Commodities trader comp progression?
Top target student debating if commodities comp is worth it. Only asking only because of family financial situation and responsibilities that will arise later down the line. (Ie parents don’t own a house and spent literally all their savings on educating their kids. Retirement coming within 5-8 years) Debating whether or not I should go the safer route of private equity to keep the family afloat or go for it in Houston.
I’m curious as to what the comp progression of someone who goes to one of the graduate programs (bp/p66) and acts as a strong performer could be. No crazy market dislocations like 2022. Just serious base case strong performer who doesn’t wash out.
I understand the industry is so variable and essentially comp can’t be determined without mentioning book size and performance but based on experience and genuinely realistic risk allocation what are the compensation figures that one can expect if they pass the ATC and work at it.
Here’s the projected cash flow(if you will) that I got based on r/commodities and various figures on wso from the bonus threads.
Y1: 80-100k TDP
Y2: 90-110k TDP
Y3: 100k-120k TDP (passed the ATC)
Y4: 180-250k junior trader
Y5: 250-400k junior trader
Y6: 300-500k
Y7: 400-600k
Y8: 450-800k
Y9: 500-1 million Senior trader?
Y10: 500-1.5 maybe even managing a book?
Would this be a realistic progression to expect? I understand that this doesn’t even account for blowup risk and zero bonus years. I’m only asking because if this is the genuine progression then it would be financially irresponsible for me to take this career.
Or another alternative would be to go the paper route and stack some good years at a bank and then move to a merchant if that’s possible. Would appreciate some color on whether or not paper guys can move to merchants and stack similar money to the top physical guys. Heard that while they do trade paper it’s not the main cash cow and that paper guys sometimes get stuck doing hedging for 300k a year
Thank you all in advance
Bump
bump
I think that is a reasonable path but if you are actually good then you're most likely underselling it. If you have what it takes you can end up at a shop that gives you 15-20% of your book. make 10 million one year - costs = 8-9mm. 8 * .17 = 1.36mm. If you are sharp you can get there within a couple years of starting if you're willing to go to a spot that pays you as a direct function of your pnl.
Do you think you have what it takes to trade a true prop book? No flow to hide behind. No physical to hide behind. If you do, then you can be making over a million a lot sooner than you're projecting.
In this case would this usually be at a smaller shop that has spots open? Also what would you recommend for me in terms of paper vs physical? Does paper really limit your comp at the merchants and access to partnership once you’re more senior?
Get the job at a big shop and use the experience to get a gig at a smaller place. If you really want to make a name for yourself early in your career it would behoove you to get out of the mindset of 'does this place have a spot open.' Make your spot in this world. If you showed up to a company that trades propane, and you could show up with the ability to make 30 million/year trading diesel, 9/10 that company would welcome you in with open arms. My point here is that in the real world there are limited rules and the more you're willing to be entrepreneurial the more doors that will open.
Start on the physical side and learn the nuance of the world you operate in down to every last detail. If you are good at this, and understand what is needed to also trade paper without a physical book, you will have a leg up on most. The key is to trade physical but have the mindset of a paper trader in how you approach risk/opps. While you're learning about the details of your physical world think about how the senior paper traders look at the world. For example, I know physical traders that trade in a way that I would call front month spread donkeys. They understand the physical market very well and use that to their advantage to trade the front month because they have a view on how futures will converge to cash in delivery. These guys are one trick ponies in that if you ever took away that single info source from them they would not have an edge. They are also limited to only trading their single commodity in the prompt. If the market is boring and vol is limited they still have to trade this single thing and find a way to make money on it. This leads to times they are limited in their ability to make money. Prop traders on the other hand tend to look at a broader world. The prop guy will never know as much about the cash market in a single commodity as well as the physical trader but if he can know 85% of it, along with having views on other adjacent markets, market structure, macro flows, etc then he can find where the best opps are, size right, and make money in more markets. This is where it becomes more of a data game than a physical market knowledge game.
Phys vs paper comp is too situation dependent to give any real answers. I know a paper guy that made 400 million in a year. I know a physical trader that has made similar if not more.
around how many years post tdp could you get your own book at a prop shop though?
It's like you didn't read my comment. The world is yours to grab by the balls. If you want some plan laid out in front of you with a checklist attached then go into banking and be a checklist slave the rest of your life. How good are you? Are are you charismatic enough to convince those around you that you are sharp enough? I know a guy that got one at 23. I know others that think they are smart but in reality they are mediocre and they will never get one.
the only problem with the tdp assumption is that you assume you pass through it. given bad years, some tdp grads did not pass ( or rather, there is no more trader seats left given the extreme hiring in 2022, 2023 ). By 2025? The bad years came & people got irritated & left of their own accord. So it’s the mental fortitude to stay & also hope that you get progressed through. If you’re banking on a smooth tdp progression, I’d implore you to rethink twice & hedge some bets in your career
Del
I would strongly push back on the notion that PE is the safer bet if you need to actually monetarily support people outside of your direct household. PE is far more cash poor than people realize: industry overindexed to VCHOL locations, high chance of forced MBA to continue (2 years of forgone earnings and ~$200k cash out the window), significant quasi-mandatory co-invest / capital calls drain bonus savings (good for the future but net cash outflow for ~10 years), compensation mix heavily geared towards carried interest (esp if non mega fund) which you won’t see for a decade if at all.
PE is great if you want to be the richer 50-55 year old (if carry actually prints). If you want to be far more comfortable and liquid in your 30s markets roles and banking are both far superior.
If you want the best of both worlds, go the paper trading route at a Tier 1 bank. You get the high guaranteed base of banking to secure your family early on, you avoid the 3-year physical operations grind, and you can easily jump to a merchant (Vitol, Citadel, etc.) down the line once you have a track record. Just avoid standard corporate hedging desks.
Thanks for your contribution man. I guess the only problem is that so many people on this forum are saying unless you’re moving physical at Macquarie, the banks don’t give you the knowledge and mastery to play at the top levels. How true is this? Thanks!
I am a young(ish) guy below 30 at a fund-like desk with my own book within a trade house and I started my career at a bank.
I think online forums experience a serious case of groupthink and denominator neglect on this topic.
Obviously many of the big head honchos at the biggest names are going to have started off in relatively less glamorous operations and scheduling types of roles at majors and physical shops, but the yearly intakes at these places are enormous - at the same time there’re only 10 or so banks with much of a commodities presence, and many of them hire less than 1 grad a year. Conversely for the guys who start off in non trading roles at majors/phys shops/trade houses even at the likes of BP and Shell, there are years where 0 TDP grads convert into trading roles.
You could really make the argument that former bank graduates are quite massively overrepresented at the highest levels of commodities trading given the relative rarity of this path. And hence in my humble opinion there is a strong argument that starting at the likes of Goldman/JPM/Citi is the best path into a prop trading seat with large right tail potential.
From my personal experience, a lot of physical knowledge can be picked up slowly across a career on a need-to-know basis, but the experience of managing real risk in a trading book is arguably more important to get under one’s belt at a young age. The higher early base salaries and bonuses are also a nice plus for sure
At any rate I’m sure many would disagree with me, but all I’m trying to point out is that there are genuinely valid alternative viewpoints here.
sure it checks out but can you get on the track? I would say 99.9% you cant..... so take the safe ber
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