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I don't know much about this, but sell-side traders are not exactly known for their deep analysis skills, so what do they do when they make the move to HFs?

My guess is that HFs need execution traders as well, and that is where the airhead sell-side traders would come in, right?

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Comments (13)

  • Kenny_Powers_CFA's picture

    ZJs

    There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.

  • In reply to Kenny_Powers_CFA
    Determined's picture

    Kenny_Powers_CFA:
    ZJs

    If you have to ask, you can't afford it.

    Talent is hitting a target no one can hit.
    Genius is hitting a target no one can see.

  • shark-monkey's picture

    Definitely depends on the fund. A lot of HF traders have come from the SS.

    Fear is the greatest motivator. Motivation is what it takes to find profit.

  • In reply to shark-monkey
    ypeter123's picture

    shark-monkey:
    Definitely depends on the fund. A lot of HF traders have come from the SS.

    @Shark-monkey -- Since the Volker Rule had banned prop trading at Investment Banks (sell side), are you saying that "execution traders" from the sell side have gone on to Hedge Funds as traders ?

  • In reply to ypeter123
    mrb87's picture

    ypeter123:
    shark-monkey:
    Definitely depends on the fund. A lot of HF traders have come from the SS.

    @Shark-monkey -- Since the Volker Rule had banned prop trading at Investment Banks (sell side), are you saying that "execution traders" from the sell side have gone on to Hedge Funds as traders ?

    1. Prop trading still exists at every bank; they've found ways to skirt it

    2. Lots of credit and global macro funds are "trading" shops where the traders - ex-sell-side guys - are the stars. They're not just execution traders, they are also generating ideas/alpha

  • In reply to mrb87
    ypeter123's picture

    mrb87:
    ypeter123:
    shark-monkey:
    Definitely depends on the fund. A lot of HF traders have come from the SS.

    @Shark-monkey -- Since the Volker Rule had banned prop trading at Investment Banks (sell side), are you saying that "execution traders" from the sell side have gone on to Hedge Funds as traders ?

    1. Prop trading still exists at every bank; they've found ways to skirt it

    2. Lots of credit and global macro funds are "trading" shops where the traders - ex-sell-side guys - are the stars. They're not just execution traders, they are also generating ideas/alpha

    Seems like I mis-phrased my question. Sorry about that.

    You mentioned that a lot of HF traders come from the sell side. I meant to ask that, when these people were still on the sell side, were they execution traders or Prop traders ?? And now that they are on the buy side (HF), are they execution traders or prop traders (i read on WSO that HF also has execution traders, but I've never heard about this before).

    Thanks !

  • mrb87's picture

    Both. But I don't think you even have a good grip on what traders do at an investment bank.

  • gammaovertheta's picture

    JamesHetfield:
    sell-side traders are not exactly known for their deep analysis skills

    And this kid wants to do S&T? Sounds like you don't know much about the business, especially if you think most sell-side traders are execution traders
  • derivstrading's picture

    Sell side trading isnt execution only, that is what sales trading is. A trading seat on the sell side in many instances can prepare you for a more prop oriented position. On the sell side you manage a book, and by that I mean a lot of the positions you have are given to you by clients. However, at every step a part of your job is to try and make money, and this will come from forming your own views and putting trades on. For example, a client lifts you in some ATM 1Y options of XYZ stock in 50k vega, Now from this point on it becomes a prop position for you, you have to determine whether you like the position, and the spread you took is worth it, which might be the case, you think the vol is high and and its not realizing, so you are happy to be short and receive the decay, wait for the vol to come off a bit and then try to buy some back. Or you think the skew is very cheap, and the name isnt realizing, so you buy some downside, keep it short gamma, or you are afraid of a takeover that the market isnbt pricing in so you buy upside, or you think the vol in the 1Y is really high but the name is realizing, or you are afraid they might profit warn in the next month, so you buy some shorter dated options against it to get some gamma etc etc, can go on but you get my point.

    Sellside traders do a very similar job to prop traders, except that its in a different framework, a lot of the times its defensive prop trading, and sometimes you dont really have a choice of what you put on the book, but you have choices on how you want to deal with it. The benefits of this is that you get exposed to a lot of different uncomfortable situations and risks, ie) in single stocks a huge thing is uncertainty over the dividend date, and a movement of a couple days can make a div move into or out of expiry, and if you are not on the ball you can get taken for a ride.

  • GoodBread's picture

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  • In reply to gammaovertheta
    mongoose's picture