Why This Wall Street Firm Wants Its Traders to Play Poker

No money changes hands in Susquehanna’s games, where employees often serve as volunteer dealers. Skill at the poker table translates to respect from colleagues and bosses. It also, according to the company’s top brass, improves performance on the trading floor. 

Susquehanna’s founders—including Yass, who placed 12th at a 2013 World Series tournament—say the casino game teaches traders how to take risks and throttle the competition in markets from stocks to sports betting. Poker players need to take calculated risks, make decisions based on incomplete information and think clearly under pressure, often with thousands of dollars on the line. The same can be said of successful traders.

Steve Cohen of Point72, Carl Icahn of Icahn Enterprises and Greg Jensen of Bridgewater Associates are among the Wall Street titans who are known to play. Boaz Weinstein of Saba Capital Management is a skilled card counter in blackjack and a devotee of poker and chess. 

Risk-takers

To get a close look at the affinities between financial trading and poker, The Wall Street Journal invited two of these pros to the newsroom for a game of no-limit Texas Hold ’em: Todd Simkin, an associate director at Susquehanna and Jeremy Wien, founder of Moo Point Capital Management. 

Simkin, who has traded, launched new businesses and trained hundreds of rookie traders since joining Susquehanna in 1997, explained how its poker playbook has applied to a growing number of markets around the globe. 

“It’s good to think about the world in probabilistic terms,” said Simkin, 49, before flashing a cursory glance at his cards. 

It took Simkin a fraction of a second to calculate how likely his hand was to win and decide how much to wager: He would go on to raise another player’s bet. He splashed chips toward the middle of the table while midsentence with a Journal reporter, barely breaking eye contact, and was equally quick to fold when things seemed to turn against him as the last communal card, known as the river, was unveiled. It was a seven of hearts, potentially giving an opponent a flush.

A web of probabilities shapes the worldviews of players and traders alike. Both groups continuously assess the chance of a particular outcome, based on endless morsels of information. For traders, that could include economic data or share prices. For poker players, it could be cards they’ve seen played or body language. Calculating risk becomes second nature. 

That might apply to measuring the odds that a pair of jacks will beat an opponent’s hand, pieced together from a stream of clues from other players and cards that have already been dealt. At times, Simkin watched an opponent’s eyes instead of cards on the poker table, hunting for microscopic reactions to the unfolding action that would give him an edge.

Or it could be used to gauge how likely the Federal Reserve is to trim interest rates, based on reams of data points stemming from Treasurys, the derivatives market, inflation data and comments from Fed officials.

“Our goal in trading is to have an active picture of forward-looking truth,” Simkin said. “As we get new information, we update our view of truth.” 

In another hand, when an opponent made a risky bet to go all-in, he reflexively called, or matched the wager, to capture all her chips with a full house—sevens over threes.

“It’s a very good model for making decisions with imperfect information,” Simkin said of poker. 

Taylor Swift trades

Susquehanna was founded in 1987 by Yass and friends from SUNY Binghamton who shared his love of poker. The firm is best known for quantitative trading and market-making, continually taking the other side of trades placed by investors while capturing the difference between the buying and selling prices. In the 1990s, it branched out to traditional investments and then set up a venture-capital unit, eventually hitting the jackpot with an early bet on TikTok. Today it has more than 3,000  employees in about a dozen offices around the world, and Yass, 66, is a billionaire. 

Susquehanna, which exclusively invests its own funds, not clients’, has long been a behemoth. It handled more than 22% of all U.S. equity-derivatives trades in 2023, according to research firm Alphacution, and looms large in commodities and bonds. Lately, it’s veering into other corners of a rapidly changing market, capitalizing on a U.S. boom in retail trading and legal gambling. 

One of those is sports betting, which has swelled since a 2018 Supreme Court decision that led to widespread legalization. The firm is currently providing odds to sportsbooks and making markets in sports where betting is legal in Europe and the U.S., crafting strategies tied to basketball, football and soccer wagers just as options traders would. 

“We want to be in as many markets as we can be in,” Simkin said. “We think we’re making good decisions that transfer from the poker table to the world of finance.” 

Earlier this year, Susquehanna launched a new trading desk for bets on Kalshi, a prediction-market startup. Traders can put money on yes-or-no wagers such as whether members of Congress will be banned from trading stocks this year, or if Taylor Swift will remain the top artist on Spotify. As soon as next week, Kalshi users could be able to place bets on whether Democrats will take control of the U.S. House of Representatives in November, thanks to a federal judge’s ruling late Friday. It would mark the first time people could legally place election bets in U.S. markets, and could open the door to broader political wagers in the future.

To set the prices tied to a Taylor Swift contract, for example, the firm researched factors that lead to artists’ longevity on Spotify and the platform’s ranking system. As in poker, Simkin says he’s dealing with a combination of unknown variables and publicly available information. 

Simkin said trading in these markets comes down to pricing odds, whether it’s a basketball or golf win or a move by the Federal Reserve. 

In 2021, he oversaw the launch of SIG Re., a venture through which Susquehanna is making insurance deals with leagues and lotteries, protecting against the financial downside if a big sporting event doesn’t produce the windfall expected, or a lottery has to pay a jackpot. It’s not that different from writing an options contract, Simkin said, in which someone might buy an option to hedge their portfolio. 

The fabric of Wall Street

Poker has long been woven into the fabric of Wall Street. 

A 2019 study by researchers at the universities of Central Florida and Alabama found that hedge-fund managers who shine in poker tournaments tend to report better investment returns. 

Wien, 40, the derivatives trader who joined the Journal’s recent game, spent five weeks this summer in Las Vegas at the World Series of Poker, a pilgrimage he has made most years since 2005. This summer’s tournament drew a record 229,553 entrants.

He woke up early to trade. After the stock market’s closing bell, he headed to one of 99 World Series tournaments that take place throughout the summer at the Paris or Horseshoe casinos. 

He stayed at the tables for hours, often in a hoodie from Georgetown University, his alma mater. He says he wears it to hide a prominent tell: his pulse throbbing against his neck, rising during stressful moments. 

Tournaments require more patience and endurance than smaller games with friends, he said. They also offer the types of payouts he seeks as a derivatives trader. In exchange for a small payment, he gets the chance for a huge return. 

Wien’s strategy entails folding an unusually large share of the hands he’s dealt and playing only plum cards that he thinks have the highest likelihood of paying out—an approach he appeared to take in our game. At a tournament, that can mean sitting for hours on end, watching other players add chips to their stacks.

What you don’t do is just as important as what you do, Wien says.

In 2018, the $5,000 he paid to enter one of the tournaments that make up the World Series of Poker morphed into more than $500,000 and a gold championship bracelet. He didn’t have the same fortune this year: He struck out on the first day of the main event. 

Yet he says the patience learned playing poker has helped him endure one of the calmest stretches in financial markets of his career. Even before starting his own shop in 2021, Wien traded some of the most fickle instruments on Wall Street—derivatives tied to the Cboe Volatility Index—at Goldman Sachs and JPMorgan. 

Those trades are often most profitable when swings across global markets are pronounced. 

Wien’s fund, which oversees about $20 million, has been positioned for turbulence to pick up for much of this year. These trades can be painful when the stock market is steadily climbing upward, as it did for months to kick off 2024.

In August, when stocks turned south on worries about the health of the economy, he was glad he stuck with it. 

“It’s worked out well,” Wien said. 

Thinking in probabilities

When Tina Lindstrom joined Susquehanna out of college in 1998, she was surprised to see that it placed as big an emphasis on learning poker as it did on trading options. 

Her team took long-weekend getaways to Las Vegas casinos and Boca Raton, Fla., where they played blackjack and poker, roamed resorts and sampled caviar. It was during these games that Lindstrom, now a senior derivatives trader at Marex, learned to think in probabilities. 

Students in a trading class play in a poker tournament that runs throughout their 10-week training and their performance is rated based on the Sharpe ratio in their play, finance parlance for measuring the return on an investment relative to its risk. That means winning big by repeatedly going all-in isn’t as desirable as picking up chips with less risk. The trainee with the best ratio is crowned class champion.

After the training, employees are trusted with trading Susquehanna’s money. 

Simkin says he frequently presses traders on actions at the poker table, as he did at the Journal’s game, in which no money changed hands. For example, he might ask why a player decided to bet based on the pair of cards in his hand. What persuaded him to bet big or small? Did she have a good hand, or was he just lucky?

In one training session, Lindstrom recalled, she and another player were the last remaining. Lindstrom studied the cards face-up in the middle of the table, rapidly deducing the permutations of those remaining undealt. After the last card was unveiled, her estimate of how likely she was to have the “nuts,” or best possible hand, skyrocketed. 

But she had a hunch she could trap her opponent and decided to let her bet first before raising the wager—and winning.

The moment taught her the importance of adeptly sizing bets and going big when she had a strong hunch.

Her first year as a trader, her manager pointed out that she was being too cautious. 

“They pulled me aside and said: ‘You never lose money. That means you’re not taking enough bets,’ ” Lindstrom said. “ ‘You need to bet more.’ ” 

Those lessons paid off. After spotting mispricings in the commodities market ahead of the Covid-19 crash in early 2020, she picked up options that would profit if oil prices plunged over the following weeks. The contracts soared when the pandemic sent oil prices into negative territory for the first time, making the trade a big moneymaker for her investment firm at the time. 

Poker, Lindstrom said, “taught me to be aggressive. It taught me to bet properly.”

Write to Gunjan Banerji at gunjan.banerji@wsj.com