What does a derivatives trader do?

John Hwang John Hwang
VIX Options Trader
Upvoted by Marc Bodnick, Silicon Valley-based investor, 1999-2011
John has 30+ answers in Investing.

 I used to market make S&P 500 options at an investment bank, so hopefully this provides some orthogonal insight in terms of what flow traders actually do at banks. There's surprisingly very little 'actual' trading. If anyone's interested, I can also write something about what pit traders and brokers do in the future.

3:00 AM (occasionally) Check the European markets. Check for orders from London options desk counterparts for any orders. Sometimes they price S&P 500 options. Trade futures if needed. Lose sleep if the markets are moving fast.

7:00 AM Get in. Check P&L. Turn on the monitors. Load up the following applications: Bloomberg Reuters, and other charting programs Risk visualization application Outlook. Excel / Proprietary Models / Pricing Systems

7:30 AM - 9:30 AM Respond to e-mails. Get breakfast. Strategize for the day. Review all the events. Send out axes to the sales force (axes are just a list of things you can price aggressively)

9:30 AM - 16:15 PM Do the following activities, repeat, 252 days per year. Price customer orders using pricer Trade futures to delta hedge the book Press Shift - F9 to see any changes in your model Trade options on the screens Take shows from brokers, and sometimes act on them. Make markets for clients, execute them. Book trades. Talk to operations people. Talk to salesforce about market color. Rumor mill. Trade events (Fed announcements, Economic Indicators) Chat with the people sitting to your left and right. It's a small space and you can hear everything people say. No secrets here. Refit the surface (if you own the volatility curve for a certain underlier, and if your firm does not mark to mid) Run simulations to measure overnight risk, gap risk, correlation risk, etc. Eat lunch on the desk (95% of the time). Forget to eat lunch about 5% of the time.

16:15 PM - 18:30 PM Recap trades, make sure things are booked properly (this is what junior traders do for you) Do P&L attribution to see where you made and lost money Send out market recap emails to sales force Make sure the surface fits the market properly and smoothly Mark the surface Hit the gym Send out overnight futures orders for London or Asia desk