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Interactive Options Course
Posted August 7, 2025 at 2:01 pm
What happens when the next generation of market minds sits down with a seasoned pro? In this special intern-led episode, Nasdaq’s Kevin Davitt joins the IBKR interns for a conversation on options, volatility, and what it really takes to succeed in today’s markets. Intern participants include Ben Raposo, Ethan Xu, Hadi Khamsi, Jessica Lasley, Rishin Mitra, Trevor Black, and Tyler Knohl – some appearing on-screen, others contributing questions behind the scenes.
The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.
Welcome to a very special edition of the IBKR Podcast. My name is Ben Raposo and I’ll be the host for today. We will be handing the mic over to the 2025 IBKR interns. In this episode, we’re very fortunate to be joined by Kevin Davitt, the Head of Index Options Content at Nasdaq. Kevin has been on the IBKR Podcast in the past, and us interns are thrilled to gain his insights as both a trader and an educator. The focus of today’s conversation revolves around the current markets, volatility, and the future of trading itself. Kevin, really good to meet you.
Ben, I am traveling today and I hope the internet complies, but I am super excited about this. I’ve enjoyed our conversation before we kicked off. Let’s do this. This is gonna be fun.
Let’s jump right into it. I’m gonna ask a few questions to get to know a bit about you, and then we’re gonna turn it over to my fellow interns for their more technical questions. Firstly, I think this is a very important topic. Do you drink coffee or do you drink tea?
Oh, coffee nonstop.
I’m right there with you and I would speak on behalf of the other interns I think there as well. And then on a more important note, what made you break into finance and make it your career and really life’s profession?
That’s a fun question. So I would say broadly, exposure. When I was young—so I grew up caddying—and as a sort of function of that, I was exposed to successful people from the age of 13. I saw how frequently those people were connected to the derivative markets in Chicago, and that certainly piqued my interest. I studied finance and poli sci in college. I did think I wanted to go to law school. I took the LSAT, I did the whole shebang. But when I got a chance to work on a trading floor in the late nineties, I remember my first day—it was unlike anything I had ever been exposed to. I was hooked and I haven’t looked back.
That’s fantastic and really good to hear. And I think some of the interns and people in our age group are along the lines in similar situations. So what would be one piece of advice that you would have for one of us interns or a beginner in the industry? And would you recommend getting an MBA coming out of our undergraduate?
Oh. Okay, so on the MBA question, I’m not sure I’m totally the right guy to answer that because I didn’t get one. But that’s no knock. What I would say is that it seems like the industry right now values a CFA a great deal. But I would also recommend thinking about how the world might change a decade from now, and that is difficult. In terms of recommendations, I would say networking is something that I undervalued when I was younger and that I consider invaluable at this point in time. I know there will be a continued impact of technology and sort of flattening of the world, but we are ultimately humans, and we like to work with people that we have a relationship with and that we respect.
And the earlier you cultivate a relationship and you get to learn from people that are in a business, I think there is nothing you can do that will have a longer-lasting impact than network young and consistently—and be genuine about it, I think, is a distinguishing characteristic. Not necessarily opportunistic, but genuine.
I think that’s really good advice. Thank you for that. And moving on to how you really gather your content and your knowledge growth—do you have a favorite book or podcast that has really shaped how you think as an individual and shaped how you think about the industry?
That’s a fun question, and there’s so much opportunity to engage with content these days. I would find it really hard to pick just one. And for books, they’re like albums for me in the sense that when you read them can be as important as what you read. So let me think of an example there.
Like I read Portrait of the Artist as a Young Man—a James Joyce book—and The Sun Also Rises by Hemingway when I was like 19, and it was really important when I was 19. But it would probably be less so now. When I think about capital markets, I think about Liar’s Poker, which is a Michael Lewis book that I consider exceptional. It’s so well written and such a narrative about the early evolution of the derivative markets—more specifically mortgage derivatives in the late seventies and eighties.
Michael Lewis, for me, is like Patrick Radden Keefe in the sense that he can take esoteric topics and make them really captivating because of his narrative skill. The Big Short written by somebody else just wouldn’t have the same impact. I think about Andrew Ross Sorkin’s Too Big to Fail—that’s pretty fabulous.
But one more specific to this industry and thinking probabilistically—which we mentioned earlier—I’m in Vegas and it’s somewhat ironic, but the importance of thinking probabilistically: this book called Getting the Best of It is wonderful.
Those are some really good insights and I think we’ll have to give those a look. Kevin, thanks for playing along with those quick questions. Now we’re gonna hand things over to the 2025 IBKR intern class for their questions. Kicking it off with Jessica. Jessica, go ahead.
Hi Kevin. Thank you for being here and taking the time to speak with us. So I’ll be asking questions on behalf of two interns. The first question comes from Ethan Xu: What are the most underappreciated economic indicators that investors overlook?
Ooh, okay. Let me think about this one. So I focus on index derivative markets, and so that will inform my thinking here. I think that most people that primarily focus on equity markets—so buying and selling stocks—tend to often overlook how information-rich the option market is, whether they use options or not. So I think about something like the value of a straddle going into earnings, which is front and center right now. The options market does a great job of predicting what type of move, what type of volatility you should expect at the single name level. And similarly, at the index side of things, understanding relative volatility levels and the mean-reverting tendencies of volatility can be instructive, even if you don’t use options.
Now, I think I’m of the opinion that avoiding bad investment decisions can be as important as making good ones. I think that’s something that’s difficult to quantify, but I believe it strongly.Last point here: I think that people tend to overvalue some indicators that have worked the last time something happened. And I think you need to be flexible and not over-index to one or two specific indicators. So no real specific answer there, but like weighing the potential benefit of any given indicator and understanding that the next time something happens, the same indicators may or may not work.
Thank you. Next are from Trevor Black. The usage of options as a trading tool has evolved. Have the core principles stayed the same, or are we looking at a fundamentally different market mechanic?
Okay, option markets have most certainly evolved. But—words matter—and when I think about core principles, that implies something really fundamental to me. That’s bedrock. So my belief is that that remains unchanged. Options remain tools for exposure, for risk management. That was the case thousands of years ago when forward contracts were introduced in the time of Hammurabi. That was the case in the 1850s when futures markets were standardized. That was the case in 1973 when equity options were first launched. The ways that these tools can be employed, with respect to things like time and place, have certainly evolved. But fundamentally, they are the same tools.
Now, I think that there are scientific principles at work—really the math behind them—but then there is the art: the practical expression of that view. And I think you need to understand the core principles to be successful in that creative application. Hopefully that addresses the question.
Yes, thank you. And my last question—how does psychology play into the modern trader’s mindset, and is it more or less important today than in past decades?
Oh, okay. Psychology. Good question. I would argue that it’s at least as important, if not more important, than in the past. And my opinion there is informed by the fact that risk gets repriced—both up and down—more quickly these days. And so I think having a disciplined plan requires a strong psychology, and that is much easier said than done. It’s a little bit cliché, but you need to want to protect capital and grow money more than you want to be right.
Humans can be really stubborn, and that can be super costly in some markets where risk is being repriced quickly.
Thank you. I’m now passing the mic on to Tyler.
Hi Kevin, Tyler from the Institutional Services team. And my first question for you is: as markets begin expanding their operating hours and trading is becoming more and more fast-paced, how do you see trading and overexposure and burnout among professional and retail traders being managed going forward?
Yeah, for people your age, I think that could be a front-and-center concern. Ultimately, time is gonna tell on what we’re calling the “24-by-5” evolution. But I’m gonna take maybe a reductive analogy from another consumer market. Back in the day—I know I’m sounding like the old guy here—but you could only shop between, let’s say, nine and five for most consumer goods. Back when my mom was growing up, everything was closed on Sunday.
And 25 years ago, you had the rise of e-commerce where you could theoretically shop anytime for anything you want. People value that. I can tell you that I’m not one of the people that wakes up for bargains super early on Black Friday. I’m not randomly ordering stuff at 2:00 AM on Amazon or Shopify. But some people work odd hours, and some people in capital markets are in Europe or Australia or South America. And our markets being available more broadly, I think, is inherently a good thing.
It’s clearly been valuable globally from the e-commerce standpoint, and I think the evolution in capital markets is gonna be similar. And my one sort of broader point is: I think humans are nothing if not super adaptable.
Thank you. And then onto my second question. Considering the recent acquisition of Stanley’s market-making department by Citadel—and Citadel’s growth in the options order flow market—how do you see this affecting the options industry, specifically for retail brokers who have fewer alternatives than ever and have reduced negotiating power?
Okay. So, Citadel has been a leader in capital markets for many years—whether you’re talking about the equity side of the business or the derivative side. I would say that these markets, both equities and derivatives, are probably the most competitive in the world. And Citadel has plenty of competition. Are they good at what they do? Absolutely. Is Jane Street or Susquehanna or Wolverine or Akuna or Old Mission or CTC or Belvedere, IMC, Optiver, or DRW? There are probably countless other ones that I’m not mentioning. Are they good at what they do? Do they compete for order flow? The answer is yes, and that is still the case.
I think that in the business, margins have been squeezed and you have to be very good at what you do to stay in this business. But the knock-on effect of that is that it’s never been better for end users of options in terms of all-in costs—which are approaching zero, effectively. And ultimately, I think that’s what’s most important.
So would you say that this acquisition is going to be a net positive for the options order flow market?
I would say it’s no different. I don’t think there will be any drop-off. And I do have to be careful, because as an exchange employee, we work with a wide variety of market-making firms, and so I’m apprehensive to take a position one way or another.
But our markets have evolved countless times over decades, and generally, things skew for the better across the user base in this business.
Oh, very cool. Thank you.
Yeah.
And I’ll be passing it back to Ben then.
Hello again, Kevin. I think we are in the age of information and knowledge, and education is really at the core of that. So from your perspective in teaching others about markets and trading—what’s a common misconception, or the largest misconception, you encounter again and again while educating others?
Really good one. Okay, let me think about that just a bit. Common misconceptions… All right. A couple of things spring to mind that I think are somewhat related. I think the way that markets are covered—or the way people think about opportunity in capital markets—tend to fall either too much one way or too much the other way. And let me explain what I mean by that. So you mentioned that we’re in the information or social media age. I agree. The coverage of that, I think, tends to skew in one situation to the “get rich quick,” “this is easy,” “if you just do X, Y, and Z you’re gonna be flying private too.” That is disingenuous, and it’s dangerous. The corollary there, I think, is that people who market derivatives as easy—or getting into this business as easy—is patently untrue. It is difficult, just like anything worthwhile.
Now, the flip side is that there’s a lot of really high-end derivative research and coverage that’s just that—it skews, for many people, a little bit too academic, a little bit too wonky, and it can be hard to follow without a degree in econometrics or something. And that’s the coverage that I think can be off-putting for people, and that they think: “This is too complicated to understand.” My belief is that there’s a big middle if you think about a normal distribution curve.
And speaking to that audience is rewarded—if you are willing to put in work to understand the risks as well as the potential use cases and the potential rewards. That’s how you can genuinely meet people where they’re at. And it doesn’t shy away from the risk element of this. We don’t want to make markets seem too easy—nor too academic.
I think it’s a really important thing to note—being aware of all that’s available. Are there certain things that, to go off that last question, we as people trying to learn should stay away from?
I would say that you should try to cultivate an information sort of chamber that doesn’t just echo what you think. Challenging your conceptions is really powerful, and the more you’re able to challenge your original inclination—and either back that up or change your opinion—I think the more kind of anti-fragile, to use a term, you’d become.
Good to know. Thank you for that.
Yeah.
Last question from me: what would you say is the biggest threat to modern-day business leaders and businesses that most of them aren’t really prepared for?
Man, that’s real speculation there. You’re bringing the heat. I think the sort of easy answer would be the potential impact of generative AI, but I’m not gonna go with that one. I’m gonna use the pandemic as an example of an unknown unknown—and I think those are the biggest risks to leaders, to businesses, to markets. It’s the thing that you don’t know you’re unprepared for because it is impossible to prepare for. We are great in the information age at modeling scenarios based on historical data. We’re not good at imagining: what if something that never happened before happens? And I’m not saying pandemics never happened—they did—but not at that scale. I realize that’s a non-answer, but I genuinely believe that unknown is the greatest risk, always.
I think we’ll just have to stay on our toes for now. That’s it from me. I’m gonna pass it over to my colleague. Go ahead.
Thank you, Ben. So now switching gears back to the options market, Kevin—how has the surge in retail options trading over the last few years altered the role of institutional investors?
Okay, I’m not sure that I would argue that X necessarily influences Y. Let me talk through that. I don’t think that one negatively impacts the other—and I want to explain that. I think it’s quite the opposite. So we talk a lot about—there’s a lot of buzzwords like “ecosystem,” which is one of those amorphous terms that is powerful. But understanding what it means, I think, is the key. A thriving ecosystem requires different players with different incentives, different goals. And I think that’s a good way to think about capital markets. Options are standardized contracts. Now, as a retail trader, I don’t really care who is on the other side of the trade. I’m concerned with getting the best price—whether I want to buy an option or sell an option. But big picture—you, this group is in college—you’ve probably had an econ class, and as dry as it can be, the rules of supply and demand are unequivocally front and center with respect to capital markets.
Now, what we’re talking about here is that the demand side of the equation has grown meaningfully. The thing that we’re not addressing is the fact that the supply side has grown to meet it every step of the way. Now whether we’re talking about short-dated options or options that expire three to five years in the future, the fact that the OCC stands between all buyers and sellers and this whole business keeps growing—it strikes me as something where we have really what I would refer to as durable growth. So I don’t think that is mutually exclusive.
So when you’re comparing options activity across different global markets, what stands out the most—particularly about the U.S. market structure?
I like that. And just to be clear, I’m by no stretch of the imagination a market structure expert. But I do think a couple of things stand out.
I’ve mentioned already the level of competition—that’s arguably the case across the U.S., across industries. In the U.S., we foster competition and an entrepreneurial spirit in a way that no other place has matched.I think we also have a really robust regulatory framework, and that matters a great deal. In my opinion, markets—and so many other things—ultimately boil down to a matter of trust.And I’m gonna be a little bit reductive again, but I don’t understand exactly how all the intricacies of plumbing work. But I know I have access to clean water, and the stuff I wanna flush out goes out. And I trust that it works the same way for my neighbor, and that there’s oversight there.
I think that markets are built on trust and the expectation of a level playing field. And U.S. markets have more trust than any place else in the world. I think that plays a role in why we continue to see demand from elsewhere—from Europe, from Asia, from South America, and elsewhere. They want access to our markets because they are trusted.
Thank you so much for your insights, Kevin. Now I’ll pass it over to my colleague to talk about zero-day options.
Hi Kevin. Thanks for taking the time to speak to us. I work with the Securities Lending team, and I’ve got a quick couple of questions for you.So I was just curious: what do you think is driving the explosive growth in zero-day-to-expiration options? And do you think, in your opinion, it’s sustainable in the long run?
Let me start with the last part—“Is it sustainable?” This has—now we’re talking about three years on from everyday options being available at the index and index ETF level—so that’s a fairly meaningful track record. I think that hints at the potential that there is sustainable, real growth here. Going back to the first part of it—what’s driving it? A whole bunch of things. When you see growth like this, it’s never just one thing. I would distill what’s driving it into utility. Options are valuable generally, but that tremendous feedback mechanism that we get—and the ability to monetize or to use them flexibly across the sort of time spectrum—is really valuable.
And so absent the ability to express your view and to monetize these tools, I don’t think you would see the growth that we have to date.
The other side of my thinking is that there are ebbs and flows in markets, and perhaps we move to a point where it retracts a bit. But I don’t think that we’re going to see the interest in relatively short-dated options dry up.
I think we have a very real thing here that will likely spread in time.
So how would you say the zero-day-to-expiration products change intraday volatility and risk profiles? When you look at institutional desks like the big hedge funds—Citadel, Point72—versus when you look at retail traders and investors?
Okay, so I would argue that there’s no right answer here. But based on what I know, I would argue that expiring options have generally been volatility-reducing because you can be more precise with your risk exposure.Now, the other thing I want to point out is that for every option that’s bought, there’s a seller—and there’s a natural balance or stasis. Again, talking in biological or ecology terms here—the ecosystem. But on the point of risk profiles, you now have so many alternatives with which to manage your risk. And I could use an option that expires later on today… tomorrow, when there’s more earnings reports… or Thursday after Netflix reports. I could go out two weeks. I could go out two years. The point there is that flexibility is valuable—and it’s valuable to both individuals and institutions. And markets are really good at finding balance. Is it possible in certain scenarios for markets to become imbalanced? I would say yes, in the short term. But in the long term, supply and demand—again, the econ that you’re gonna take or have taken in college—it rules the roost. Maybe that’s wonky, but it’s true. And so I think the value is unequivocally positive. Because you have the ability—whether you’re sitting at Point72 or Citadel or wherever, or you are me managing your own money and buying and selling a few options here and there—the value is the same. And I don’t think that there’s a tremendous systemic risk.
Sounds good. Thank you once again for taking the time.
Well, Kevin, on behalf of myself and the fellow interns, we really appreciate you joining us and for this awesome discussion that we just had. Best of luck with your travels back home.
Thank you. I hope the video wasn’t too laggy and the sound isn’t bad. I wish you all the best. Work hard. At the end, the road is long—and nice job. Continue networking. Figure out what it is you like about different positions. There are so many different opportunities in these markets. Thank you for having me on this afternoon.
Cheers. Thanks, Kevin. For our listeners—if you enjoyed this episode, feel free to check us out on the IBKR Campus, as well as YouTube, Spotify, Apple Music, or wherever you download your podcasts. Thanks for tuning in, everybody. Have a nice day.
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Index
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Options
For the sake of simplicity, the examples included do not take into consideration commissions and other transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. An investor should review transaction costs, margin requirements and tax considerations with a broker and tax advisor before entering into any options strategy.
Options involve risk and are not suitable for everyone. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies may be obtained from your broker, one of the exchanges or The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, IL 60606 or call 1-888-OPTIONS or visit www.888options.com.
Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and education purposes and are not to be construed as an endorsement, recommendation or solicitation to buy or sell securities.
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Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by going to the following link ibkr.com/occ. Multiple leg strategies, including spreads, will incur multiple transaction costs.
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