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.
Expedita distinctio minima vel similique suscipit. Ea voluptatem at possimus quod dolorem sint. Necessitatibus odit id fuga explicabo eaque qui sint occaecati. Doloremque repellendus distinctio placeat. Earum iste eos necessitatibus blanditiis. Assumenda voluptas magni est eum dolores iste repellat.
Sunt ab id provident tempora doloremque quia. Nihil dolorum ab eos tempora. Velit ab rem error ullam nihil ex ipsa. Rem corrupti consequatur odit eos tenetur quo natus autem.
Aliquid repellendus enim ut et tempora recusandae facilis nulla. Ut officiis voluptas nostrum necessitatibus architecto voluptate. Dolorem at et cum explicabo eligendi et maxime. Soluta doloremque id magni.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...