Path to physical commodities trading
There's plenty of advice on this forum for HYPSM students to get into IB, PE, and HF, but I'm finding very little content for the path and expectations for physical commodities trading (metals, oil, etc).
What is the typical/"optimal" path in your eyes? Is it to do a TDP, try to get into a tradehouse out of undergrad, etc? What's the path like from there? What are hours and comp projections?
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for Energy i would say TDP. What i've read in these forums is that metals is a bit unstructured but they are developing tdp structures as well.
For energy, hours would be 8h00-19h00 but depends on the markets you trading.
What’s TDP?
Trader development program. Producers like BP and Shell has these three years rotational programs that gives you a chance to convert to a full time trader seat at the end by passing an exam and applying for the internal opening.
I'm a junior in undergrad trying to recruit for a trading internship at a BP or a Shell. Anyone have any tips on how to break in? What skills should I be honing in on? What are the technicals I should be studying?
Depends what commodity you’re trying for, oil is very different than nat gas. There are certain basic principles that apply to both, things like options Greeks, beta, alpha, statistics, linear regression etc.
I landed a base metals trading internship because I picked up a ton of freight and container shipping knowledge because I was trading those stocks during peak Covid when ports were super congested.
I parlayed the knowledge from that job, along with additional research on nat gas, into a full time job at a privately owned energy commodities trading shop.
Basically, learn how the market works, and how traders make their money, then demonstrate that knowledge in an interview. Foot in the door is the hard part, so just gotta apply and reach out to recruiters like everyone else unfortunately.
I thought commods trading is less quant-type?
Currently in G/P trading.
First, It's worth mentioning that, this space is not nearly as linear as career like IB. My mentor used to tell me, there are 101 career path that people go through to get on the trading floor. There are no set path or optimal path--maybe some way will save you a few years of work but still at the end of the day you will be equipped with different experience and skill that makes you a trader of different style.
That said, from what I've seen, I will say there are three ways/three types of people:
Join TDP: spend three years, do three rotation, and you will be given a chance to pass an exam and apply to a trader job. It a relatively certain path.
Start out in a support function or trading analyst then work your way up: probably the most common way, there are tons of shops and endless amount of jobs in them. You will need to build some relationship with traders/whoever's job you want, you will need to be your biggest advocate. But at the end, your career journey will shape the kind of skills you will have.
Coming from the right family: as dumb as it sounds, I've met quite some people coming from big oil family, old money, heir of city/country founder.
There are a lot of other caveat: if the TDP is from Shell, your might want to consider finding other places to trade for, BP is fine to stay for long term. Starting out from big trade shop might not always work out for you. Let places like Traf or Glendora came looking for you when you are ready.
Hours wise: it's usually 6:30 am to 3:30 pm for me. Comp, who knows, depends on where you start, your base will probably be very stable, starting from 65k-110k, and grow to as much as 100k-500k. Then your comp will be that plus a bonus, which will be a multiple of your base. If you are a trader, usually it also has to do with your seat cost. But generally, bonus can be from almost nothing, to go from as high as 1m, 5m, 15m, or even 20m.
Hope this helps.
What is your advice for someone who struck out on TDP final rounds / rotational programs and is having a hard time landing any traction for ops/risk roles? Any advice to break in? Also thanks for this comment; it’s super helpful to all of us.
If you made it to the final round, you are doing something right. I think BP only brought like 10 ish kids to a final round for a program like this. The career is long, and especially in this space, there's never a set path, so don't be discouraged.
One thing I will say is to broaden the search and be creative. There are so many end users who can actually give you decent exposure. Pipeline companies and exchanges too. And places like utilities, albeit sometimes starting out on the lower end of pay, can give you some great experience as well. Also, don't lose contact with the network you built. I have a coworker who had a short stint at this shop doing logistics, ended up leaving for a semi-unrelated role, and 10 years later, got a call from the first shop for a trading seat. You never know if the chance to break in/take risks will come in the next few years.
is that a lot of people in the industry?
Not really and it might be a little misleading of me to mention it like that. In reality, a lot of people from important families who I personally know still break into the industry with the first or second method. It's just that they have a better network that helps them down the line for a relationship-driven business, and the fact that they have been exposed to the industry makes them more likely to go into the field.
Curious about your thoughts on the Shell TDP.. What have you heard that makes you feel it may be better to look elsewhere? Is that related to comp, culture, opportunities or something else?
There's nothing wrong with their TDP. It's a good program and it takes experienced folks--so even better for whoever wants to pivot. Don't get me wrong, if you have the chance to start in Shell TDP you should definitely go for it. It's just personally I think their emphasis on the trading business is not as heavy as BP's. So once your three-year stint comes to an end and you are interested in the biz model of those of the trading house's you might want to consider going to somewhere else for the long term.
Would it be bad to start at a Traf or Glen GDP? Let’s say in Ops or something similar? Is that a bad place?
No. Whenever someone says a program or a role is "good," it's saying the role shapes your career in a particular way that's preferable, but 1) what's preferable depends on the individual and 2) even then everyone has their own path. And in this case, just by the virtue of being able to have a foot in the door you are already in a good place in the space. Idt traf have anything particularly interesting other than a 2-year rotation program? but again, you don't have to immediately have exposure to trading to have a good career in commodities
May I ask for the quantitative requirements of commodity trading?
do you know about power trading/ real time trading roles and how to apply as a graduate to those?
Also interested in RT trading. Did you make any inroads at getting a seat?
People always want to keep quiet because they want less competition. They also are bound by confidentiality clauses and restrictive covenants. I’m no longer trapped so DM me if you like
Hi - couldn’t dm you due to username, would you mind dming me?
Hi, i cant message your username, any chance you could dm me? Would love to learn more
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