Why SIG Tells Traders Not to Hedge! - Ex-SIG Trader and Moontower Founder, Kris Abdelmessih

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How do top hedge funds actually hedge trades? At SIG, traders were often told not to hedge. Most assume elite trading firms hedge every position, but Susquehanna (SIG) built its edge by avoiding hedging when trades had positive expected value (EV). Kris Abdelmessih—who later moved into portfolio management roles in energy-derivatives trading outside SIG—explains the firm’s model: centralized risk, large position size, and no hedging unless residual exposure distorted EV or created excessive P&L variance. He shows how this framework let SIG capture options market making edge, tighten spreads, and outcompete firms that hedged mechanically.

This episode is definitely a new treat for viewers, linking options pricing, trade sizing, and execution to concepts used in algorithmic trading, alpha generation, portfolio optimization, multi-strategy hedge funds, pod shops, and even sports betting edge.

We also discuss...
How early exposure to the Amex options pits revealed structural options market making edge from wide bid-ask spreads and fragmented exchanges.
Why observing senior traders shaped his understanding of expected value (EV), risk of ruin, and edge compounding in proprietary trading.
How late-1990s retail flow and weak market microstructure created abnormal options edge before competition increased.
The shift from easy trading to tougher environments as order flow toxicity rose and spreads tightened.
Why measuring growth in trading comes from recognizing past mistakes, skill vs. luck, and the paradox of skill.
SIG’s belief that markets are mostly efficient and why uncovering inefficiency requires serious labor, pattern recognition, and deliberate practice.
Why traders must assume customer order flow is informed, reinforcing humility and disciplined risk models.
How SIG’s structured recruiting and education flywheel accelerated mastery of options pricing and liquidity provision.
Lessons from working with elite performers like Jason McCarthy and seeing extreme competitive drive and work capacity.
Why outlier PMs excel across domains, linking athletic intensity to portfolio management and hedge fund strategies.
How choosing between discretionary and systematic trading requires understanding personal strengths and cognitive style.
Why young traders must tune out status games in high-prestige quant trading, pod shops, and multi-strategy hedge funds.
How moving from SIG to a Chicago prop trading firm introduced him to backer models, P&L splits, and strict risk budgets.
Managing natural gas options risk through inventory risk, vega exposure, and shifting volatility regimes.
How designing options-themed games for his kids teaches expected value, open outcry trading, and real-world decision-making.

02:05 How Kris first recognized real trading edge
04:01 How early market structure created easy edge
05:27 Why improvement in trading comes from hindsight
07:08 The core SIG frameworks that shaped his edge
09:37 Why uncovering edge requires labor and precision
11:02 How informed order flow forces trader humility
12:53 What truly differentiated SIG from competitors
13:23 How SIG built a world-class education pipeline
16:30 How SIG captured edge by refusing to hedge
18:11 How centralized risk controlled exposure and variance
19:09 How SIG used size and spreads to dominate markets
23:20 What Kris learned working with Jason McCarthy
25:40 Why elite traders share extreme competitiveness
26:06 How top performers operate across domains and PM roles
28:22 How Kris transitioned from SIG to prop trading
31:56 What shifting into senior roles taught him about trading
33:46 How Kris built training and feedback systems for traders
35:00 How the backer model works inside prop shops
38:41 How escrow capital protects traders from tail events
41:03 How natural gas options trading changed with regime shifts
42:13 How Kris applies trading edge concepts to life decisions
45:46 Why personal alignment beats chasing status in trading
47:13 How status games distort decision-making for young traders
52:23 Why striver behavior is actually risk management
56:27 How Kris teaches opportunity cost through parenting
1:01:28 How exposing kids to decisions builds intuition
1:04:46 How Kris teaches EV using homemade trading games
1:08:05 How iteration and feedback loops shape real learning