The podcast highlights the evolution of the options market over the past three decades, focusing on the increased efficiency of markets and the use of proprietary option valuation and hedging techniques.
Mat Amberson discusses his experiences trading options in the pre-electronic era, emphasizing the challenges of trading during volatile market events and the significance of technological advancements in making markets more efficient.
Deep dives
The Evolution of the Options Market
The podcast explores the evolution of the illicit equity market over the past three decades, highlighting the increased efficiency of markets and the development of proprietary option valuation and hedging techniques. It discusses the growth of the options market, the use of data analytics and option backtesting, and the importance of risk management protocols in the face of up shocks in stock prices.
Mat Amberson's Background and Early Days
The podcast features an interview with Mat Amberson, the founder of Options Research and Technology Services. Mat shares his background in investing, starting from his early experiences trading options in the 70s and working at Lehman Brothers. He discusses his transition to becoming an option market maker on the floor and the development of innovative volatility calculation techniques. He also explains the challenges of trading during volatile market events like the tech bubble.
The Politics of Trading in the Pre-Electronic Era
Mat Amberson reflects on the challenges and dynamics of trading in the pre-electronic era. He discusses the politics of getting trades done, the limitations of information availability, and the significance of human interaction in executing trades. He also highlights the evolution of trading practices, the impact of electronic trading, and how technological advancements have made markets more efficient.
The Influence of Retail Trading in Today's Markets
The podcast delves into the rise of retail trading in recent years and its impact on options markets. It explores the increased presence and influence of retail traders, their preference for buying options rather than selling them, and the resultant changes in market dynamics. The discussion also touches on the opportunities and challenges that arise from the involvement of retail traders and the need to adapt trading strategies accordingly.
Matt Amberson is among those who have watched the steady and consequential evolution of the listed equity options market over the last 3 decades. Getting his start on the floor of the CBOE in the 90’s, he was in the trenches during the period of incredible single stock volatility that was tied to the original tech bubble. While markets were not nearly as efficient then as they are now, Matt sought to improve his edge in trading options, seeking enhanced methods for estimating a stock’s volatility and searching for instances where the market may have left value undiscovered.
Using proprietary option valuation and hedging techniques, Matt backed traders who were tasked with implementing this systematic approach some 25 years ago. And while those days are past, the IP developed lives on in the form of the company founded by Matt, ORATS, Option Research and Technology Services. Throughout our conversation, we learn about the growth of the US-listed options market and how Matt and his partners have developed their data, analytics and option back-testing service. In the process, we consider risk events like GME and hear Matt’s perspective on risk-management protocol in light of the increasing frequency of up-shocks in stocks. I hope you enjoy this episode of the Alpha Exchange, my conversation with Matt Amberson.
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