Futures traders London
'The culture is so different. We try to build relationships with clients who invest money in real companies, for the long term'. This comes from a recent who specialised in shares (equity) and who was lamenting the rise of derivatives – financial products such as options, swaps and futures that can be almost infinitely more complex than simple shares. Today's interviewee is one such derivatives trader:
"Fifteen years ago this job was completely different. Earlier practitioners would be standing up for 10 hours in the 'pit', estimating option prices by plugging numbers into a basic calculator (big fat finger error risk!), shouting and waving hand signals. These days you sit in front of many computer screens, clicking and updating code. Lunch would occasionally be my left hand drinking soup and my right hand on the mouse. Trading options is ideal for someone who likes being in front of a screen."
News programmes continue to illustrate financial news with evocative footage of shouting men in a trading pit. But almost all of those have gone. This is how the interviewee's day starts:
"I switch on my seven screens. There are many programs to log into. I sort each data feed to update me preferentially on news in the underlying names I trade and on macro developments. I ensure my connections to all relevant exchanges are functioning. I calculate hedge limits and input them into the order book. I make sure all this is done before 8.45am, as the market opens at 9am. At 9.01am there can be some juicy trades – you want to be fast."
Equally interesting to see is just how mathematical trading has become. If you're an outsider to finance like me, or you are working in an area of finance far removed from derivatives trading, you are unlikely to follow everything the interviewee says about his work. Still it's worth skimming if only to get a sense how far removed this kind of work is from the old idea of a market where buyers and sellers physically meet to haggle over the price of something tangible like a cow or a loaf of bread. One sentence to get you in the mood:
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Why do many traders detrend when trading futures. Doesn't detrending remove long term trends?
Detrending adjusts for inflation. But then any long term trends are removed right? So do many traders detrend?
Detrending involves studying the short tern volatility of the market. See