Socially Distanced Trading at Optiver

Ever wanted to work at Optiver? One of the most sought-after destinations for our graduates, Optiver trainee Olle Tielrooij explains why Optiver is such an exciting company for Econometricians to work at and how the company has adapted to doing trades remotely.

Can you tell us something more about Optiver and your current position in the company?

Optiver started as a Dutch market-making firm 35 years ago. Today it is a global player with offices in Amsterdam, Chicago and Sydney, and smaller offices in Asia and a new office in London. Trading has changed significantly over the last two decades and has become more technology-driven. These changes impacted Optiver’s business over time; we are now as much a financial firm as we are a tech firm. I think that the success of Optiver has everything to do with the relation between those two fields.

Optiver is a market-maker, which means that it is our task to provide liquidity to the market. We do this by simultaneously offering buy and sell prices for a large range of financial instruments on all major exchanges around the world. By doing so we not only make financial markets more efficient but, because of the tough competition between market making firms, we also lower the cost of trading for other market participants. One of our strengths is our ability to manage risk which allows us to stay in the market, even in times of extreme volatility when it is very hard to estimate the value of financial products.

As pricing formulas can become quite complex, traders have to be good at mathematics and have a strong intuition for numbers. Since Optiver does a lot of research and is good at determining the value of financial products, they stand out from other companies in my opinion.

I started working at Optiver only two months ago, so I’m just a trainee. First you have to learn all the basics. We have an inhouse university where you first get 4 weeks of lectures and tutorials. After that, you follow simulation training. In this training you are connected to the actual market, but you use fake money. This way you have a lot of room to make mistakes. After that, you usually join a team. I’m now a trader in our single stock options team. This means that I trade options on all the individual stocks.

Since you have been a trainee conducting these simulated trades, what has been the most exciting trade you have done?

Good question. I think that’s not really how I look at it. Of course, there are some big trades that we do. It is really cool to analyse everything and then make the decision whether or not to go for a trade. But most of what we do is smaller trades. Usually, I don’t make each individual decision as to whether we do a trade or not, our automated trading systems do. My role is to carefully monitor whether our systems are doing what we intended it to do. For example, if I see an opportunity and want to buy a specific instrument, I will tell the trading systems to lean into the direction of buying and it will try to execute this. If I see something going the wrong way, then I give different directions. There are some much larger transactions that we also do but that is still manual work for the trader. For example, we trade directly with institutional trading firms. In this field, you have to do a lot more analysis because it might be the case that some other parties have more information than you do. And that’s the thing that I like best: thinking and discussing for a very long time whether to conduct a trade or not, then days or weeks later, seeing how this trade actually goes through.

How cool! So given your experiences with Optiver, how do you like working with the company?

It has really been amazing so far! The job of a trader is very difficult to describe. Even now I’m giving you as much information as possible, but still, you have to experience it for yourself to really understand what it's like. That is what I think is the coolest part about it. Other than that, I absolutely love the people that I work with. They are some of the smartest people I have ever met and considering my bachelors in Econometrics and my masters in Oxford that says a lot. They are also super nice. Everybody is focused on the team and bringing Optiver forward. So far nothing but positive experiences!

If we go back to the very beginning of your career, why did you choose the bachelor squared degree in Economics and Econometrics?

Econometrics was an easy choice. I always liked Mathematics in high school. I liked the statistical parts the most. When I learned about the double bachelor’s degree I was sold. It was a nice extra challenge that I was willing to take. Economics was a super nice addition since you get a closer look into the applied side of what we learned in econometric courses. Furthermore, I was really looking forward to studying with people from all over the world.

Looking back at those years, which skills acquired in your bachelor proved to be most useful in your current job at Optiver?

Besides trading, I also worked in consultancy and banking. I noticed that studying Econometrics gives you a number of core skills that you miss out on in some other studies. For example, looking beyond numbers and thinking about what the obtained statistics actually mean. In this way, you add a lot of value to a number you see. Furthermore, I learned how to separate arguments that have significant impact on things from arguments that don’t really matter. These skills prove to be helpful in almost every job, since a lot of jobs revolve around analysis and making decisions.

We are wondering what kind of student you were. Were you always this motivated and dedicated even when you had just started studying in Rotterdam?

I had already been a good student in high school but going to university I expected to be studying with only very smart people. So, at the start, if I could have signed for a 7 average, I would have done it. But I still wanted to give it my best. Especially in the first term of Econometrics which, as you probably know, can be quite demanding. I ended up scoring very high grades, even 9.5 averages. That really launched my career. I was just wondering how far I could take this. So, during my first year I really focused on studying and sports. And after I got my BSA, I started doing a lot of other things like committees, working for the university, and internships. But I’ve always tried to keep up the good academic records.

Sounds like you’ve had a great time in Rotterdam. Taking your double bachelor’s degree as a reference, what was your experience doing your master’s in Statistical Science in Oxford?

Studying in Rotterdam was indeed a great experience! It is a great city and since I grew up in a small village in the very south of the Netherlands, it was really nice to move to a big city and be part of something bigger. At the same time, Erasmus offers so many opportunities to get involved which was great for me. On the other hand, I think Oxford is a little bit more of a bubble. Almost everybody living in Oxford is in one way or another linked to the University. It was such an amazing experience as well to be part of such a bubble. I really liked studying with some of the smartest and most passionate students in the world. Besides, I really enjoyed all the traditions that come with such an old institution like Oxford, like dining in halls that were built before our great-great-great-grandparents were even born. That was just incredible!

That sounds amazing. The Covid-19 outbreak occurred during your master’s, right? In what way did this affect your experience in Oxford?

Yes, it did indeed affect my experience. Fortunately, I had finished lectures by then since we had 4 months of lectures followed by 2 months of purely studying and preparing for exams and after that 5 or 6 months of research for the thesis. So fortunately, I still had the classroom experience, and I was able to meet all my classmates in person. But indeed, after that, everything went digital. As you guys might know, studying for exams was hard sitting at home locking yourself up in your room for 10 hours a day. You really miss being able to share things with your classmates and doing fun stuff on the side. Fortunately, the exams went well. The next part, my thesis, was a quite similar experience. I was allowed to meet with my supervisor once a week. I was not able to discuss my thoughts with the other students in person during the research project. For me, studying in Oxford was mostly for meeting such dedicated classmates and professors, so it is a shame that Covid affected a part of my experience there. Therefore, studying at Oxford was less stimulating than it could have been academically, but we also missed out on some Oxford sunshine.

Yes, that is a shame. We have seen many students leave the Netherlands for the UK but not often the other way around. What made you decide to return to the Netherlands?

Yes, I would have surprised myself if you would have told me 2 or 3 years ago that I would end up working in the Netherlands! I have also been very focused on working in London; I think all my applications during my master’s were to investment banks in the UK. But somehow, I got reconnected with Optiver and since I already really liked the company, within 2 weeks I ended up having about 4-5 rounds of interviews. There weren’t that many jobs in the Netherlands which I would have stayed for. My career is quite important to me and I wanted to kickstart it by working in these high-pressure environments. And in that sense, Optiver is one of the few jobs that I would have considered in the Netherlands. Of course, it is also nice that my family and friends are here, and it is also less demanding for my girlfriend. She was willing to move to London with me, but she preferred to stay closer to her own life.

So, what makes Optiver different from other Dutch businesses?

It's going to sound a bit cliché and I am sure that somebody else might have experienced it differently, but the feeling I got after sitting the interviews was amazing. I stuck around for the drinks - it was a Friday evening, and I ended up having great conversations about things that I enjoy and that they were passionate about, and I realised that this was the environment I was searching for. Generally, the people here are very successful, but they are still very down to earth and that's not something that I saw in the UK investment banks. Other than that, Optiver is also quite a niche business. I found this a bit intimidating initially, because if you work at an investment bank, they have a million opportunities afterwards, whereas in trading that’s a bit different. Nonetheless, I think that if trading is a good fit for you, then I highly recommend it. 

If we were to consider an average day in your life since you've been working with Optiver, what do you like most about your day?

I like that it's a super intensive job. There are other jobs where you also have to work 60 hours a week, but you would have more coffee breaks and meetings, so the intensity is certainly missing. When the markets are open, then there's always something happening which we have to analyse and decide whether it has an impact on our positions and then see how best to manage it. So, yeah, I really like the job. For instance, it’s already Friday, but I feel like it's only Tuesday and there are many days like this because time flies by so quickly. In other jobs where you're advising or consulting or even when you hold a junior position in large businesses, you are not given too much responsibility to make decisions. However, at Optiver I have been given plenty of responsibility already. For example, I have my PnL (Profit and Loss: an income statement which explains the daily fluctuations in portfolio value) and I make my own trading decisions.

You've only been working there for four months but were you ever nervous about what you were going to say or do?

Yes, of course, and that’s the fun part; being nervous shows you care! That being said, though, you have to be aware that you cannot possibly know everything. For example, when we trade against institutional investors, I know there are some very smart people and it can be nerve-wracking. But the intensity also makes you determined to find out what is driving your counterparty’s decision and then decide whether to do the trade or not. Again, it is a very high-pressure job and it's simply about finding a balance that suits you, which is hard when we are talking about longer periods. Personally, I've only been here for four months, so I can't really tell you how I will handle this pressure, but as of now, I really enjoy this job.

We are glad that everything is going very well. Given your experience, how would you advise other students who are considering pursuing a career in trading?

Reading is a very important part, and it can help you determine whether trading is a career path that suits you. There are also movies worth watching that depict the dynamic nature of Finance, like Margin Call or The Big Short. These would certainly do the trick, even though they are a bit dramatized. Also, reading the Financial Times, the Wall Street Journal, or anything written by Michael Lewis will also give you a clearer overview of Finance, while keeping you up to date with the latest developments in the financial markets. This will also help you in a future trading career as a big part of the job description is to identify the important factors in the news and analyse how you can trade on those.

A fun thing to do is to start investing yourself either just in a personal account or with an investment society.  Even if you want to do more exotic trading, like options, it's still a great experience to start investing in stocks, because you can already start perfecting your decision-making process, you can already learn how to do your due diligence prior to a trade. Indeed, it's very different if you actually put in your own money and it doesn't have to be anything substantial, but it's just about the experience, about doing the analysis and making decisions. Finally, in trading, self-reflection is paramount. At the end of the day, you have to analyse the decisions you made while the markets were open and make sure that you constantly learn from your mistakes, and thus improve yourself. In terms of the right mindset for a trader, you have to constantly be focused on improvement and if that sounds appealing then trading is good for you, but if that sounds exhausting then probably not so much.

Great advice! You probably saw this coming - in the past months there was a lot of hype regarding “stonks” like GME, AMC and such. How did you and your colleagues experience that market frenzy?

It was a great experience. I think there's two things worth discussing, one is the global effect on financial markets and the other is my personal experience during that period. It wasn't just WallStreetBets backing a stock, but it had ripple effects throughout the entire economy or at least the financial markets just because investors saw what can happen when amateur investors cooperate effectively. But the event was immense; large investment firms that were shorting other stocks were afraid the same would happen to them. They simply wanted to get out, so many of them decreased their leverage and covered their shorts.

Also, global indices like S&P500 and the EURO STOXX 50 went down on this news. This was very interesting to see, but also presents a risk that you might want to be aware of as a trader. More specifically, I’m a single stock options trader and a large part of the GME story was also many people trading derivatives, placing bets on the side, which accelerated the rise in price of that stock. In normal times, it is quite easy or intuitive to trade with a minimum level of mathematics, but in such situations, even the most complicated and efficient mathematical models could break down, so you can't trust your results anymore, simply because everything becomes discrete. All in all, experiencing such a corner case first-hand was a great lesson.

 That sounds like quite an experience! Given what's happened in the market in the past two months, would you say that this is something that is likely to happen again? So, would you expect amateur traders grouping up for a common cause again in the near future?

Yeah, I expect it to remain quite a topic in investing. The US is about to send out an extra round of $1400 checks to many of its citizens (Read: https://estimator.faector.nl/article/2021-03-09-stimuli-check). Last time they sent the stimulus cheques, many people immediately put theirs into their investment accounts. Therefore, I expect an influx of capital on the market and have to admit that this retail investing market still has plenty room to grow, with relatively low adoption in Europe and developing economies. Finally, I think that groups like WallStreetBets revolutionised the means of communication among investors.  Before this you could never have pictured such a large set-up. The funny thing is that it wasn’t professional investors communicating via Bloomberg who pulled it off, but amateur ones chatting on the social media platform Reddit.

So, we take it that amateur traders are a force to reckon with in the future. Speaking of the future, we have reached our last question for you. Where do you see yourself in 10 or 15 years? Would you want to go back to the UK at some point?

Good question, and very difficult to answer. I think for the next year or two I'll be here, at Optiver Amsterdam, as this is the best place to learn this business. Then, I think it would also be nice to do a small exchange through one of the other offices. For instance, London is growing very quickly, and I think that it will be good to see such a small start-up within a much larger business. Or perhaps Sydney. I think my girlfriend would also enjoy living in Australia a bit more than in the UK. And indeed, after that, I see myself still at Optiver, as it is an amazing company. The average career of a trader is about 8 years, so that is not very long, and after that there are still a lot of other opportunities within the company. For instance, I can see myself training the new generation of traders, becoming a data analyst or perhaps even take a job in the corporate side of the business. At some point in time, I would also like to start working for the Erasmus University, beside my job with Optiver. 

A special thank you to Olle Tielrooij for taking the time to give our readers such elucidating responses and valuable career information!

 

About this article

Written by:
  • Sterre Spaanderman
  • Aaron Stefan Popa
| Published on: Mar 26, 2021