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bouncer
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Salaries in Options Market Making

February 2nd, 2007, 5:53 am

Anyone knows what the market rate is for experienced options market makers in Europe, UK and the US?
 
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jd1123
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Salaries in Options Market Making

February 3rd, 2007, 1:42 am

Depends on too many things. You have to be more specific.
 
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bouncer
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Salaries in Options Market Making

February 3rd, 2007, 10:11 am

Have been trading vanilla options for a few years, coming fresh out of school. And it's screen trading, not floor trading, so I have no contact whatsoever with the competition. Therefore, my view on others and the marketplace in general is pretty limited. I gather I am among the best ones at the place where I work (and we are tops in Europe) and I guess that they might be ripping me off by paying me anywhere btw 200-400k a year.Any clues?
 
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mwam
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Salaries in Options Market Making

February 3rd, 2007, 2:02 pm

QuoteOriginally posted by: bouncerHave been trading vanilla options for a few years, coming fresh out of school. And it's screen trading, not floor trading, so I have no contact whatsoever with the competition. Therefore, my view on others and the marketplace in general is pretty limited. I gather I am among the best ones at the place where I work (and we are tops in Europe) and I guess that they might be ripping me off by paying me anywhere btw 200-400k a year.Any clues?200-400K GBP or USD ? are you trading equity options ?
 
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bouncer
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Salaries in Options Market Making

February 3rd, 2007, 6:33 pm

That would be the rate in Euros. Equity/index options
 
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jd1123
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Salaries in Options Market Making

February 3rd, 2007, 6:44 pm

How much P&L do you produce? That's really the determining factor as to what you should earn. Are you being paid more or less than 5%-10% than what you earn for your firm?
 
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bouncer
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Salaries in Options Market Making

February 3rd, 2007, 8:21 pm

I think it comes down to that. 5-10 percent. Certainly not more.
 
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EnergyQuant
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February 4th, 2007, 12:38 am

QuoteOriginally posted by: bouncerI think it comes down to that. 5-10 percent. Certainly not more.Not my market, but I'll still give my uninformed opinion ;-)Sounds like the seat you sit in is worth a decent proportion of your P&L. In that case, if you are earning anything like the mid-point stated earlier(5 to 10% of net book) you are doing pretty well.In my experience, the range of bonuses for a trader are something like2 to 5% : flow trader5 to 7% : strong desk, good systems, some residual risk7 to 10% : no franchise, limited systems, some risk10-15% : prop trader, good shop15-20% : prop trader, hedge fund20%+ : superstar who can get risk capital anywhereAll of are net P&L.EQPS Truly great traders make their budget in the first half of the year and then spend the second half of the year negotiating away costs from their desk to somebody else :-)
 
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jd1123
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Salaries in Options Market Making

February 4th, 2007, 1:10 am

EQ,Thanks for the great and informative post.
 
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bouncer
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Salaries in Options Market Making

February 4th, 2007, 8:12 pm

Thanks for your reply, ER. Seems very informative and useful but wakes the higher levels of my ignorance:- what does a 'flow' trader do? Sounds like a monkey who executes orders, but I am not sure- what does 'no franchise' mean - is it possible to be a prop trader at a hedge fund? Because I thought prop traders played their company's money while hedge funds those of their clientsAgain, forgive my stupidity - I am trying to get rid of it.
 
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NorthernJohn
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Salaries in Options Market Making

February 4th, 2007, 8:27 pm

QuoteOriginally posted by: bouncerThanks for your reply, ER. Seems very informative and useful but wakes the higher levels of my ignorance:- what does a 'flow' trader do? Sounds like a monkey who executes orders, but I am not sure- what does 'no franchise' mean - is it possible to be a prop trader at a hedge fund? Because I thought prop traders played their company's money while hedge funds those of their clientsAgain, forgive my stupidity - I am trying to get rid of it.While questions are never bad ones, you have thrown in some real insults in there, despite, it would apppear, having not yet shown that you are not a "monkey" yourself. May I suggest you show a bit more humility, before you set yourself up for a serious fall?A flow trader while not a fully defined term, tends to mean someone who trades a customer facing book in a reasonably liquid product. This is a highly skilled job, and some of the best paid people in the city are flow traders. "No franchise" means that just having the seat, and the customer flow, is not expected to produce any profit. A franchise means the existence of customers who will lift offers, and hit bids, and so provide genuine income.And yes, hedge funds are filled with prop traders. The hedge fund is a company, so your last line does not make much sense.
 
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CPDOstar
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Salaries in Options Market Making

February 4th, 2007, 8:45 pm

Can someone explain to me what are the main challanges in flow trading. Is it the slippage between stock quote time and purchase time? Is it trying to get the stock cheaply whilst giving a market competitive quote? What other factors is the flow trader exposed to?Thanks for your time.
 
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NorthernJohn
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February 4th, 2007, 8:58 pm

You are looking at the whole business a bit strangely. Your post reads as though there is some centraal repositiry of stocks that the trader can buy from at mid. The whole point is that the trader will buy, or sell, without knowing if, or from where, he will get a hedge.
 
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StatTrader
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Salaries in Options Market Making

February 4th, 2007, 9:25 pm

Nice post EQ. The numbers you mention are pretty in line with what I've seen too.ST
 
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bouncer
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Salaries in Options Market Making

February 5th, 2007, 6:14 pm

Northern John, thanks for your enlightening feedback on the art of flow trading. A clarification of my last sentence:A prop shop trades their own money not that of their clients - perhaps I am mistaken, but I don't believe so. I deduce therefore that a prop trader works at a prop shop. Hedge funds play with clients' money. In that sense I am a bit confused of the notion that prop traders trade at hedge funds. Is the P/L of the hedge fund trader (the P/L from which his pay is determined) the real return that the trader makes to the fund ( (P/L - costs)*management fee ; the rest goes to the client, I guess) or the total return he makes on the portfolio he manages ( P/L - costs)
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