Best roles out of school for quant majors in commodities
Interested in rates/fx/ commodities because of macro traits of the asset class, but most interested in commodities. Studying math + stats at a strong target very strong in those disciplines, and can code Python/C++. What are the best roles out of school to lead into a buyside role trading either gas or power derivatives?Castleton Research, FTR trading, AQR commodities division? Or the supermajors? BB S&T? Where can I get the highest career upside with my skillset and credentials in the commodities space?
Interested as well
If you can go the supermajor route I would do so. Put in the 2-3 years and you can go wherever you want after that if you don't want to stay there (good chance you might want to stay though). Hedge fund, prop shop, other physical shop as a prop trader, continue doing physical if you like it, etc. Learning from a physical player like BP or Shell gives you the most optionality and that is what trading is all about.
Power and Ftr don’t really have much to do with Marco
I work at one of the places you listed as an option, and I will say neither natty or power has much to do with macro. FX/Rates/Oil is where macro comes into play, and even our Oil business is less and less macro driven as the money is in refined products trading cracks and diffs. It’s incredibly tough to break into buyside commodities without doing a stint in Ops. Subject matter expertise and knowing a commo inside and out combined with sharp math skills and coding ability is how you set yourself apart imo.
The earliest I’ve seen someone at my firm make junior trader is after 5 years of experience, and that’s still on the rare side.
Why would "sharp" math skills matter? My impression was that basic arithmetic (i.e converting from ccf to btu) would be good enough, no need for calculus
Statistics and probability type of stuff, not really calculus. It depends on the team and role. I’m in gas but power is a lot more quant focused.
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Going to be bored silly at a super-major or in ops. Do not take any of those roles.
Target DE Shaw/Baly/MLP/Citadel. Or try your best to network with smaller funds. DE shaw would be the ideal fit but they do not hire every year.
I know citadel takes undergrads but usually people come from a QR background. Where do people come from who work at these firms on the sell side?
Most of the above named shops run systematic/stats-arb strategies so they do not really hire outside QRs. For more traditional fundumental strategies more likely a merchant or so.
1. Beware that pigeonholing is a real thing. It's good to have a skillset and it's a positive for a new hire all else held equal, but you need to think about if you really want to play that up as your entire career. I have known engineers/computer scientists who spent years programming fancy ways to solve a market and achieving nothing because what they were trying to do is impossible. And then you will have business majors who do a TDP and become a trader at BP in their mid-20s. So there is a risk to being "quant" as well as a benefit. You don't want to have a year 1 asset be a year 10 liability.
2. You will have little career choice in your first years if you join an oil major. It's take or leave it. And most of those jobs are not going to use any quant skillset whatsoever. And I'm not aware of multi-managers (BAM, MLP, etc) who actually hire people out of school for a specific commodities role (ie PMs tend to get people with trading/analytics experience in the thing they are trading) with the possible exception of someone more centralized like Citadel who take people to build up an infrastructure. So just be aware that the number of jobs you are thinking of that will take a new grad and make them a systematic commodities trading guru is not necessarily that many.
Great response, but this is basically the style of thinking where someone who is truly quant talented should never step foot near a major. Places like DE Shaw/Squarepoint as an example would laugh a BP TDP out the room. The information edge BP had is far thinner these days then 5 years ago, while their analytics cannot keep up with the big data aws heavy modeling other firms dominate (example).
Then you move to something like FTRs that is truly a pure math puzzle where the best algorithm wins. Hedge funds have learned how to properly use quants now and many roles out there. That said something like FTRs you will need a masters and typically a Phd even. All the major HFs hire QRs, PMs may use excel but the math behind their models is trusted to math brains now.
Lastly, if I said BP TDP or one of the other two top TDP programs or bust, there is just as many top QR roles or bust out there.
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That's an interesting perspective on FTRs. I'm more accustomed/referring to oil/products where there is a low lying upper limit on the usefulness of statistics, math, or programming alone to solve a problem- and more emphasis on using industry knowledge to shape those approaches and thinking holistically about how to trade with a model and understanding when models are useless. From my experience, it's a clear benefit in certain aspects (if you really like doing it, if you settle into a role where it's bringing money in and valued), but definitely not a superior approach for everyone.
I mean citadel hired like 10 bp folks. Why do you think they'll be laughed at?
A lot of the prop shops have dedicated desks for commodities etc. if possible those are the roles I would target from an upside and immediate responsibility perspective. I.e. I made trades with monetary risk during my internship
I didn’t read the other responses, but I always think going the FTR route is a good plan. You can almost walk right out of school into a risk taking position at some shops, I saw this first hand. Now the shop I was at didn’t get them % of book, but the few guys that came through that did well their first few years went on to funds, and the guys that did okay stuck around and still made good money.
Do you know what the best firms are out of undergrad for FTR? Seen people from my school go to dc energy, but no where else. Castleton and SIG had people do FTR, but after a rotational program. DC seems like a nice gig but I feel like you could get more variability/risk at a place like Castleton/SIG as a bigger firm.
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