Good afternoon,
I've been looking at some job listings on LinkedIn and other websites for power&gas trading roles for different companies and I've come to the realization that I'm not entirely sure what defines a "trading" role at different kinds of companies.
I'm currently working for a utility company as a prop trader; however, we also have portfolio managers that hedge our production and try to increase/decrease our hedged positions based on research etc etc.
I noticed that for a lot of the power & gas trading roles that I've seen online for banks define the trading activity as hedging/risk management for clients of the banks. Is there no speculative trading at the banks?
What does the power & gas trader role encompass at companies like Shell, BP, Trafigura, Vitol etc? Which shops are purely speculative that reflect performance via a "book". How is P&L defined when you are managing client flow or hedging?
I would really appreciate it if someone with a broader understand of the different types of energy trading roles could explain what the different kinds of trading roles exist at different companies. Which roles take speculative positions, manage client flow, hedge etc..
Thanks in advance!
Gas
Producer-your selling gas trying to maximize sales price of the physical molecules and keep the gas flowing. Financial hedges are most likely done at the CFO level and require pre-approval by board based on cash flow requirements and strategic initiatives.
Midstream-managing gas control and maximizing your percentage-of-proceeds contracts or take-in-kind customers to keep the plants off flare and manage takeaway capacity
Utility/refiner-purchasing gas minimizing your feedstock costs. Financial hedging done at the C-level
Trade Shop- making money by physical asset-based customer deals or prop trading around that. Derivatives used to express a prop view.
Bank-Managing customer flow, hedging deals with implied margin day-1, utilizing balance sheet for park and loan or reserve based lending customers
Shell, BP- All of the above but most likely different desks, different traders doing each of these aspects of the business
Great! Thanks for the detailed reply
Also, if anyone has worked as a power & gas trader at EDF or similar (prop), I would love to know more.
BR
Most people in the business made a pit stop at EDF, big shop with a revolving door there
Why don’t traders stay? Is the bonus structure unfavourable?
From what I have heard, bonus percentagss were continually below what was promised.
Seat costs were also ridiculously high, 3-5x what they should be at a reasonably well run firm.
Thanks for the replies, can I ask you what sort of P&L is considered average, good, great, and fantastic? I’m not sure if this is the industry standard, but in power & gas I think it’s a multiple of DVaR? How does this compare to oil (paper) or metals?
BR
In total dollars, P&L is all relative to where you are at. Some place 5M is fantastic, some it's below average. 10x Var is probably going to be the "budget" number.
Thanks! Is this specific to prop trading? Or do these metrics work for other types of trading too?
I worked for a small shop that was a fund within a hedge fund type group. When I was on the RT desk my ‘seat cost’ was $600k and that was purely speccing flows, virtuals, P2Ps/CRRs, daily puts and calls, and bal days in ERCOT.
When I got promoted off the RT desk we were purchased by a company who had tighter risk limits and as a short term power trader my number was $1.2M. However, we got a higher salary in lieu of % of book because that could not exist within the company’s structure. This position allowed me to trade the curve, Bal-weeks and bal-mo along with longer term options.
What is a seat cost exactly? A number such that if your pnl is below it then you get no bonus?
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