Commodity Trading vs IB Trading (Graduate)
Hello WSO,
Currently enrolled in my last year of business school (tier1) in the UK, I am going to intern as a summer in S&T in a tier2 bank this summer. However, being interested by the commodity, I am currently enrolled in LDC graduate programme recruitment process.
First Question: Even if money should not (and is not) the main motivation, realistically, how much can I expect to make in a tier2 bank (think UBS, HSBC, Barclays, Nomura) as a trader (more fixed income) vs at LDC (as an Analyst1, Analyst2, Analyst3, Asso1, Asso2, VP...). Let's say I am performing well at 30 years old, what are my salary expectations in both ?
Second Question: How hard is it to go from agricultural commodity trading (ABCD) to energy (Trafigura, Vitol & co...)
Third Question: What are the hours (in general) in commo?
Thank you in advance
If you want to go in energy just start in energy. No point in starting in aggs.
I work around 10 hours per day.
You will really make dumb decisions being so focused on the money early in your career. If you are a good trader you will eventually make a lot of money. Then to maximise that you want to be in the right place at the right time.
The questions you should be asking yourself is: do I enjoy my team, do I have a good boss, am I happy, am I trading something that's gonna stay interesting in the future.
You are 100% right about the money, I was just wondering if there was a big gap between bank vs commo
I would really like to start in energy, however it seems (in Europe) to be quiet challenging to break in as a Junior / Graduate without a strong commodity resume and/or a top engineering / maths / quant degree (looking at Linkedin)
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Is ags even. worth it? Seems like salaries across the board are lower (both for entry level and traders) and moving to middle of nowhere early on (for both UK and US roles).
It is a totally different world in ags vs something like oil/power/metals. At ag shops often times your coworkers are people that grew up on a farm or around them. They went to places like University of Nebraska/Iowa/IIllinois. The pace of everything is much slower than in other physical commodity trading companies. Salaries are lower but there is also less competition to break in. On the high end, if you run a desk some day, then you can easily make 500k or more in a good year. It isn't in the millions but you also work about 20-30 hours a week during the slow times (a decent portion of the year when there is nothing happening) and max 40 hours a week when things are busy.
Q1: less initially than in S&T. You can probably bank on a much longer career at an ABCD though.
Q2: very hard unless you are trading something like biodiesel. Even then I don't know.
Q3: ten hours a day sounds right. M-F. You have to be available at all times however, no such thing as an off the grid vacation save for maybe a day or two a year.
Do you mind walking through a day/week-in-a-life? I believe there was one on WSO but that was from a while ago and for an energy trader. If I recall correctly, you're in metals so would be helpful to see what you do on a day to day basis.
Initially you will make more at a bank vs commodity house/producer. At a producer you will only move into a junior risk taking role if you're lucky in 3-5 years. While in that time at a Bank you will grow much more quicker. However, the real question you need to ask yourself is what are you interested in? S&T is very different from commodities. Commodities you are actually entering a contract to move products from A to B. So it is not only financial risk management but also operational and people risk management. Long run if you do well you can do well in either field tbh. An S&T role will give you a bit more exit opps into the buy side eg AM/HF/Family office. In the commodity space you become a trader and the number of seats are just so limited you will not really change your role that much. Ma be originator or some other role in the company itself.
Dont know why would someone move from ABCD to a Trafi/Vitol. Different markets with different dynamics.
10 hours is the norm but i've also seen 12-15 hours (though rare). however you can expect calls over the weekend if you're a trader and something goes wrong. Also most traders are always on call. For example if you're working on a contract and for some reason are unable to wrap up negotiations before your vacations, you cannot really hand it over to someone else.
I am in a similar situation, finishing undergrad at tier 1 UK school in STEM degree. I interned at an (energy) commodity trading house twice and they expressed interest in me staying FT in trading track. Ultimately I went with S&T at US BB trading (not energy) not because of pay but because of better training, bigger network, and better options down the line / if I find that trading isn't for me. I'm lucky that I got a trading seat waiting at the BB so I won't be stuck waiting for a book to open up.
My thoughts are: You always have to be confident in yourself as a trader, but there is a non-trivial chance that you aren't cut out to trade, and you won't know until you have risk. The way I see it, if you are a good trader, it won't really matter at BB or LDC you'll make great money. But if you aren't you'll be glad you wen't to the BB. This is different of course if you have a preference towards energy vs other product, but I didn't mind.
Can confirm it was between 9 and 11 hour days as an intern.
Mmmm not sure how the training at S&T at a BB would be better than at a producer. If you do find that you don't like trading i do not really see that many exit ops from a bank tbh. If you were in IB sure there a multiple career paths if churning out excel is not really your style. But S&T? Yeah you do move quicker into a risk taking role at a bank but thats cause in commodities you actually have to learn the ops, product and markets. If anything commodities will give you better exit ops if you're looking at something non trading since your ops, supply chain, market knowledge can lead you to commercial roles vs a bank tbh. May be i am unaware of other exit ops from S&T in banking that are not trading related.
You're right S&T in the long run has fewer exit opps. However consider a 1-2 year time scale when you find out if trading is for you or not. As a front office analyst in a BB it's easy to move internally into practically any product or area of finance, every year seats open up and networking is trivial. Whereas if trading doesn't suit you at a commodity shop you either have to go to a middle/back office role there or change company, probably still within the commodity space though, or you're back to grad scheme applications if you still qualify.
In terms of training, the benefit of BB is that you have experts in every product all in one room. Yes you will probably get (marginally) better product specific knowledge from the producer, but when you want to learn about interest rates (as a price factor in your commodity) are you able to grab coffee with world class interest rate specialists? Can you swing by the FX desk to better understand how the dollar is moving? I went the S&T route so I'm biased, but IMO makes sense as a junior to build a holistic view of the markets as well as specialist knowledge in your product. Plus S&T also has excel churning IB-style groups (with comparable exit opps) for those who want it.
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