IB or Trading

Based on the most helpful WSO content, here are some insights into why someone might choose prop trading over a megafund or elite boutique in the IBD/PE/VC route:

Advantages of Prop Trading:

1. Starting Compensation:

   • Prop trading firms often offer amazing starting compensation, which can be very attractive early in one's career.

2. Autonomy and Flexibility:

   • As a successful prop trader, you set your own hours and essentially become your own boss. This level of autonomy can be very appealing.

3. Internal Funding:

   • Top-tier prop firms are funded exclusively by internal money, meaning there are no outside investors to question new money-making ideas. This can lead to a more innovative and flexible working environment.

4. Nimbleness and Efficiency:

   • Prop shops are generally smaller and more nimble, allowing them to exploit market inefficiencies quickly. They often operate in liquid and exchange-based products like options and cash equities.

Disadvantages of Prop Trading:

1. Job Security:

   • Working for an institutional firm like a bank offers better job security compared to a P&L-only trader at a prop shop. Banks provide a ladder and management structure to climb, offering some degree of protection.

2. Reputation and CV Sheen:

   • Banks, especially core BBs (Bulge Bracket banks), tend to have a larger reputational profile. This can add significant value to your CV, which is harder to cultivate at a prop shop.

3. Formalized Learning and Mentorship:

   • Banks often emphasize collegiate development and provide a clear structure for learning and mentorship. This can be lacking in prop shops, where the environment might be more sink-or-swim.

4. Exit Opportunities:

   • If you fail as a prop trader, reinventing yourself can be incredibly hard without tangible skills like programming or advanced math. In contrast, roles in IBD/PE/VC often provide a broader skill set that can be leveraged in various future opportunities.

Conclusion:

While both career paths are lucrative, the choice between prop trading and a role in IBD/PE/VC often comes down to personal preference and career goals. Prop trading offers high initial compensation and autonomy but comes with higher risk and less job security. On the other hand, roles in IBD/PE/VC provide a more structured career path, better job security, and broader exit opportunities.

For more detailed discussions, you can refer to the following threads on WSO: - "Why pick S&T over Prop trading?" (url: https://www.wallstreetoasis.com/forums/why-pick-st-over-prop-trading) - "Sales and Trading - A Comprehensive Guide" (url: https://www.wallstreetoasis.com/forums/sales-and-trading-a-comprehensiv…) - "Why choose Sales and Trading over Investment Banking?" (url: https://www.wallstreetoasis.com/forums/why-choose-sales-and-trading-ove…)

Sources: Why pick S&T over Prop trading?, I'm Trying to get into Prop-Trading From a Non-Target School, Prop Trading (MM) v.s. BB Sales and Trading, Why choose Sales and Trading over Investment Banking?, RE: Prop/Quant Trading - Why is it not as big a target as Investment Banking?