Not sure what you can do with your econometric knowledge after your studies? Or just curious where other econometricians work? No worries! With the rubric ‘Into the Business’, the Estimator gives you a taste of different companies where you, as an econometrician, can end up. This time we dive into the world of Optiver. We talked to Denny Man, alumnus of Econometrics in Rotterdam and currently a trader at Optiver, which he took up after pursuing a career in professional poker.
Could you explain what Optiver does?
Basically Optiver started out as a proprietary market making company, so we do not have clients in that sense. In market making you trade for your own account and we provide liquidity between buyers and sellers on the market. You could compare it to currency exchange at the airport, when upon arrival you need to exchange for the local currency and change it back to euros before you leave. The small spread between the rates is the edge of market makers. We basically provide this service to the financial markets. So that is more or less how Optiver started out, but nowadays we are also moving a bit more into positional trading. Our core business is still market making, but positional trading and other opportunities are becoming increasingly important.
Does your background in econometrics & poker help you in your job?
I think both topics have a lot of common ground. Trading is similar to poker in a way is that you are constantly assessing your risk and reward. Whatever way you trade there is no certainty, all you can do is base your decision on the data and the market. It is important to have the right mindset and not be discouraged by a setback, because even what seems to be the best of trades can go wrong by unforeseen circumstances.
The overlap with econometrics is that in our trades we make use of a lot of data analysis. Which to me of course makes perfect sense, as I am a truly data focused trader, in the sense that I prefer to see the data before I am convinced. And as an econometrician you have a big advantage in this aspect, because you already know about time series analysis, you know what data sets are, what kind of problems can occur with datasets, etcetera.
(...) trading is very dynamic in the way that no day is the same.
I am not sure whether it is something more econometric or poker related, but it is also very important to have a strong analytic mindset. For example if interest rates go up, what does it do to certain products. You’ll often get an avalanche of causal relationships. Thus a good understanding of correlation is vital for a potential trader.
Could you describe an average day at the office?
I wake up at a little past six as I come from Rotterdam, and want to make sure I am here before the markets open. I am usually here quite early as most of the people come in at around 8:15.
We then start the systems and go through the news, especially reviewing what happened in the US. Afterwards we have our morning meetings at 8:35 and discuss important aspects of the news, discuss what happened to volatilities and so on. We then try to come to a consensus on what positions we want to take and which to reduce. When we are finished with the meeting it is time to get ready for the markets to open at 9.
That is when the trading starts. The markets usually calm down at 12, which gives you time to grab a sandwich before you need to get back to trading. So that is basically the life of a trader. If it is not that busy, you focus on making system improvements or doing some data analysis, while consistently being on the lookout for a new trade. Finally, at 17:30 the markets close and afterwards you do your administration, and sometimes you need to do a day report. Afterwards you can go home but most of the time you still have certain aspects you want to look into first.
How many people work in one team and how do you work together?
We have a few relatively large teams, one of them is Index, which I am in. Another team is Equities, which trades all the stocks, and we have Delta One, which trades in Delta One derivatives. Furthermore we have the teams Commodities, Debt Products and Currencies. Those are the main teams but within those teams we have smaller units, called desks. The teams consist out of around 20 to 25 traders, and the desks about 3 or 4. For me in Index for example, I focus on the S&P, Nikkei and all the non-Euro indices. Another desk focusses on AEX, DAX and so on. Other teams are structured in the same way, with a certain asset class and smaller desks that specify on certain stocks or asset classes.
It is very important to properly communicate with your coworkers, because if anything is happening with the stocks, you need to be able to be on top of it immediately. Thus across desk and team communication is also very important. If you do not have information that other traders have, you are lagging behind. There is a lot of information around and as a trader it is important that you pick it all up.
How can students/ prospective employees prepare for a career at Optiver?
There are several stages of preparation, for either the hiring process or for the actual trading itself. For interviews, it is important to have strong arithmetics skills, and being able to handle brain teasers. For examples I would refer to traderstest.org. Furthermore, think of why you want to work here: motivation is important. Also try to read up about Option Theory. You do not necessarily need to know all the details, since they will be taught to you here, but just for yourself to check whether it would be something you like.
Basic math skills are very valuable for a trader, especially in assessing whether what shows up in the system makes sense or not. Far more important is to have strong analytical skill though, good understanding of causal relationships.
Could you tell a bit about the internal training?
You get a training of about two months before you join your team. The first two-and-a-half weeks consist of going through Option Theory, learning how our systems work, our trading style etc. We have students from all kind of studies, such as mathematics, but also even aerodynamics, who often know close to nothing about options when they come here. So you will go through all the fundamental knowledge in those classes, and after those weeks you will be doing simulation trading in an environment which mimics the market. It is important to be proactive and ask as much as you can to other traders to improve.
Furthermore we have continued training throughout your career. At Optiver we offer a wide variety of courses and classes: from language courses, which come in handy taking in account we have 41 nationalities here, to programming classes, but even social awareness courses.
Can you give a preview about your case at the Econometric Career Days?
As I mentioned earlier, when you apply at Optiver you need to take different mathematics tests. So we will have tests during the Econometric Career Days that resemble the real mathematics tests. We also have a Market-Making game, showing how to make trades and so on. Also not unimportant, the Econometric Career Days offer a great chance to meet recruiters.
What potential coworkers would you be looking for?
From a trader perspective, it is important to have someone trustworthy but also very competitive: the more you push yourself the better. It might sound cliché, but trading is very dynamic in the way that no day is the same. On top it is important you are able to work in an international setting, basically everyone here speaks English.
Finally, you need to be stress resistant to a certain extent: at Optiver you can get a lot of responsibility very quickly, which is nice but you do need to be able to handle this.
Any concluding remarks or tips for our readers?
I would recommend if they are thinking about becoming traders, attend a lot of events! Talk to as many traders as you can, because it can be hard to figure out what it precisely entails. Also, visit the poker tournament that we will organise for FAECTOR members next spring.
Optiver will be one of our Premium Partners during the Econometric Career Days 2017. Meet them during their case or presentation on the 22nd of November. To stay up-to-date about the Econometric Career Days, like us on Facebook.