Citadel LLC

Right down here, they're bringing their businesses.

Ken Griffin is bringing Citadel, which is one of the biggest hedge funds in the world.

They're building three blocks from the church, a two point five billion dollar skyscraper.

Everywhere you go down here, there's towers being built.

Speaking of having an investment edge, today's guest is one of the most successful investors and entrepreneurs of our day.

Alec Litowitz is one of the four original partners of the hedge fund Citadel.

And Citadel, which was originally founded by Ken Griffin, is widely recognized as the most successful hedge fund in history.

Ken Griffin started Citadel in 1990 using money that he made trading from his dorm room at Harvard.

Four years later, today's guest, Alec Litowitz, joins.

He becomes one of the four original partners.

He's a principal at the firm.

He had almost no trading experience.

Tell me about some of the players here.

So Ken Griffin obviously is the founder of Citadel, somebody that we have covered very closely as he's moved the core of his business, you know, from hubs in Chicago and New York.

They still have a big hub here in New York to Miami.

He's somebody who's been, you know, very proactive.

Goldman tells me it's what, like $200 trillion or something we're doing at this expiration?

Yeah, shout out to Citadel who's getting a lot of attention in this cycle because they've quoted $9 trillion of value expiring.

And so big numbers get big attention.

And so I've been out there trying to shake my fist at those kids for inflating things inappropriately.

And why delta is important here is because delta tells you the stock equivalent value of what is set to expire.

And so when you hear a number, and so we quote $2 trillion, as you can see here, is this amount set to expire, which is still a lot for an expiration.

But when Citadel says, hey, $9 trillion is set to expire, they look at every single contract that's set to expire, whether it's a penny option that's 50% out of the money or to deepen the money option and say, hey, that one contract is worth 100 shares of stock.

And that's just not correct, obviously, right? Because some options are worthless.

That makes the most valuable piece of information their order flow.

Is this why Citadel was buying the order flow from Robinhood?

Was? Is, you mean?

Yeah.

That positions them as a particular type of informed trader, a facilitator, who really serves to fan the flames of the crowd.

And the failure that people have, I mentioned earlier there was a paper released earlier this year from Hannah Unterberg that looks at the aggregate active share of the traditional discretionary managers and concludes that it's become negative, right? And that's looking at the asset management space.

But that ignores the informed traders who are really the market makers who've chosen the facilitation route and use that to seek extraordinary profit, witness the profits we've seen at Citadel and Jane Street and other market-making firms.

They effectively have become the croupiers at the casino.