Quant interview preparation

Questions

100

Traced to a firm

53

Firms

15

Updated

September 2026

Asked at

All firmsOld Mission Capital12Tower Research Capital10Jump Trading7Akuna Capital5Citadel4DED.E. Shaw3Jane Street3ACAQR Capital Management2DRW2Millennium Management2Schonfeld2SCSquarepoint Capital2Susquehanna International Group2Belvedere Trading1Optiver1

Topic

All topicsProbability10Coins, cards and games6Expected value8Statistics11Market making15Estimation and mental maths4Stochastic processes4Regression5Machine learning6Time series6Programming10Options and derivatives8Fit and motivation7

Level

AnyCoreIntermediateHard

Type

AnyBrainteaserTechnicalCaseMarket viewFit

1. 087You think the market is overestimating volatility. What options strategy would you use?Options and derivativesIntermediatetechnicalOld Mission CapitalProp Trading · Chicago · 2025

   Say this

   Sell volatility and hedge the direction out. The cleanest expression is a short straddle or strangle, delta-hedged so the position is a bet on volatility rather than on the underlying. If implied vol is above what I think realised vol will be, I collect the difference through the gamma-hedging P&L.

   Then walk it

   1. The mechanism: a delta-hedged short option position makes money when realised volatility comes in below the implied vol you sold. Your P&L is approximately half of gamma times the difference between implied variance and realised variance, integrated over the life of the trade.
   2. The instrument choice. A short straddle at the money has the most vega and gamma per unit of premium, so it is the purest vol expression. A short strangle has less gamma but a wider profitable range and less immediate pin risk. If I wanted a cleaner exposure with no path dependence I would sell a variance swap, where the payoff is literally implied minus realised variance.
   3. Risk management is the whole trade. Short gamma means every hedge is at a worse price than the last, so a gap move is where the loss lives. I would cap it with a long wing, turning the strangle into an iron condor, which sacrifices some premium to remove the unbounded tail.
   4. Sizing from the tail: I would set the position so the worst plausible gap, say a five percent overnight move, is a loss I can carry, not from the expected daily P&L. Short vol positions have positive expected value most days and lose several months of it in one session.
   5. And the honest caveat: implied vol trading above realised vol is the normal state of the world, not a mispricing. The variance risk premium exists because sellers are being paid to warehouse gap risk. So I need to believe implied is rich relative to that premium, not merely rich relative to realised, otherwise I am just collecting a risk premium and calling it alpha.

   Where candidates lose it

   Answering short straddle and stopping. Two things must follow: that you delta hedge to isolate the vol view, and that short gamma means a fat left tail so you cap or size for it. Also the variance risk premium point, because saying implied is above realised therefore sell it is the reasoning that ends careers.

   Expect next

   • How do you make it a pure volatility trade?
   • What happens if the stock gaps ten percent overnight?
   • Why is implied usually above realised in the first place?

   Reported by candidates at Old Mission Capital (Prop Trading, Chicago, 2025). Source: Wall Street Oasis.

2. 091You want to express a view that the underlying will move a lot but you have no view on direction. Straddle or strangle?Options and derivativesIntermediatetechnicalProp trading firmsDerivatives

   Say this

   Straddle if I think the move is likely but might be moderate, strangle if I think the move will be large but is less likely. The straddle costs more and starts paying sooner; the strangle is cheaper with a further breakeven and more leverage to a big move.

   Then walk it

   1. Definitions: a straddle is a call and a put at the same strike, usually at the money. A strangle is a call and a put at different out-of-the-money strikes.
   2. Put numbers on it. Stock at 100, one-month at-the-money vol 20 percent, so a monthly standard deviation of about 5.8 percent. The at-the-money straddle costs roughly 0.8 times spot times vol times root T, about 4.6, so breakevens near 95.4 and 104.6. A 95 to 105 strangle might cost 1.8, with breakevens near 93 and 107.
   3. So the straddle needs about a 4.6 percent move to break even and the strangle about 7 percent, but the strangle risks 1.8 rather than 4.6 and pays more per unit risked on a ten percent move.
   4. Greeks tell the same story. The straddle has more gamma and vega per contract and the most theta decay, concentrated near the strike. The strangle has less of everything but a flat maximum loss region, and it gains relatively more from an increase in the wings of the vol surface.
   5. What I would actually decide on, and this is the part interviewers want: whether the implied vol I am paying is cheap relative to my forecast, and where on the smile I am buying it. Out-of-the-money strikes usually carry higher implied vol because of the skew, so the strangle can be the more expensive trade in vol terms even though it is cheaper in premium. If the whole surface is cheap I buy the straddle; if only the wings are cheap I buy the strangle.

   Where candidates lose it

   Answering purely on cost, as if cheaper were better. Compare them on breakeven distance, on cost, and on where you are buying the vol surface. The skew point, that out-of-the-money options often carry higher implied vol, is the answer that shows you think in vol terms rather than premium terms.

   Expect next

   • What if the event has a known date, like earnings?
   • How would the skew change your strike choice?
   • When would you prefer a calendar spread instead?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.