Route to HF from physical commodity trading
Wondering what it takes to make the leap from a physical commodity trading role at a major in the ags space (ABCD) to a HF that has a desk/pod that trades agricultural derivatives. What separates the physical commodity trader from the one at a HF that trades only financially settled derivatives, with no exposure to the underlying physical product?
My experience in the space so far has been solely fundamentals based trading: cost-of-carry and returns to storage in relation to the futures calendar spreads, understanding the freight markets at a high-level, and being constantly in tune to international supply and demand.
My sentiment on the HF space (forgive me if I’m wrong, clearly it’s not a space I’ve ever been in) is that there is a much more quantitative aspect to all decisions being made. But do the HF’s value the experience of a trader who has traded solely fundamentals?
I’m doing my best to self-study the skills that were never formally taught to me that I know would be important in a career at a HF. Python, advanced portfolio management, option volatility and pricing, bayesian probability, etc.
Any advice appreciated. Maybe I’m totally on the wrong path. I should make clear that the reason I want to work at an HF at all… comp, network, faster-paced, more quantitative.
Based on the most helpful WSO content, here are some insights and advice for transitioning from a physical commodity trading role to a hedge fund (HF) that trades agricultural derivatives:
Key Differences Between Physical Commodity Trading and HF Trading:
Exposure to Physical Product:
Trading Approach:
Skills and Experience Valued by HFs:
Quantitative Skills:
Fundamentals Knowledge:
Steps to Transition:
Enhance Quantitative Skills:
Networking:
Tailor Your Resume:
Prepare for Interviews:
Conclusion:
Your background in physical commodity trading, combined with your quantitative skills and econometrics experience, positions you well for a transition to a HF. Continue building your quantitative expertise, leverage your network, and tailor your resume to highlight your unique blend of skills. This approach will enhance your chances of making a successful leap to a hedge fund trading agricultural derivatives.
Sources: https://www.wallstreetoasis.com/forum/hedge-fund/quant-hedge-fund-career-progression?customgpt=1, Ask me anything - quant/quantamental Hedge fund manager/Consultant - Everything on liquid hedge fund strategies, Advice On a Career, https://www.wallstreetoasis.com/forum/trading/qa-quantitative-analysttrader-career-path-technical-topics-education?customgpt=1, Ask me anything - quant/quantamental Hedge fund manager/Consultant - Everything on liquid hedge fund strategies
As an intermediary step, may be try and shift to the derivative desk of the physical shop you work in. Jumping from a pure physical role to a HF seems a stretch but it seems a few HF are opening up physical desks. There are also hybrid companies (CCI, Hartree, Freepoint) that seem to bridge the physical commodity world and the pure HF model.
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