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    IMC Trading Interview Preparation Guide 2023

    Uploaded by

    Sair Shaikh

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    IMC Trading Interview Preparation Guide 2023

    Uploaded by

    Sair Shaikh
    7 views1 page

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    7 views1 page

    IMC Trading Interview Preparation Guide 2023

    Uploaded by

    Sair Shaikh

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    IMC Trading Interview Guide 2023

    Trading is in many ways similar to sports betting, there is a fair value for the probability of a
    team winning or losing a game, just as there is a fair value for the price of a stock or future.
    One tactic in trading or sports betting is to use the information at our disposal to cultivate an
    ‘edge’ or a pricing advantage on the people we are trading against, and to use this to our
    advantage.

    Another approach is to provide people prices for every outcome. In stocks this means
    providing a buy and a sell price, in sports betting this is providing odds for both teams to
    win. In sports betting, these participants are called book makers. We will explain how these
    bookies attempt to make a profit later.

    There is a relationship between the odds a bookie gives you and the implied probability of that
    event happening. For example, if Team A are paying $2.00 to win a game and you bet $1.00
    on them, if they win you will receive $2.00 (your original dollar and a dollar profit) and if they
    lose you will lose
    $1.00. To break even then, Team A needs to win 50% of the time, and so the implied
    probability they will win is 50%. More generally, the relationship between odds and the
    implied probability of the result is

    Probability of Result = 1 / Odds

    Book makers make a living having effective pricing of these probabilities, and we can
    assume they have done a decent job accounting for the historical data that would help
    forecast an event. There is one other trick that bookies usually use - they skew their prices
    lower so that if we bet on both sides, we would lose money. Say again we see Team A are
    playing Team B, and we think the odds of ether team winning is 50%, then the fair odds for
    both teams is $2.00. However, a book maker may offer
    $1.90 on either team.

    If we look at the probabilities implied by these odds its 52.6% for either team, so these
    probabilities together with their odds imply that a result will occur 105% of the time, which is
    clearly impossible. If the sum of the probabilities is less than 100%, then betting on both
    teams in the right ratio guarantees profit and is called arbitrage.

    So how then do we make money betting? It’s not easy, but it can be done if we have enough
    ‘edge’. Edge is the advantage we have over the book maker because we have spotted a
    mistake in how they have used previous information, or because we have access to
    information they’re not considering. When we bet, it’s this edge and not the price we are
    focusing on, because it’s our edge that generates our profit.

    Once we have a clear edge, we want to bet to take advantage of it. Another important
    consideration is by how much? There are many things you should consider when choosing
    your bet sizing, a few key ones are:

    • How big is your edge in this bet?


    • How much do you have available to bet?
    • Are you risking money that could be used for future bets with a larger edge?

    When betting you should weigh factors like this to make a strategy you think will maximize
    your profit.

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