 100 ups and maybe on the crude oil desk, they're trading 500 up. And then when I
Patrick (CEO of WSO): [00:50:29] Can you explain that for the people who don't know those terms, five hundred up? Can you explain what that means?
Knightshade: [00:50:34] Yeah, it's just like the size of the contracted trading. So like if you're on the screen and you're looking at options and you want to trade something like a put spread or like a put or a call spread or something, you know, there's a, you know, you decide how much you're going to do. So one lot would be just one option, one hundred, that would be a hundred options. So, you know, 500 up means it's 500 options on the on the package or the right option. So it's just, yeah, it's just a measure of the amount of risk you're taking. So, yeah, so I walk into the first day on the Eurodollar desk and they're like, Yeah, you know, we're half a bit at one hundred thousand up. So it's definitely a big jump from, you know,
Patrick (CEO of WSO): [00:51:13] They're moving a little bit more money.
Knightshade: [00:51:16] Yeah. So that's how you knew. And just looking like the option inventories, when you look at the actual position and the risk that they have on it was definitely, you know, it was institutional size like it was, you know, Goldman Sachs would have a similar book, but they wouldn't because they don't even dabble in option volatility market.
Patrick (CEO of WSO): [00:51:33] So you guys were like, were you big enough to actually move the market?
Knightshade: [00:51:36] Yeah, oh, yeah, we would we would trade things, and it would shift the entire term structure. Wow. Yeah. So I mean, it was super cool. And then like, you know, asking people, I mean, the culture was kind of, how do I explain it? Like people were kind of quiet, like they all kind of just tell there's a lot of gears turning in everyone's head, which is cool in its own way. So you had to be like choosy about the questions you ask. You know, you don't want to sound too stupid, even though you were stupid relative to everybody else.
Patrick (CEO of WSO): [00:52:05] Yeah, it was kind of it was a quieter, kind of more intellectual culture. Got it. Ok, so people were kind of just really focused on their job because so much was at risk, I'm sure, across all those tests. Ok. So, yeah, I'd love to hear. So, you know, day to day, what were you? Were you with those two, those two guys that were kind of interviewing you initially, like kind of sitting alongside them? Were you given a book right away? Like, how did how did that work? And then talk to me about comp a little bit to.
Knightshade: [00:52:34] Oh, yeah, sure, so, you know, when I started, you know, I sit next to two guys that hire me and there's a couple other guys that were kind of same seniority, you know, mid-level traders. So I'd watched them train on the screen. Then they would ask me questions when it was quiet, just like gauge, whether I understood what was actually going on. Like if something, you know, because as the markets are active and moving fast, there's a bunch of like a bunch of noise and it's all about like, can you filter out the noise and figure out what the trades are going through the market that actually matter? So they want to know whether I was picking that up or not. And then just generally option theory and stuff like that. So after two months of doing that kind of stuff, they just basically said, hey, all right, we're going to start you on the overnight session you are now in like you're now the guy. So yeah, my day to day, I would get in at like 11:00 or midnight, something like that.
Patrick (CEO of WSO): [00:53:24] But tell me about that first. Tell me about that first night.
Knightshade: [00:53:29] Yeah, I mean, it was it was definitely adrenaline. Oh, it's so much adrenaline. Because like, you know, like,
Patrick (CEO of WSO): [00:53:36] Please don't blow up. Please don't blow up my first night, right?
Knightshade: [00:53:38] Yeah, exactly. No matter how much fear, you know, like actually trading is a totally different ballgame.
Patrick (CEO of WSO): [00:53:44] So how active did they expect you to be? Can you talk a little bit about, like you said, the positions were huge, but like, are you? Can you talk a little bit about the specific trades you are putting on? And then almost like, you know how active you had to be? Was it like constant movement where you're coming in and out of of trades or just explained to someone in the, I guess, a little bit more like a I'm a fifth grader level?
Knightshade: [00:54:10] Yeah. So I mean, it's a good question because it's not there's no like right or wrong answer, really. So yeah, I mean, they did expect me one hundred percent if it was a trade, I needed to be doing. Like, you know, first off, it was expected that I memorized the entire position. So like, you have 30 different expiries and we have all these different strikes and all this different inventory, I need to have the entire book memorized where we're long, where we're short, what's our general like risk position in terms of like Gamma and Vega, the standard griefs of your book? So the assumption is you're smart enough, you have this stuff memorized. And then secondly, you need to know how the market moves. Our market moves relative to other markets. So like if you know, equities are selling off like the S&P 500 selling off rapidly, that's a risk off scenario, which means there's a flight to quality, which means our market, which is an interest rate, which is a quality. You know, it's not a risk asset, it's a safe asset, it's a safe haven asset. So equities sell off. You need to understand that there's a good chance that we're going to rally our were. Our market's going to go up, which means yields go down. That's a risk off move. So kind of just like the general function of fixed income relative to equities and like things that are happening geopolitically.
Patrick (CEO of WSO): [00:55:24] So you would be watching the other markets, seeing what's going on there and then you would start executing trades right away.
Knightshade: [00:55:31] Yes, so, yeah, so the trading so for options market making, it's really about what is your theoretical value and what is paper trying to do, papers like the institutional guys, like either people at banks or hedge funds that are putting on more specific bets, like that's the true order flow. That's the people that demand, you know, the people that demand of this product, they demand the market exists so that they have this liquidity, right? And so we're just we're providing that liquidity. Ok, so let's say there's a let's say there's a point spread and it's worth one tick. My market is half dead at one half, and I would just make sure that I'm on both sides of that market for a good size. And if it's being looked at a bunch like there's a there's a window on our software, it's called an RFP window, so there's a request for quote. And you see that it looks like it's an interesting trade that that it actually might trade, then you just make sure you're out there like you have, you're quoting, you're quoting it, that you're going to participate on the trade. And so where it becomes interesting is that like, let's say, the spread worth zero point nine and then on the screen, you see that two point spread is one bid for 5000. You have to decide based on everything that's happening geopolitically around the world, your inventory, you know, currency pairs, everything you're looking at your Bloomberg listening for different sounds. You have like little, little alerts based on like technical levels, all these different things you have to say. All right. Well, do I want to trade this or not? Is it, you
Patrick (CEO of WSO): [00:56:56] Know, is it worth the whatever that little tick or whatever you want to call? I don't know how you call it that,
Knightshade: [00:57:03] That yeah, at that point, it's a dime
Patrick (CEO of WSO): [00:57:05] The spread or whatever. Yeah, yeah.
Knightshade: [00:57:07] So yeah, it's really so the job is really about like making sure you make the right trade based on these factors.
Patrick (CEO of WSO): [00:57:13] So sometimes when you're making a trade, it's like it's an obvious trade. It's like, Hey, there's a ton of spread here. Everything's quiet, like, just do it and it's an easy one. And then there's other like kind of gray area ones where you're just trying to, you know, sometimes kind of go for it. And other times you'll just, you know, ease up a little bit.
Knightshade: [00:57:30] Exactly 100 percent. Yep, OK. So I mean, when there's clear when there's clear edge, like if that puts bread was worth zero point seven and it's one bid, you need to be the first person selling
Patrick (CEO of WSO): [00:57:38] That you're like, Hey, I'm in. Yeah.
Knightshade: [00:57:41] Got it. I would say I would sell ten thousand of those. No problem. Yeah. So yeah, that's kind of a gist. But like, you know, when I first started out, you don't you don't even understand how these things operate. Like, you wouldn't have an intuition to know, OK, this thing might trade. I need to be on it. And you know, memorizing the position is pretty difficult when you have, you know, is maybe like 500 line items that you have to have the exact number pretty much memorized. So you don't really like, you know, the risks, you know, you have a risk slide and it's like all your different Greek's based on your the the different scenarios. So you have like maybe like a packet of 10 pages, you know, we were pretty archaic. It was all on printed paper, but now it's all most top firms now to have it on screen. It's look, it's more like dynamic software that that shows the risk it's updating. But for me, it was it was on a piece of paper and it was like maybe like a pamphlet of 10 20 pages, and I needed basically to also memorize that, too. So there's a lot of memorization. And just like so this
Patrick (CEO of WSO): [00:58:36] Is just so you understand where your exposures are and if things are going certain ways, what you needed almost like, how to how to close that risk or lose less, basically.
Knightshade: [00:58:46] Exactly. So yeah. And then so, you know, the biggest thing is like, you just you have to be out there when he's like for your dollars. The deepest expiry is like four years, which is like, you know, most market making desk. It's shorter expiry like crude oil maybe have like a six month expiry Treasury option, three month expiry. So you're kind of more in and out of the market, like for your dollars, it's more of like you're kind of like a mortgage company that they put on mortgages in like warehouse, all these pool of mortgages or the like, securitize them and sell them off that thing, but like someone's holding a long duration asset. So it's just it's something trade that's illiquid in your dollars, and we've been warehousing it for a year and like, it's clearly the trade we need to be doing it. That was the biggest stress. Like, if this is a three year option and we have the inventory and it's trading the way we need it to trade, like you can't miss that or like, yeah, or you get fired, we get fired.
Patrick (CEO of WSO): [00:59:40] So because it's sometimes we'll sit for a while and when when that opportunity presents itself, you need to be there and ready.
Knightshade: [00:59:48] Exactly. Got it. Yeah, I mean, there's definitely, definitely a stressful job. But as long as you're smart and you keep after it, like
Patrick (CEO of WSO): [00:59:54] It's very rewarding. So tell me how long you were there and kind of how long were you doing the overnight shift? And then kind of what? What made you think it's time to do something new?
Knightshade: [01:00:02] Yeah, so I was there for two years. First year was kind of again more of like getting my my feet wet. The introductory, you know, I was a trader, but I wasn't super confident. And then second year, definitely more confident. They gave me kind of more authority in terms like the size I could trade. And like, you know, if if
Patrick (CEO of WSO): [01:00:23] You were doing well, you were doing well so far like they were happy with your.
Knightshade: [01:00:27] Oh, yeah, yeah, so after, you know, after my first year review that, you know? They say, Hey, if you're doing a great job, here's your here's your bonus, et cetera.
Patrick (CEO of WSO): [01:00:36] Do you mind sharing what your base and bonus was or your overall comp?
Knightshade: [01:00:40] Yeah, so. Such as a first year trader like overnight, guy, that's like, you know, you're the bottom of the barrel, you're making ninety five.
Patrick (CEO of WSO): [01:00:53] For for bass, for bass
Knightshade: [01:00:55] And your base salary, and then you and then your bonus is like even if like we lost money that year, it was actually, you know, it's kind of a black swan year for the firm. And of course, it was the year I showed up. But even when we lost money, you're at at a lower level trading that you're guaranteed twenty. So, you know, my take home was 120. But, you know, on a profitable year, it's a totally different story. So you're 95 base plus maybe like one or two times your your salaries. So.
Patrick (CEO of WSO): [01:01:25] So your second. Really?
Patrick (CEO of WSO): [01:01:27] You were you lucky enough in your second year this firm to do better?
Knightshade: [01:01:31] And yes, yeah, OK.
Patrick (CEO of WSO): [01:01:33] So were you getting did you get a bump in base at all in your second year?
Knightshade: [01:01:37] Yeah, I got a know 10k race and then yeah, the bonus was, you know. I guess a six figure bonus.
Patrick (CEO of WSO): [01:01:45] So about a hundred and fifty or so, whatever.
Knightshade: [01:01:48] Hundred, yeah. So yeah, I mean, all day, if you're at a mid to a good size mid to a good to your firm and you're a trader like mid-level, yeah, you're anywhere between one hundred and fifty to 250 is what eight hundred fifty two hundred to be conservative is what your take on is nine good years. It'll be over. Two hundred all said and done.
Patrick (CEO of WSO): [01:02:06] Great. Ok, so let's get that. Thank you for that data point. So you're in your second year, you're more confident you're trading bigger size and then you have tell me, were you still in the overnight?
Knightshade: [01:02:18] Yes, not overnight. Again, I didn't have any qualms with it like it was, it's to me it was it was kind of calming because, you know, you have the desk, there's 11 people total on the desk. And for me to go in and just be one person on an entire eight hour shift, I felt like that was kind of cool in its own way. It actually spoke a little bit if I ever needed to transition into a new firm. Mm hmm. Yeah, that was that was no issue. Yes. Second year they gave me the right to do block liquidity. So block trades, or when you have like a major prime broker, maybe like Credit Suisse or Morgan Stanley that has a, you know, a major institutional player that needs liquidity on large size. So most of the time, I would make the market for four blocks so that, you know, the block threshold is 10000 up. So yeah, if there was something super tricky, like a front month year dollar trade front month, it's tricky because it has a direct like a bet directly on like side policy over the next few months. Got it! So it's not very easy to to predict price unless you're like, you're a veteran like even people that have been trading the product for years will totally screw up trading some months Eurodollar options. It's a it's a super complex product to trade. But I was trading the block liquidity and then in terms of like my exit there, you know, so maybe I'm giving away too much.
People would figure out the firm, but yeah, I mean, it was just a general restructuring after we lost money that year. You know, the owner of the firm wasn't too happy. They fired a bunch of people, not me. They fired like, kind of like the senior level people, the head of the desk and like the senior traders. It was enough of the risk takers that had been historically profitable. They had all gone and it just felt like there's a definite culture shift there. And it felt like, you know, overnight, fine. But I want to have kind of more of an impact in like. I don't know. I just I just I was curious, so I started interviewing around. Uh, yeah, and I ended up liking the people that I interviewed with, and they were telling me about their strategy and what they're trying to do and the amount of people at the firm. And I was like, You know what, I'll I'll hop on board. So, yeah, so right now I'm at a startup. It's, you know, we're eight people. We have three guys that are veteran traders. They've been they trade at the floor. They've seen it all. Yeah, and they've got a bunch of money stored away and they're investing in technology. And, you know, they have high hopes to kind of like, start this, this new firm. So we, you know, we hired a few like Russian programmers, they're really good. Are you guys?
Patrick (CEO of WSO): [01:04:52] Are you guys starting to you're already trading or you're getting set up right now?
Knightshade: [01:04:57] Oh, no. Yeah, we've been trading. They've been trading for a couple of years now. And so I kind of hopped on board with them. So, yeah, you know, so three trips to actual traders, one guy that's kind of, you know, he's a backup trader plus like head of technology and recruiting, and he kind of like overseeing the entire operation. And then we have the three programmers we have, you know, we have a guy from Citadel who was like a developer, the guy from. The two Russian guys, actually, I'm not even sure where they're from, but, you know, they definitely, you know, they move the dial, they're smart, they know what they're doing. They've been programming for quite a while ago.
Patrick (CEO of WSO): [01:05:32] Is it more like algorithmic? Are you taking actual position instead of just market making or is it still is still a market making type shop?
Knightshade: [01:05:41] It's still it's still market making, but right, like you know, the constraint now and market making is technology like
Patrick (CEO of WSO): [01:05:49] The spreads are so small, right?
Knightshade: [01:05:50] So bread spreads are super small. And so it's now it's about latency and whether like, can you show enough size out there to compensate for that small spread? Got it. Because, you know, yeah, when spreads are small, you need to you need to magnify the amount of size, the pressure the same amount of dollars. So it's all about technology getting in and out of markets. So that's what we're working on. It's like we had to build out a hedger. So first off, it's like futures liquidity, like making sure we're first in the market for futures. And then second, it's like our quoting for options.
Patrick (CEO of WSO): [01:06:19] What made you what made you think that a start up like this would be better positioned than an established firm that you left? Was it because the people that were leading this start up and kind of their track record?
Knightshade: [01:06:32] Yeah, I mean, it was a mix of everything like, you know, I was just kind of.
Patrick (CEO of WSO): [01:06:36] I you were looking for something new
Knightshade: [01:06:38] Culture, I wanted something new. Yeah. You know, there's so many smart people at top firms that like literally to differentiate yourself from a guy that's been trading the same product for 10 years. And he's from MIT. And he knows exactly like everything like you never. I don't want to say never because I hate admitting that to myself. Like the chances of actually like compounding your income and like changing your life is so much smaller at a big firm like that. So if you can take your
Patrick (CEO of WSO): [01:07:03] Because you're not going to get, you're not going to get a big cut of the P&L any time. Yeah, yeah, yeah.
Knightshade: [01:07:09] It would take years to get promoted to senior trader and actually get like true, you know, cuts big enough where like you can become part of that.
Patrick (CEO of WSO): [01:07:16] Can you talk about what the cuts look like like from trader and mid-level and kind of partner like? Do you know those numbers?
Knightshade: [01:07:23] Uh, yeah, so again, so like if you're trading a little stuff in the bottom, you're trading assistant. Eighty five K, if you're entry like first year trader, ninety Typekit bonuses are minimum Typekit. And then if you're middle trader, your salary is going to be between one hundred and five to one hundred and twenty five. And then, you know, bonus gets a little bigger again, like maybe one to two times your salary. And then if you're a senior trader, depending how long you've been there, things like that. I really don't know the salary, but you know, it's one fifty plus for sure. Yeah. You know, the guy that was a senior trader there, he had a, you know, he's 40 years old, had a family. So I would imagine they're paying him over 200 salary. Yeah. And then his thought would be, you know, maybe half a million bucks if it's a profitable year.
Patrick (CEO of WSO): [01:08:07] But is it like a based on like what he brings in on his trades is like a percentage of that. Is that how it's done? Or is it more just. No, no,
Knightshade: [01:08:15] No, no, no, no, no. Like so for these bigger markets, like when you're trading products on like the American stuff? Yeah, the you know, it's just one. It's one product, it's one team effort. So you have 11 people creating one product. So it's more of like,
Patrick (CEO of WSO): [01:08:28] Yeah, it's a whole group. Got it? Yeah. So it's a dumb question. Sorry, yes. All right.
Knightshade: [01:08:33] So you obviously taking note about how good you're doing. If you're not doing well, they're going to like fire you. So got it. Yeah. But then how do you know? So our firm, I think we average, you know, again, we're major institutional player like we trade a ton of size. So our profits on average are like 30 million.
Patrick (CEO of WSO): [01:08:53] And so your specific product for your
Knightshade: [01:08:54] Specific product specific product for us, eleven guys. So like maybe the take home for the DAS is 30 percent of that because you have to pay, you have to pay all the developing and fees and pay the firm for the capital backing things like that. So 30 percent, that's you know, that's nine million bucks. So maybe four and a half million goes to the head of the desk, right?
Patrick (CEO of WSO): [01:09:13] Got it. Make sense.
Knightshade: [01:09:14] Ok. So then the other the rest gets other people right? Ok. So but like, you know, you can't like, that's an exorbitant amount of money. Like, this guy knew exactly what he was doing. He was, you know, his genius level smart like, you know, people that are trading at like top firms, but it's not as much exposure. Maybe their profits on the year, 10, 15 million, 30 percent of that call it three to five million. Still, the same number of people. So maybe had a desk, it's a million bucks and then the rest trickles.
Patrick (CEO of WSO): [01:09:41] Yeah, all the way down. Yep, OK, that's fair. Thank you for those numbers. So you're at this new shot? Yeah. Tell me a little bit more about, uh,
Knightshade: [01:09:50] This new place for the new shop. I mean, we're just we're working on new technology, working on new ways of like managing an overall volatility book because it gets really tight. And we need to figure out like, how do you manage? How do you manage a book beyond like just the traditional Greeks like Vega and Dharma and stuff like that. So like right now, my role is working on a project. I'm using Excel, Python and R. And I'm just kind of I'm building out like this thing that runs a simulation based on historical data. So it's difficult because you have to like, I have to like build out the infrastructure for like pulling this data in the first place. You know, just start up to something, people here. It's like there's just a lot of like natty gritty stuff I got to do first before I can even like, build out a real trading system. Right.
Patrick (CEO of WSO): [01:10:37] But are you working with the developers in Russia with that for that? Are they helping you,
Knightshade: [01:10:43] The Russian developers, but they live in Chicago, so. Yes, I am. Yeah. Yeah. So I'm working with them and. I mean, it's a little slow, like getting getting the firm on its feet just because, like again, it's about manpower and the amount of money you have to like hire people. So but yeah, I mean, in terms like I'm still trading the overnight session, it's U.S. Treasuries, so it's a little bit different of a product. So it's the entire yield curve. So there's the twos, fives, tens and 30 year bonds or notes, whatever you want to call them. So we're trading options on those. So it's definitely a different trade like we're doing relative value stuff versus like your dollars is like LIBOR versus Fed policy.
Patrick (CEO of WSO): [01:11:24] Are you getting print out? Are you getting print out still on your on your on your positions or your job? Would you guys have a screen now at this place?
Knightshade: [01:11:32] It's hard for us, everything on screen. Yeah, it's a little bit more advanced. Got it. Yes. So the true appeal was one just because, like, the culture was great that these guys are kind of funny, like, you know, they're cool guys. And then the one guy works for Salomon Brothers, and he was the clerk for the heck. And then we got to serve long term capital management.
Patrick (CEO of WSO): [01:11:54] Oh, LTC. Yeah. I can't remember. Yeah, I read the book way back in the day.
Knightshade: [01:11:59] John Meriwether.
Patrick (CEO of WSO): [01:12:00] Yeah, yeah, OK.
Knightshade: [01:12:02] So he worked for him. And so I was just like, immediately. I immediately gravitated towards that because like I had just read that book when genius failed. Yep. So yeah, I was just I was sold on that so
Patrick (CEO of WSO): [01:12:13] Great book, by the way,
Knightshade: [01:12:15] For those here. Yes. Very good book. Yep.
Patrick (CEO of WSO): [01:12:19] So anything else before we call the pod in terms of like advice you'd give to your younger self or to any of the listeners?
Knightshade: [01:12:26] Yeah, I mean, I think, you know, kind of like based on the story I was telling you guys like it's I think it's super important to just have a goal in mind, like not everyone will have a goal in mind, but if you do, it'll definitely kind of separate you from the rest because you knowing what you want in and of itself is kind of like, that's, you know, a good thing. And if you can talk about the process, you just you just sound a little bit more smart. I don't know if that makes sense or if I'm saying that well, but and then like, have your own opinions like, I don't know if you have a true thought process that's like an opinion different from someone, and it can actually sound smart and it actually could be right. I think that's a very that's a powerful thing and you're going to seem authoritative and like, obviously, you're not going to be like, you're not going to get promoted to like a boss or like a senior level guy right away. But those are like the qualities over time. If you compound them over years, like, you'll immediately have the respect of people that are above you and you'll get promoted and things like that.
Patrick (CEO of WSO): [01:13:22] I mean don't always just be it. Don't always be just a yes man or yes woman where you're just saying agreeing with everything they say.
Knightshade: [01:13:27] Challenge them, right? Yeah. Yeah, it's about yeah, yeah. I mean, like, come on, you have to be smart and be innovative, and that kind of those kind of things are respected. And then lastly, I think specifically, if you want to get into like trading and stuff like everything's going like quantitative stuff. So like you have to even if you don't have the experience, maybe have any kind of degree like me, you at least have to like, go in and maybe take a python course or like work with data sets and just kind of be able to talk about working with data because, you know, that's all they're looking for knowledge. They need guys that can build out tools major.
Patrick (CEO of WSO): [01:13:57] Yeah, there's a major shortage of that talent, right? So like if you if you can get that on your resume, do it. It's going to give you a big leg up. Cool, man. Well, thank you so much for taking the time and thanks to you, my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. Patrick at Wall Street Oasis dot com. And till next time.
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