Harel Jacobson is a quantitative portfolio manager at Oporto Delta in Tel Aviv, Israel. His work involves managing a volatility and systematic trading portfolio across all asset classes. Harel relies on trade automation that he created with ADL® in the TT® platform. In this interview, he shares why he turned to ADL for his trading needs and how he learned to develop trading models on TT.
In his spare time, you can find Harel at the gym advancing his amatuer boxing career and coaching other boxers. Follow Harel on Twitter at @VolQuant and learn about his quantitative approach to trading.
How did you get into trading and what path took you to where you are today?
Harel: My first interaction with the derivatives market was during the second year of my BA in economics. I started working as a support representative at SuperDerivatives (now part of ICE), so I had to handle clients’ queries regarding our market data and derivatives pricing. As I started walking down the rabbit hole of derivatives pricing and modeling, I realized that this was what I want to do for the rest of my career. The only problem was that I felt my quantitative background was insufficient to read and understand technical papers, so I decided to teach myself quantitative disciplines, mainly math and statistics/probability theory, and coding. After gaining confidence in my abilities, and after I built and backtested my first trading strategy, I joined my former boss as a quant trader under his mentorship. After my mentor left that firm, I stayed and moved up to portfolio manager. My focus was mainly FX and interest rates volatility trading. About two years ago, I joined Oporto Delta to manage global volatility and systematic strategies portfolio.
What exactly is a quant, or quantitative trading, and how does the TT platform assist you in your trading?
Harel: To me, quant trading is finding patterns and opportunities in the data. Many times we are awash with data and information, but we have very little ability to make sense and analyze the data correctly. A good quant knows both the mathematical and statistical foundations and understands the market dynamic. To me, this is the ideal combination for anyone who runs quantitative strategies in financial markets.
I came across TT when I was looking for a good execution platform for my listed derivatives option book. I was primarily managing option book gamma exposure. While I was in the FX space, banks provided me with their own execution platform. When I left FX, I found that there aren’t such platforms available outside of the proprietary bank platforms, and there are very few good off-the-shelf execution algorithms that suit my trading style. I was extremely pleased to find TT and ADL as they provided me with a perfect solution for my trading needs.
As a heavy user of ADL, can you tell us how you learned to use ADL and how it fits in your trading process?
Harel: Very much like everything else I’ve done throughout my career, it all boils down to trial and error. TT did offer substantial support and assistance [including a library of ADL training videos], but at the end of the day, the best way to learn how to build an algorithm is to deploy the logic and test it, see where it fails, debug the algo and try again until you get it right. ADL just fits perfectly with my trading style as a gamma hedger. When I have to simultaneously run a large book of dozens of option strategies, it really makes life a whole lot easier when I know that I have zero execution risk given the high volume and frequency I execute on a daily basis.
Do you have any particularly memorable market trading events?
Harel: I consider myself a flash-crash junkie. I can remember each and every flash crash event that took place over the last 15 years During that time, there were about nine events that I would consider flash events. I think that the most memorable flash events I’ve experienced were the 2014 Treasury flash crash and the 2015 SNB EUR/CHF floor removal. Back then I was more focused on FX and interest rates and ran multiple large options books with decent gamma exposure. Luckily I was long gamma through the events. In a matter of minutes, my execution algorithms executed dozens of trades, and I had to trust that my algos executed the right amounts and that I wasn’t missing trades. Experiencing execution/operational errors during fast-moving markets can be extremely costly, which is why I constantly improve my algos and stress test them. When you trade through these kinds of events, you really witness the overwhelming power of market volatility. For anyone who hasn’t traded through a flash crash, I can only describe it as standing on the beach and watching a tsunami wave heading your way.
Has the global pandemic affected your trading business? If so, how have you adapted?
Harel: The global pandemic has definitely affected my trading setup. While I’m accustomed to a powerful trading workstation with two powerful machines and seven monitors, I had to adapt to a home office, with screaming kids in the background, while trying to navigate a very difficult trading environment. Took me a few weeks to find the right balance, but I was able to adapt to the situation quickly, and in hindsight, it only improved my trading skills and mindset as a trader.