Trading vs. Banking?

Hey guys, I know this question has been asked before but I’m looking for some specific advice for my situation. Last summer I interned at a major in Crude Trading. It was something I networked my way into and wasn’t very structured. I enjoyed my work, but didn’t get close to any trading/scheduling action. I tried to make the most out of it, and loved the trading floor, but wanted to explore other firms/options.

This summer, I have an offer for Energy IB in Houston (MM) along with an actual internship program offer for a different major, also in Houston (so I could get a proper experience). This shop trades a lot of nat gas, which interests me more than crude. Both career paths interest me, and I’m not sure which to take. My gut says banking so that I can get firsthand experience in both industries, but I’m worried that this would make it quite difficult to break into trading if I later decide I want to go that route for FT. What do y’all think?

 
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Take the energy internship. I believe the most important aspect of internships isn't the 'prestige' factor of it all, but it's actually a great opportunity to take a sample size of a couple of different things within the sector you choose to see how they stack up. I never worked for the same company throughout any of mine and was glad I did. It's pretty much the only opportunity you'll get to work at a different shop per year for 2-3 years, and will help you narrow down what you WANT to do. 

Banking, trading, and anything finance-related is gonna be hard. There will be a lot of similarities and overlaps regarding the problems you'll face in both of these equities classes. However, trying to find a job that you don't TOTALLY hate will really be the dealbreaker down the line when it comes to FT work. None of it will be 'fun', but you'll feel a lot less depleted if you are in a subset or a sector that you at least find interesting. Finding things interesting often let those break out their own skills and will be subjectively better performance-wise. 

I'd jump on the Houston firm. Give it a go - if you hate it, I really don't think you'll burn any specific bridges within the S/T industry should you choose to return. Maybe your original fund will have a sour taste, but honestly? If they don't want to hire you because you took an internship opportunity to explore something else, then fuck 'em. Not a company you want to work for. The banking experience will have any other trading prop shop looking to scoop you up, provided you don't fuck it up. 

Best of luck!

 

Thanks for the advice, I truly appreciate it. I agree with the idea that internships should be used to explore a couple different things within energy (in my case). The only thing that worries me is that if I later decide I like energy trading more, breaking into a solid Trader Development Program style rotation (BP, Conoco, Shell etc.) would be more difficult coming from a summer of banking. However, I can just cross that bridge when I get there I suppose.

 

I have not taken an options and derivatives or corp fin class - I'm at a LAC. I have, however, read the Investment Banking textbook and Options, Futures and Other Derivatives textbook. Both paths seem interesting. With regards to banking, I am drawn to the pay, relative stability and almost guaranteed pay/responsibility growth over my career. Ultimately, I would want to move to the buyside and become an investor (PE/HF probably) and call some shots. Trading interests me because there is so much variability in day-to-day life. I love the idea of eventually making trades and taking risk. I want to have a PnL that is my own. I have met some energy traders that have pulled 50 mil in a year, which is obviously something that interests me. I just know that making that much money is incredibly unlikely. I'd love to hear your thoughts.

 

Hey - so I think the two questions that matters here are: what do you see yourself doing in 10 years? And what interests you day to day? Investment banking is the highest level overview of a company whereas energy trading is extremely in the weeds. In banking you care about synergies and how a one billion dollar company can benefit a three billion dollar company over the long term. You’ll build a model of the entire company’s finances which might mean you don’t know the detail on most business lines. Energy trading has you care about the most finite details in the market: is this compressor station in small-town Kansas going to be operating a week from now?; if this one LNG vessel going through the Panama Canal gets delayed, how will NatGas balances be impacted? Is weather coming in colder than expected? Those type of questions are what move basis markets. Regarding my corporate finance/ options class question: good on you for enjoying both of the books you read. I tend to think that someone who likes one (corp fin being banking, options being trading) would not be in love with the other, but that is only my individual skewed view.

The trading route provides one stand out route: being a trader at a major/bank/trade shop/hedge fund till you retire/take a break at the age of 40, and you already know the investment banking typical routes. Though despite what some think, there are a lot more routes that energy traders can take in their careers and I’ve been pretty surprised at what positions are available through head hunters (Bill Gate’s energy fund is the one that stands out from a conversation a while back - I think it was some sort of energy development). It is more limiting, but I think that the in the weeds experience is valuable in some career paths.

Regarding pay: if you’re a star banker/PE investor, you’ll make great money. If you’re a star trader you will make insane money. I would say a 30yr old star trader will make more than a 30yr old star banker (director level). Banking pays better at the beginning, no doubt about it. Trading after year 3 might take over if you get a trading seat. And if you go trading analytics, man is the market hot for you. Current + former Shell and BP employees make up a significant portion of the industry’s big hitters on the trading and analytics side. Also, you have to think: is business school something that you want to do? Traders don’t get MBAs because there is no need. Depending on the career you want after IB, you might have to - which could be pretty sweet from a social/experience perspective but also opportunity cost. Just about what you want.

There are many bankers that I’ve met that think trading would be so amazing from a pay and work life perspective, but there are about 0 traders who would want to be bankers. Being someone who considered both, I think why traders wouldn’t want to become bankers is because most traders aren’t super polished professionally, have great pay, pretty amazing hours, and simply don’t want the exit ops that bankers have. Conversely, some bankers might want to be traders because it seems cool with another fancy title, the hours are better, and pay can also be pretty amazing. Imo, traders could do the investment banking analyst job (minus the powerpoint stuff - I have never seen an aestetic powerpoint from a trader), but they would be pretty bad at the relationship management side of being a more senior banker. Imho, a banker would not be a good trader. Speaking of people, traders can be difficult to work with. They are paid to have an opinion on things and it can be a lot - most people have opinions on most things. I think Houston bankers are pretty chill overall - just work long hours so it can be tough to be friends with them on the weekends and after work.

Regarding your situation: Looking ahead to your first year post grad: I think that if you went the trading route and hated it, you could get a banking role if you moved within that first 1.5 years - I have seen it. I do not think that the opposite would be possible without taking a few year setback. However, taking the banking internship may be a really good move if you hold onto the two trading relationships. Sadly, I do not think an internship at a trade shop really shows you what traders do. If you managed to sit in on fundamentals meetings, then that might give you a better understanding of the job, but if you just watched people trade on ICE, then probably not. If you don’t like the banking internship, keep that trading contact updated during the internship on your thoughts. It’s great that you did the crude internship sophomore year so that you can have this thought process.

DM me if you have any more personal questions about your offers - I know both sides pretty well in energy.

 

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