About me

I am an ex-nuclear engineer/physics professional with a strong interest in quantitative finance.  I have traded interest rates, energies, agriculture, and equities professionally in my career.  My interests are options pricing and intelligent automated decision logic.  You may find me often on Wilmott.com, NuclearPhynance.com, and EliteTrader.com under the username of henderson.

Please above all else, ask questions!  I am happy to answer any questions.

Catch me on LinkedIn: http://www.linkedin.com/in/stewarthenderson

Comments
  1. Tom Thongprasert says:

    Stewart,

    Why is Kernel Development/Device Driver experience so key in the high frequency trading space?

    • autospreader says:

      Hello Tom,

      Often in the high-frequency space, it is necessary to optimize/limit/understand calls from the programming language that you are writing in for resources from the system kernel. Each of these calls can take considerable time and any optimization at that level that you can perform allows more quantums (CPU time) to be spent performing valuable trading computations. Most of these resource calls to the kernel are conversations on the order of “create me a thread”, “give me some memory”, “I need access to the networking interface”, etc. All of these are very expensive.

      Cheers,

      Stewart

  2. ishtar says:

    Stewart,

    If I were to start an automated equity options marketing making and market taking platform. What types of trading strategies outside of volatility arbitrage could I employ to be successful? Also, please give me your definition of market taking. I’ve heard several vague examples so I wanted to get your $0.02 on this as well.

    Regards,

    Tom

    • autospreader says:

      First, I will start with your question of market taking definition. In my opinion, market taking occurs whenever a market participant “takes” a standing order (liquidity) from the market place. For example, if I have a standing order to sell 100 shares of stock X @ 100. The current market for stock X is:
      1000 99.99 X 100.00 100
      where,
      1000 is the bid quantity
      99.99 is the bid price
      100.00 is the offer price
      100 is the offer quantity (my order)
      Now envision, that the entire market is going up and since stock X appears to be highly correlated with the market returns from your research you also expect it to go up but due to reasons of illiquidity it is lagging the market in your opinion. You perceive there to be edge in taking liquidity (often called “lifting” the market, that is buying the offer. The converse is often called “hitting” the market) so you move your order up and now the market for stock X becomes:
      1000 99.99 X {Next price level} {Next standing offer quantity}

      With this terminology being settled up, I believe out of the hedge fund space, we are certainly out of the distressed asset space and move back into the classic long/short strategies as the market has seemed to stabilize at least for the foreseeable few months. True volatility arbitrage and dispersion trading are though the meat and potatoes of many firms in the Chicago region. I definitely would start there and work my way out if I were doing it again.

  3. Tom says:

    Thanks for that clarity …Essentially if I drew out a price ladder, and assume a particular instruement is highly “liquid” characterized by small intervals / ticks; the market maker is essentially paid a rebate to provide a certain level “spread” or X amount of “liquidity” via trading volume?

    Strategy wise, Market Taking and Market Making is essentially similar to what the fed does via monetary policy through the act of buying backing or selling more treasuries?

    If the statement above is true, what other strategies outside of vol arb could I devise? I am not that smart lol ….

  4. Lim says:

    Hi -thanks for the site, finding it very useful.
    Do you have any intraday strategies you are employing is it it longer timeframe strats?

    • autospreader says:

      Sorry for the latency in response; professional life has taken me away from the blog! I do have intraday [hifreq] strategies that I have been using; most of the items that I post on the blog are targeting day to weekly timespans.

  5. clarodina says:

    Hi,

    Want to feedback on one of your eurodollar post using ZSE?1*1-3*ZSE?2+ZSES?3*3-ZSE?4

    The graph is interesting but how would you capitalize on that? If you are using more than 3 legs the buy sell spread would defeat on potential profits and using limit order would not gurantee you get fill on the indvidual

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