How much do traders at large firms get to trade with?
I'm a long time lurker (2yrs) and I haven't seen this question covered on here: How much does a first year commodity trader at one of the majors (Trafi/Glencore/Vitol) get to trade with on a daily basis? Monthly?
How much does a physical commodity trader at one of the major (Trafi/Glencore/Vitol) get to trade with on a daily basis? Monthly?
Also interested.
Have a feeling it might be similar to banks where you have a risk limit not a notional amount of capital to play with.
Constraints are typically going to be position size and VaR moreso than notional value.
I worked in risk at 2 of the shops you mentioned (or similar Swiss trading house). From what I've seen junior roles get 250k to 500k VaR. From there increases are dependent on performance, up to millions of dollars of VaR. Also depends on what products they trade and if they're part of teams i.e crude/natgas/gasoline desks usually demand higher VaR then some of the smaller products.
Any idea about the limits for a physical trader?
Example: a soft commodity trader sourcing coffee in Africa. How much of budget would one of the majors give their staff to source x tons of coffee in developing country x and deliver it to buyer in developed country y?
I ask because the spread is tight with a lot commodities, so a time, geographic, or production arbitrage would require a significant capital outlay in order to make a worthwhile return ($ amount).
Depends on the commodity. Know a few crude traders who work for those/similar shops and their risk limits are a lot larger than 500k.. You can't even get a tanker for 500k. Most of them have at some point lost 5m on one trade and mgmt is fine with is.
The sky is the limit! issues arise from var primarily from what I've seen on the desk
I have never really seen any set rules in physical, but anything you do is going to have get approval from somebody above you. It's not really a "here's a million dollars, figure something out" kind of proposition. Starting out it's more of a "hey, I think we can sell to this guy which nets us back more than usual" or "hey this guy is selling to us below market for xyz reasons." Starting out, the wider the margins the likelier you will be allowed to do something.
If we're looking at really big physical deals of recent years, all of those massive oil offtakes in Russia are negotiated up to the CEO level. On a smaller scale, but big for metals, there was the story of a big aluminum pile you could see in satellite pictures in the US. There is no way that kind of position was built up without approvals of basically everyone at the firm.
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