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Understanding Jane Street

thediff.co

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Re: Understanding Jane Street

#11

Post by paulpauper »

smabie wrote: post #2

Generally good article that delves into how a market maker functions. Couple points: Re EA: quoting my boss, EA isn't really a dominant thing in the market maker space, it's pretty much only espoused by a couple high profile individuals (mainly, SBF). Re strategy: point about how there's little strategy involved in being a market maker is off-base. Everything is ultimately strategy: do I continue to pour resources in…

). By setting up a structure such that you profit during a crash (either by selling puts, leaning net short, or through some other method), you introduce an uncorrelated return stream that can really help

isn't selling puts directional? One strategy could be something like trying to find a way to bet on volatility but without a negative carry or at least as small as possible...this is hard to do. Taleb's universa fund tries to do this.

Re: Understanding Jane Street

#12

Post by quickthrower2 »

paulpauper wrote: post #6

1. It's realllyyyy hard to get hired. So many stories are along the lines of "I applied...blah blah... didn't get in" 2. You have to solve over the phone very hard math questions to make it past the initial screening stage. I dunno what comes after that. The highest-stakes gambling events in the world are typically very discreet, invite-only affairs. One that might be close to the top in terms of available winnings h…

So you are doubling your money each year? Do you have a forward strategy to keep that up?

Looking for people with good track records is a terrible way to choose traders. See: https://m.youtube.com/watch?v=zv-3EfC17Rc

Tldw: meets a person, picks 5 horse winners, gets then to invest. How did he pick 5 winners? Emails 1000s of people, using a permutation per person. The person who sees the 5 wins thinks he has a system.

Real life version: 1000000 monkeys given ability to trade. Scratch bum=buy, scratch head=sell. One of the monkeys will certainly have a good trading record by the end of it.

Re: Understanding Jane Street

#13

Post by ReggieCommaRose »

quickthrower2 wrote: post #9
smabie wrote: post #2

Generally good article that delves into how a market maker functions. Couple points: Re EA: quoting my boss, EA isn't really a dominant thing in the market maker space, it's pretty much only espoused by a couple high profile individuals (mainly, SBF). Re strategy: point about how there's little strategy involved in being a market maker is off-base. Everything is ultimately strategy: do I continue to pour resources in…

Does a market maker consider another market maker “toxic” by your definition? I assume by “toxic” you mean too smart? Or do you mean they cheat?

Usually too smart, on rare occasion they cheat. MMs inherently deal with information assymetry and adverse selection because they generally stand ready providing liquidity with quotes out in the world (though obviously width matters). Toxic counterparties are parties who decide to trade against you who have a better idea about “true” price than you. They might make or they might not, depends if the degree in which they’re right overcomes the spread they crossed. Other MMs can be (and often are) toxic.

Re: Understanding Jane Street

#14

Post by riverlong »

paulpauper wrote: post #6

1. It's realllyyyy hard to get hired. So many stories are along the lines of "I applied...blah blah... didn't get in" 2. You have to solve over the phone very hard math questions to make it past the initial screening stage. I dunno what comes after that. The highest-stakes gambling events in the world are typically very discreet, invite-only affairs. One that might be close to the top in terms of available winnings h…

> I increased my account by 5x since the lows of covid to present with simple large cap tech and etf strategies (...)

You managed to make money on a levered high-beta strategy in a zero interest rate environment? If you don't know who the rube is in a market, it's you. Add a bit of volatility and the smart kids at Jane Street will eat your portfolio. They are on both sides of every trade, taking your money no matter what you do.

The days of the "good track record" traders in the public markets have been over for 15 years. Forget your strategies, park your money in SPX and thank me later.

Re: Understanding Jane Street

#15

Post by CoolGuySteve »

keepquestioning wrote: post #4

My greatest regret is not getting into this firm

There are a bunch of these firms. And when you pass the gauntlet, you realize that the people are smart but no smarter than at other firms. At some point, the strict hiring filter just produces noise.

If anything, having that many achievers results in bored people doing things that are suboptimal for the performance of the firm as a whole. Whole divisions of wasted talent spawn and self perpetuate.

It's the hiring process hazing ritual that sets the allure, there's not much else to it.

Re: Understanding Jane Street

#16

Post by [deleted] »

paulpauper wrote: post #11
smabie wrote: post #2

Generally good article that delves into how a market maker functions. Couple points: Re EA: quoting my boss, EA isn't really a dominant thing in the market maker space, it's pretty much only espoused by a couple high profile individuals (mainly, SBF). Re strategy: point about how there's little strategy involved in being a market maker is off-base. Everything is ultimately strategy: do I continue to pour resources in…

). By setting up a structure such that you profit during a crash (either by selling puts, leaning net short, or through some other method), you introduce an uncorrelated return stream that can really help isn't selling puts directional? One strategy could be something like trying to find a way to bet on volatility but without a negative carry or at least as small as possible...this is hard to do. Taleb's universa fun…

[deleted]

Re: Understanding Jane Street

#17

Post by bob29 »

googlryas wrote: post #8
bob29 wrote: post #3

Quoted post unavailable.

With all due respect, what do you do for society?

At my job? I take food ingredients and perform some manual manipulation to arrange them into enjoyable edible form (although the natural gas powered grill and the electric element powered heating elements, via cooking oil perform the bulk of the "work" in terms of watt-hours), and contribute to the maintenence of the facility and equipment that allows that to happen. Per shift (along with 1-4 coworkers) I think I am involved in preparaing late breakfast or lunch for approximately 150-200 people, saving them perhaps dozens of minutes from preparing the equivalent meal themselves. (don't worry, I dont think you owe me too much respect).

Re: Understanding Jane Street

#18

Post by cbau »

bob29 wrote: post #3

Quoted post unavailable.

- There is a search cost of finding someone to trade with. Market makers streamline the process by always having a deal available. They might not offer you the best price you could get if you waited, but if you want to buy/sell a commodity right now you now have the option to do so, and probably removing the search costs from society as a whole is economically efficient.

- Special case of the above: They allow people who have want to trade huge amounts of a commodity a way to efficiently do so (no need to talk with multiple people; can do the trade all in one place).

- By making trading more efficient, society can get a better idea of the "true" price of things. Extremely important because prices guide investment. For example, if you're a farmer, and you're thinking about what crops to plant or a research lab thinking about where to focus your research. Having an efficient market with accurate prices ensures the economy grows at max speed.

Re: Understanding Jane Street

#19

Post by [deleted] »

paulpauper wrote: post #6

1. It's realllyyyy hard to get hired. So many stories are along the lines of "I applied...blah blah... didn't get in" 2. You have to solve over the phone very hard math questions to make it past the initial screening stage. I dunno what comes after that. The highest-stakes gambling events in the world are typically very discreet, invite-only affairs. One that might be close to the top in terms of available winnings h…

[deleted]
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