Getting into commodities advice

When considering entry points into commodities trading, here’s what you should weigh based on the most helpful WSO content:

1. Trading in S&T (Physical & Paper)

• Pros:
  • S&T roles focus heavily on derivatives and paper trading, which can be a fast-paced, data-driven environment.
  • If you enjoy a high-pressure, cutthroat atmosphere, this could be a good fit.
  • Skills in S&T (e.g., derivatives trading) are transferable to other areas, but transitioning to physical trading may require additional learning.
• Cons:
  • Limited exposure to the physical side of commodities, which involves logistics, storage, and freight.
  • May not provide the same level of optionality for career moves as physical trading.

2. TDPs (Trader Development Programs) at Majors

• Pros:
  • These programs are structured to provide a comprehensive understanding of the physical side of commodities, including logistics, financing, and hedging.
  • They offer a strong foundation for building a career in physical trading, which is often seen as more niche and macro-focused.
  • Physical trading roles provide exposure to the real economy and can lead to diverse career opportunities.
• Cons:
  • These programs can be highly competitive, and the learning curve is steep.
  • The focus on physical trading may not appeal to those who prefer the fast-paced nature of paper trading.

3. Trading Assistant/Ops/Scheduling

• Pros:
  • These roles are excellent entry points for understanding the operational side of physical trading, such as freight, storage, and logistics.
  • They can serve as a stepping stone to a trading role, especially in physical commodities.
  • Building relationships and learning the intricacies of the market can set you apart as a future trader.
• Cons:
  • These roles are less glamorous and may not involve direct trading initially.
  • Progression to a trading role may take longer compared to other entry points.

Key Considerations:

• Interest in Physical vs. Paper Trading: If you’re drawn to the operational and logistical aspects of commodities, physical trading or TDPs are better fits. If you prefer derivatives and financial instruments, S&T is the way to go.
• Optionality: Physical trading roles often provide broader career options, as they encompass a wide range of skills beyond just trading (e.g., logistics, financing, and long-term deal-making).
• Lifestyle and Culture: Physical trading can be more relationship-driven and slower-paced compared to the high-pressure environment of S&T.
• Background Fit: With your finance and coding background, you may find S&T roles appealing due to their data-driven nature. However, coding skills can also be valuable in physical trading for modeling and logistics optimization.

Ultimately, your decision should align with your long-term career goals and personal interests. If you’re still unsure, exploring TDPs or trading assistant roles could provide a balanced introduction to the commodities space.

Sources: Is S&T still a good career path?, Calling all Physical Commodity TRADERS: Benchmark indices and physical commodity trading risk, Crude Oil trading at big oil exit opps, Physical Trading: Best commodities to be in?