Fundamental Analyst at Prop Trading Firms?
I've seen some job postings of fundamental research analyst roles at prop shops like Citadel Securities, Optiver, and SIG. My understanding is that the analyst performs fundamental analysis based on corporate events/macro strategies and trades the headlines. While the skillsets on these roles seem fancy (fundamental analysis, trading, macro, event-driven, etc.), I'm not sure if the analysts will be inferior to traders/quant researchers in terms of career progression/exit opps. Any insight?
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These firms want Fundamental analysts to work with their Quant Trading teams in order to get a more holistic, non-algorithmic view on where markets could move. A lot of those firms have single-stock options desks and index desks where fundamental analysts are looking at company/sector/geography specific news and helping determine whether the algorithms are in line with what they predict.
Example could be pricing in how British market closings for the Queen’s passing could affect options prices - tough to write into an algo but just reading different articles about the way they are structuring these events over the next 2 weeks gives a little more clarity which can be useful in pricing, hence fundamental analysts.
Thanks for the reply. Yes I do have an idea of what the position looks like. Just wondering what is your opinion on this type of roles in terms of career/comps/exit. Do analyst really play an important role or it’s more like doing support work for traders and QRs?
tf how does the Queen passing affect prices anywhere? London traders must've been drinking away their sorrows.
Queen dies = bank holiday = free day of theta = sell vol
stfu you're making me look bad
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ive seen some of these firms, jump, drw, etc start to hire fundamental energy desk as they are expanding to discretionary fundamental prop trading. Honestly these companies, if you make money you will not be inferior, but their is a non zero chance than when your teams performance isnt doing well - could they just cut and go back to the systematic way of the past.
Citadel Securities started its semi-systematic options trading team in 2017 so definitely makes sense. Wanted to ask where you had heard more about the discretionary prop trading for Jump - is it specifically in energy or expanding across a variety of business lines?
Energy - source headhunters
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It’s brand new. They don’t have one bro
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Bump. Btw, do these (fundamentals) shops ever use sell-side equity research?
Bump. Btw, do these (fundamentals) shops ever use sell-side equity research?
Personally no - I find sell side research to be ass for commodities. I think some macro/rates guys might. Not sure about equities, but I don't think these guys fundamentally trade stocks.
Very similar to being a desk analyst on a trading desk at a bank. The two roles I keep seeing advertised are (i) merger arb analysts to help with arb trading, and (ii) corporate credit analysts to help with single-name credit trading. Unlike a sell-side publishing analyst who covers a set list of names, you will focus on reacting to events and move on once that event plays out. Your goal is to price the event (think upside/downside around a series out outcomes) and have a view on where the stock/bonds should trade. Like any trading seat, the guy who puts on the risk (the traders) get all the glory and upside financially. How you, a supporting analyst, get paid will depend on the shop and how much the traders value you. For example, on a high yield trading desk at a BB here in Europe, a trader will get around 8-9% of P&L (net of costs for sales, desk analysts and back-office netting) whereas a desk analyst will get a fairly fixed comp that doesn't vary too much with P&L. In terms of exits, a lot of guys jump into trading seats or jump to the buy side so there are a lot of ways to drive your career from these seats. Great places to learn trading techniques if you already have good fundamental skills.
I spent last summer in one of the fundamental analyst seats mentioned in OP’s post so I will try to expand on this. Everything said above is generally true, except most firms are really working to expand the trading capabilities of their research analysts. So we would place plenty of our own research focused trades that were generally a bit longer term in nature when we felt that the market was mispricing a dividend size or had the timing of an event wrong as general examples. The traders themselves are primarily just focused on vol arb opportunities, while we were able to place trades around more fundamental factors that were relevant to corporates and their outstanding options. I’d say the work was split 75/25 between time spent assisting traders with their pricing inputs and helping them be defensive as market makers, vs actually trying to identify more fundamental trade ideas. Both were very interesting though.
We also place more reactionary trades in response to headlines. So if our webscrapers popped up with a headline that we thought would impact a stock price, and we felt that we were quicker than the market to that new piece of information, we will quickly try to buy/sell the stock, options, or whatever we can get our hands on to express the opinion. The focus is heavily on speed here and the analysts are generally trying to get the trade off in under like 15 seconds. This can be quicker or longer depending on how quick the market is to the news, how strongly we feel about which direction/how much the stock will move, and whether it requires us to do a little extra quick research to confirm our view.
I wasn’t there long enough to really see people exit but I’d imagine moving directly to a more fundamentally driven trading seat is possible. You generally get some trading education but not nearly as much as the traders so it’s hard to say how easy of a move that would be. Otherwise id say HF’s would be easiest. Tbh though, you would already be in a buy side seat and there is decent upside to high performers. You will generally start off covering very illiquid and uninteresting sectors and stocks for your first year, and then will move to higher value and more exciting stocks and sectors based on your performance and interests. The analysts who cover tech or biotech and are good at it, for example, are probably making high 6 to even 7 figures. I also mentioned that these teams are increasingly placing their own research focused trades, in which case you comp will definitely be tied to your pnl. Your impact on the traders is also quantifiable which will help drive your comp. Say for the last few years, researcher A covered semiconductors and the semiconductor traders consistently brought in $100M on average. Researcher B was now moved to semis, replacing researcher A, and the same traders now brought in $150M. Market conditions and general luck may be heavily impacting the numbers here, but there are plenty of instances outside of just placing your own trades that you can visibly impact pnl that the firm will recognize and reward you for.
Working at prop trading firms is also generally super exciting and these places mostly have amazing cultures. Hours are generally ~50 per week and you get paid about the same if not more than a banker in your first couple years, with comp scaling quicker than banking if you perform.
hi, thanks so much for your super helpful comment! Could you pls send me a DM? I would really appreciate it!
Thanks for the response on this - I'm looking at some of these roles because I'm interested in building a more "quantamental" skillset. Could I DM you?
this is correct, this kind of role is very news flow driven.
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