In this episode of The Derivative, Jeff Malec sits down with Bernie Yu, co-founder and CIO of Patronus Capital, to dive deep into the world of options trading, market making, and the nuanced art of capturing convexity. Drawing from his experience at Optiver and his journey to founding Patronus, Bernie shares insights into how a four-person team competes in the hyper-competitive options market by focusing on S&P 500 volatility. The conversation explores Bernie's unique approach to trading, the importance of liquidity, and how understanding market flow can create strategic advantages. From his Australian roots to the trading floors of Chicago, Bernie offers a fascinating look into the mechanics of options trading, risk management, and the evolving landscape of derivatives markets. SEND IT!

Chapters:

00:00-00:54=Intro

00:55-06:14=Actuarial Science, Cricket, and the Trading Floor: Bernie's Multicultural Journey into Finance 

06:15-21:40=Market Making Decoded: The Art of Liquidity and Convexity

21:41-31:58=The 0-DTE Dilemma: Navigating Options Market Inefficiencies

31:59-41:36=Competing with Giants: A Four-Person Team's Edge in Options Trading

41:37-50:35=Liquidity Dynamics: The Hidden Engine of Financial Markets

50:36-57:16=Future Horizons: Tax Advantages and Market Expansion Strategies

57:17-01:05:41= Market Time Machine: Lessons from Black Monday and Future Market Insights

From the Episode: MMI Index Blog post

Blast from the Past - How Futures saved Stocks

Follow along with Bernie on LinkedIn /Patronus Capital and check out the Patronus Capital website at www.patronus.capital!

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