Beyond The Semesters Episode 7: Soumitra Agarwal, Optiver
Welcome back to another episode of Beyond The Semesters, an initiative by the Coding Club, IIT Guwahati where we interview and try to get a peek into the life and work of IIT Guwahati graduates currently working in fields of research, development, and others.
This time we have with us Soumitra Agarwal from the class of 2018. He pursued his BTech in Mathematics and Computing and is currently working as a derivatives trader at Optiver, Netherlands.
We talked about his experiences in the Quant industry and how his life has changed significantly from his college days. He cleared many myths regarding the finance sector and gave valuable suggestions for students willing to pursue this field further.
The following is what beholds beyond the semesters !!
Ques. As you are currently working in Optiver, can you elaborate on what work you do there as many of us are not well acquainted with it?
My role is that of a trader. You decide on what positions you want to take in a bunch of different financial products. For example, one financial product that you would know about is stock. But Optiver trades options. They are derivatives and it is my responsibility to take a position on behalf of the company and also provide market. I’ll explain what providing a market means. There are different financial institutions like banks that provide you with mortgages and also give you a place where you can get risk-free interest when you give them your money. It is basically a storehouse for your capital. There are other financial institutions like brokers where you can buy and sell stocks.
What Optiver does is they market make certain financial products which means if you want to go and buy, say, a stock in Apple, a broker would provide you with a price at which he would be able to buy it for you and you would probably be trading against some other market maker who is ready to sell at that price. Market makers provide 2-way quotes so if we think something is worth $10, we’d say we’d be ready to sell it to you at $10.1 just so that we make some profit and you don’t have to actually pay up a lot and find another seller in the market because it is unlikely that you’d find a seller at the exact moment you want to buy. The seller might be selling at $20 and if you want to buy, you’d have to pay up a lot against whatever the fair value of that thing is. So, we require these institutions to ensure stability in the financial market.
A hedge fund manages capital for big money makers like, eg: Jeff Bezos would give his money to a hedge fund. It would then be their responsibility to manage his assets such that in a situation where Amazon crashes, he doesn’t lose all of his money. If I have exposure to all the Amazon stock, I would ensure it by hedging it against something else and that something else is the sort of financial products we market-make, and every time they want to get out of that position they have to pay up to 20 dollars. This would lead to a lot of movement of capital. To ensure stability, we say we’ll sell it at 10.1 and buy it at 9.9 and we make a certain spread on it.
And why are we able to do it and not someone else? That’s because these financial products don’t have a good way by which you can calculate their fair price. We do know because we do a lot of research on it and I do that. I calculate what the fair value should be and then I take the risk. My objective is to make the most money for the company while doing it.
Ques. What is the work culture at Optiver? You have interned at Goldman Sachs, so how would you compare the company’s work culture?
What I was doing at Goldman Sachs was really different. I was working as a mid-office software developer so it was pretty chill and because I was coordinating with the London office I used to go in at 12 and was done by 8 or 7:30 pm. But at Optiver it’s quite different you feel quite entrepreneurial like you feel “this is my shop and I have to improve it as much as possible” so I am talking to developers, and researchers to get software built or for an explanation to an option pricing model. And also trading-wise, there’s a lot you need to do.
So definitely I think it is better than a hedge fund where if you are managing your own fund then you have to work all the time, people do like a 90–100 hour work every week which is basically not sleeping and working but at Optiver, I feel like I work around 50–55 hour a week and yet get a social life so it's not as good as what you’d expect from a country in Europe where work-life balance is really valued and people don’t work after 4 pm, it’s different from that, but I know people who work at Goldman Sachs or any other bank and still work 11 hours a day. The nice thing is that once you are outside, no one is going to call you or bother you like I have been on vacation and had not had a single message or call. I also do not think working 11 hours a day ruins my social life or does not let me enjoy other things like I play squash.
I get time for all the things I like, so it's not too bad.
Ques. Getting into Optiver is not an easy task and it doesn’t even come for on-campus placements. What made you apply for off-campus placements and how hard was the recruitment process?
Yeah, so we are slowly expanding, but I don’t know why we haven’t expanded to IIT Guwahati yet, so recently we got interns from Madras, and Delhi so I think Guwahati would be next on the list. I was really lucky in the sense that there is an ex-Optiver employee, who had started their own company and was helping people from other IITs get into the placement process for Optiver. The company had the challenge to predict stock prices, given some input. So if you were able to understand the concept that was enough to take you to the second stage which was a mental math test in which you need to quickly calculate. Then there were three interview stages:-
One of them was on Skype where they were asking for normal puzzles and they were expecting you to just be able to understand if you were wrong. They judge you on basis of your confidence and judgment. So like, they gonna ask you what is the probability that if they deal out three cards that sum of the card is more than 30 and then you have to quickly guess. It’s kind of tough to quickly calculate in mind the probability so you kind of make-a-market according to your intuition. They judge your intuition by asking you what are your bounds for 50%,90%, and 100% confidence. If you were able to do that in a logical fashion, they are quite happy.
Puzzle, quick thinking, confidence, and performance under pressure are what they judge, you just need to be confident!
The 4 and 5 stages were in Mumbai, they were kind of simple and the same as the Skype interview. The whole selection was a long process.
Ques. Do you miss Indian food?
I do a little bit, but it’s fine, you also don’t want to eat outside like because the food is the same and it is way more expensive than in India, like one of my friends from Mumbai exclaims that he can’t pay more dollars for a Vada Pav than the rupees in India. We cook at home when we feel like it. I don’t think I miss that much, as some other food takes its place but whenever I come back to India I obviously go on the feast.
Ques. Anything you miss from India there?
I think the weather is kind of bad here as it rains 200 days a year and it is also really cold, you move around the city by public transport but a lot of dutch people owns bike for travel because the infrastructure is quite good. There are more bikes in Amsterdam than people.
Ques. We have heard that in quant firms the amount of money you get as a bonus is in proportion to the amount of money you make for that company. Is your model also similar?
Yeah, it is somewhat similar. If you’re doing really well, you will get a big chunk of the company’s profit. We have 4 different levels of traders and at every level, there is a specified amount of profit share you would get. People at the higher level get a bigger chunk and people at the lower levels get a smaller chunk and everyone at the same level gets a similar chunk. So, my bonus is dependent on how much money the company makes and not how much I make individually. This motivates me to help other people, help juniors, and help people in other teams because if anyone makes money it’s beneficial for me rather than just me making money, which I think makes quite a good environment. Everyone is really helpful. But yeah, a certain fraction also depends on how well you perform.
Ques. We learned that you were the CP head of the Coding club? What advice would you give to people just starting with CP and why did you not go for an SDE role?
The only advice I would give is to practice a lot and that’s the best way to do it. Just pick a site, I think CodeForces is the best in my opinion, but you can pick any site and keep practicing. I had this neighbor, you can call it, in my hostel whose older brother worked in Google, London. He really pushed him to do it and he started pushing me to do it as well. He would remind me before every contest. We formed a sort of group and it was like a healthy competition. He would say I’ve done 3 of them and I would be like, “now I have to do them as well”. Just find an accountability partner and keep practicing. And if you’re interested and you see yourself getting better, you’ll just stick to it. As for the second question, I applied for all the roles. I interned at Goldman Sachs and got really good reviews. So, I was expecting a PPO as everyone in our previous year had gotten it too. But I didn’t get it and then I was like, “I need to apply to every single job opportunity that I get”, which is why I applied to Optiver in the first place. I applied for many SDE roles and I got into JPMorgan as well but I preferred going outside India. It just sounded more charming and exciting.
Ques. Did you give any contests after getting the job just for recreation?
I’ve been really off it because I’m working 55 hours per week. So, you don’t get the time but I do some problems here and there because it’s been like three and a half years and sometimes, you’re feeling nostalgic. But I’m not even half as good as I was in college so you lose the motivation to do it as well. There’s this IBM website where they publish a puzzle every month and you can solve it with or without programming and I’ve done a bunch of those.
Ques. How have you evolved yourself from rank 71 in a particular Kaggle competition to the application of ML in your current role and the transition into finance?
Kaggle was not much ML at that time; it was more like statistics and probability, but people were good at using Boosted Models and complicated stuff, and I used to get stuck at elementary things, which is why it is pretty applicable to what I do now. Hence, as I said, automated trading options are complicated because it’s contextual, there is a team at Optiver which is trying to build all of these products, and I sort of project manage what they do. I need to understand all of this because they give me this we have built this, and how are you going to use this?
How can we make it such that it can interact with two different teams so we can trade two different products using the same model and stuff, if I wouldn’t understand this, then I wouldn’t have been able to take that role. I don’t think I use classic ML that much even still now but statistics are quite useful just like probability theory and distribution theory.
Ques. So you got selected for GSOC twice, any tips for people who want to contribute to open source in machine learning?
I actually applied in the first year as well but didn’t get selected but learned a lot about the process. So you can look up what organizations were listed last year and many of them had projects each year, there are some new organizations every year too. The one I did, Scilab, had a project every year, what I did was even before the project came out I just started looking out what project they had last year, then I started to talk to people involved, just getting involved in the process and showing them you are interested.
They already give you a lot of resources on how to contribute, what the organization does etc. Reading code and fixing small bugs can give you enough familiarity with the code so you can start contributing, so the stakeholder of the company can recognize you, and then you can start a discussion, so just being more involved in the community of the organization gives an edge over someone else who just started when the project was listed on, you will have a more in-depth proposal.
Ques. How did COVID affect your life considering you graduated in 2018 and it came just after that?
I got to experience the real Amsterdam for one and a half years before COVID hit and everything shut down. But what I do, I can’t do from home, which is why I had to go to work every day even during peak COVID. I wasn’t working from home even for a single day, so my life wasn’t as affected as other people’s. I couldn’t play squash which I really liked, so instead, I would play the guitar.
Ques. Have you been on trips to India, like right now you’re on a vacation? Do you come to India to spend time with your family or do you like to visit tourist places?
I would like to spend time with my family. I have been here for 3 weeks already and I’m going to be here for another week. So, it’s a long vacation. I have traveled around the country a little bit. I met my grandparents and I met a bunch of old school and college friends. I went to Bangalore and Mumbai but not to the tourist places.
Ques. And do you go to tourist places in and around Europe?
Yeah, it’s quite easy to travel around Europe. I’ve been to most countries in western Europe. Actually, there is a bunch of Caribbean colonies which are Dutch so you can actually go to Aruba which is close to Venezuela without a visa. I actually did this really nice hike called the Tour Du Mont Blanc. It’s like 180 km and it’s probably one of the best vacations I’ve ever had. It goes through three countries. You start in France, go through Italy, Switzerland and then back in France. It’s just 9 days of walking up and down, you go up 1000 meters every day, come back down and you’re with the same people every day, so you make really good friends.
Ques. Which hostel did you belong to? How was your hostel life?
I was in Manas, and I feel like hostel life is the best experience of my life, it really gives me a place of belonging when you are in college. By the end of the third year, I knew everyone in my batch and where they were living. We were sharing our room in the first year and living on the ground floor because Lohit was under repairs.
You could just go into anyone’s room and hang out with them. Having so many friends so close, that you are not gonna have in adult life. Your group just keeps getting smaller and smaller as you grow old.
Ques. Do you plan to continue at Optiver or do you have any other plans as of now?
I am personally quite happy with what I am doing at the moment. I feel like I have progressed well, people respect me enough, they value my opinion and it pays quite well. Though I like Amsterdam and would like to settle here for sure.
Ques. Do you miss the campus? How is your day in life now different from that at campus?
I miss the campus and usually keep going through the aftermovies of Techniche and Alcheringa. My favorite places on campus, used to like to be at this one guy’s room where we would all chill out, I also had a bunch of friends at Kameng, then the Food Court, and the then newly opened Rolls Mania.
Coming to what my day looks like now, now I go to work every day, but I feel like I have an excellent social life now. Either I am hanging out with someone or going out, playing squash or maybe I am making some music.
On Saturdays, I party, since you really work hard the whole week so you got to party hard on weekends. :)
It was a great experience interacting with him for us, and we hope that you enjoyed and got to know about life as a Trader at Optiver!
