Compensation in Trading
I would appreciate your advice on compensation in trading.
Currently I am doing an MBA. This summer I will do an internship at a BB bank in their Markets division. Since it will be a rotational program, I will have the chance to work on several desks.
Within trading I do not yet have a clear favorite. Right now, I am pretty much indifferent between asset classes and specific desks. While compensation of course is only one decision criterion, it is not an unimportant one and I would like to be able to make an informed decision. Therefore, it would be great to get your input on the following questions.
1) Are there any fundamental differences in the compensation of traders in different asset classes (equities, rates, commodities, FX, volatility), both in the short-term (analyst/associate) and in the mid-term (associate/VP/MD)? For instance, I have read that historically, commodity traders seem to have outperformed their counterparts from other asset classes. I'm not sure, however, if this can be generalized and if this was only caused by the commodity bubble.
2) Could you please list some trading desks that in your view will be the most attractive ones on terms of compensation over the next 5 to 7 years? Please name specific desks (i.e. US Large Cap Volatility Trading) and not only asset classes. Please also justify why you are bullish for the desks you've mentioned.
3) In general, has there been a tendency in the industry to reward traders of more complicated products? I.e. has there been a compensation premium for traders of exotics versus more straightforward products? If so, do you believe that this premium will persist going forward?
4) How well does volatility trading pay compared to trading in 'traditional' asset classes?
5) How well does trading pay compared to quantitative strategies and to structuring desks?
too long didnt read
I have just shortened it as much as possible.
I have not seen many MBA's get placed on commodities trading desks. Of course I am talking about 3 years inside 2 places but I saw the MBA's get placed in other areas but not trading.
lot of s&t assoicates are not on desk pnl so get paid via their training program and bonus is by that too.
I traded both commodities and equities and made a ton more money in commodities.
Be aware, though, that your chances of blowing yourself up are much greater in commodities due to the increased leverage.
Keep in mind that I did all my trading in the 90's, but back then the compensation in commodities was about 4x greater than equities.
@monty09: I wouldn't say that I am a typical MBA since I'm advanced in math, derivatives and computer programming. So I believe that my chances of getting into trading are at least not zero. Anyway, the topic of this thread is compensation in trading, not MBA's chances of getting into trading.
@Edmundo: Would you say that this (obviously) huge difference between commodities and equities trading compensation was just a temporary thing due to the commodities bubble? Or do you believe that it will persist going forward? You know, I am just wondering what exactly justifies these 'excess' compensation for commodities traders. Saying it in terms of Arbitrage Pricing Theory (APT), there must be some factors that explain these huge 'returns'. Factors that come into my mind are that
1) maybe commodities trading is more demanding / requires more skills than equities 2) simply more risk (as mentioned) 3) temporary thing due to the commodity bubble
Would also be interested in your views on volatility and rates trading (exotics in particular). Thanks a lot to all for their input so far.
If you wanna go into trading, try a an M.Fin instead of an MBA.
"I'm a fly Malcolm X, buy any jeans necessary." MITT ROMNEY 2012
no one said they are at zero and the mba's I saw were pretty top notch just that the firm saw their skills were useful someone else. and my point was not trading but commodities. Most of the head of desks in my shops dont have mba's so they dont hire a ton to work for them.
to your question...
I have only been in commodities so know the numbers in nat gas and power. I am in houston and in the phy scence.
he is already doing a MBA... lol
Plenty of imperfect and up and coming markets in commodities. In the grand scheme of things, power for example, is still in its infancy and is ever changing and evolving. This opens up opportunities and could explain the higher returns in the past and a reason why they could continue going forward. Of course, higher reward, higher risk...
you have less energy people so the volume could be much bigger. My shop is small and bonus pool is fairly large so less people to spread it around
bout time wx... where you been? energy topic... get on it
'Traditional' commodities is definitely something I will consider. Energy trading, however, is not an option for me since my firm is not doing that and I really would like to use this internship to get my foot into the door of their trading business.
So far there has been quite some discussion of commodities and energy trading, which both seem to be quite remunerative. Apart from that, I would also be interested in your views on compensation in volatility and rates trading (exotics in particular). Thanks all for your views so far.
I would also be interested in your views on compensation in volatility and rates trading (exotics in particular). Thanks all for your views so far.
I can not help there. Sorry
Your first two years will be in a program so your comp will be pretty in line with your other program mates.
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