Hi folks,
Say you are a new BB analyst in London given a choice of three trading desks, all of them commodity derivatives.
a) Gas & Power
b) Emissions
c) Agriculture
- Which would you prefer and why?
I like Gas & Power because it's the largest market of the three and there will continue to be lots of opportunities (right?). I like Emissions because it seems to be really growing fast (right?) and it seems to be a unique and interesting area, but not sure whether trading such a unique underlying would quickly pigeon-hole me into that niche. I like agriculture because it includes biofuels (right?) which seems to be area with high growth potential, and I find many of the producer nations (emerging markets) very interesting, but perhaps involves lower value clients and transactions? (not sure about this). Any ideas?
-
Which underlying will give me the most mobility and transferable skills in case I want to move to a hedge fund, a different commodities group, or another location other than London/NY (perhaps Toronto, Calgary, Cayman Islands) after a few years?
-
Do hedge funds have preferences in terms of the underlying you traded at the BB, like would they consider Gas&Power trader > ags trader > emissions trader?
-
In which market is it easiest/hardest to be profitable? Is there a difference in terms of career prospects, compensation, and quality of life?
Thanks in advance for any views on these questions as well as related comments.
At a place I interned, Emissions and Biofuels constituted one desk. Agric. was different.
I would check to make sure agriculture includes biofuels. Personally, if I had to rank:
Gas and Power b/c how big the market is and the exit-opps (not necessarily into hedgefunds or more trading). I think that understanding the underliers of these products makes you a great candidate for other jobs in the industry.
Emissions. There's promise but alot of the work is either LOCAL in the US (as in county by county) or international. I think it would be an even better choice if the desk were in London. Detractors to growth and size of market - US and the Kyoto treaty.
Agriculture. I'm not a country boy so I'm not personally excited by this. If I were, I would rank it higher because the industry exit-opps are great like with gas and power.
To clarify about industry exit opps - traders are often pidgeon-holed into trader like jobs. I had a discussion with a friend about this who works for a BB, and he mentioned that his exit opps consisted mostly of HF's, lateralling to other banks, research, other funds, and PWM.
Those are obviously all great and prmosing. But if want to move to an industry-side job in some sort of corporate finance role, fuel commodities and agriculture trading translate better than other products to this.
***Note: I don't work full-time, but I've had a couple relevant internships. Take this info for what it's worth.
Thanks theHam1.
I should have clarified that all three desks are at a US BB in London, not NY (I've now updated the first post). Does that change your opinion on emissions?
For pidgeon-holing, I'm aware that traders have a fairly unique skill-set, and that HFs are a common choice when leaving a bank. However, could HFs really have a use for an emissions trader? Obviously somebody with trading experience in the major energy markets and/or precious metals etc (the biggest markets) would be attractive to an HF. But do HFs actually speculate on emissions markets? What about for moving to a different trading desk within the bank, say, precious metals; would experience with one underlying be more valuable than another?
theHam1 prefers:
Anyone else have an opinion, or able to answer some of these questions?
I'm interested in hearing some answers too...
really that's your personal preference, but I think gas and power is the most interesting
Agriculture is most geographically transferrable - UK P&G for example is very different to continental - and US is totally different to that. And obviously emissions right now is only really a market in Europe.
don't know about this
All of them can be profitable if you're a good trader obviously! However for emissions there are only a few market makers so that might be a better opportunity.
Anyway feel free to message me if you have any qs
Trade whatever you're best at. If in doubt, do some research and go for the one you're most interested in.
If you plan on moving out of country don't do gas; too much local specialization that is not very transferable (think pipe downtime, weather, refineries supply demand etc). Like what fp175 said, agri is better if you want to move around. not too sure about emi.
If I were in London, and I had the option to trade emissions, I would choose that product. I, however, do find the product itself incredibly interesting.
Also, if bio-fuels were included under "emissions," I would have even more of an impetus to choose emissions.
I have to agree with what's above. Trade what you are interested in.
Gas and power, but there are so many other factors to consider in this sphere and it really depends on where your company has an edge. Europe's pretty interesting when it comes to power markets, and no doubt issues like market coupling (managing cross-border electricity) will keep things that way in the future, especially since you have some people pushing for more integration.
Same goes for gas, efforts to make things more liquid and transparent (for example new nord pool gas exchange that just started trading last month) are still on going, and it's a very exciting place to be.
So, I'm guessing you're going to be at either Goldman Sachs, Morgan Stanley, or Merrill Lynch?
I suppose ags is the least dynamic industry at the moment. Even with the recent volatility, the market itself doesn't seem to be undergoing rapid change (right?). However that characteristic seems to be what makes the skills so geographically transferable. Now I have a favourable view toward power and gas just because there seems to be so much going on for these markets in Europe. I know absolutely nothing about these industries though and the people who interviewed me are aware of that (bombed both the gas and electricity interviews). Emissions seems to be the most interesting and the most dynamic, with new developments in the market structure seemingly everyday. If it wasn't for my worry about the uncertain future of this market, and my worry about my uncertain future should I one day want to move to a different trading desk or a different business, I would pick emissions immediately purely out of personal interest.
As for choosing based on where the firm has an edge, I'm not sure how I would go about gleaning reliable information on that. I don't think I know enough about any of these markets to determine what constitutes an 'edge'. And current employees in the commodities division are probably going to be biased (not that I am really in touch with them at this point anyway).
"So, I'm guessing you're going to be at either Goldman Sachs, Morgan Stanley, or Merrill Lynch?"
Good guess.
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