Q&A: US Power Trader (Prop/Spec)
Hey WSO, 5y into my career and currently on garden leave after a 3y+ stint at a US power shop. Hoping to give a little bit of insight into the industry as others on here did for me a few years back. Most of my experience is in DA/RT (INC/DEC, PTP/UTC) and FTRs, along with cash & term on ICE. Feel free to ask (almost) anything, obviously some specifics I can't get into but DITL, career progression, comp, general view on the industry/market right now is all fair game.
How hard is it to lateral over to a commodities shop after working in S&T? What are some exit opportunities if you don't perform well on the job? Is it better to go into S&T to build experience first?
For some context, never worked directly in S&T but this is the only "trading" focused forum on here. I started in essentially sell-side research for power, and transitioned to a spec shop afterwards. For power specifically, there's a few tried-and-true career paths (IMO). The RT trader/scheduler at a utility/IPP to DA/RT to cash/term trader route is probably the highest probability path. I know of a number of larger/more quantitative shops (more FTR focused) that hire out of grad/undergrad as well as from competing shops. Sell-side research is the last path that I think works quite well still.
For power, if you were to go work at a utility or a sell-side research firm and wanted to exit into something other than trading, there's still plenty of exits. Between jumping to the load side at a large corp (Walmart employs a number of power traders) and jumping to development (new load, generation), there's a number of opportunities outside of being market-facing.
I can't speak to different commodities, or the relationship between S&T and exiting to a commodities shop, but I would assume it works somewhat similarly.
How do you think the ERCOT market will fare for the next 5 years ?
For prospective juniors interested in trading power, will it be better to start at a utility, bank commodities s&t, or a trading firm ?
I think the best way to phrase it is that ERCOT will not be the most interesting market over the next five years. Politicians/regulators are still reeling five years after Uri, and they're not going to forget it anytime soon. Then, look at passed regulation like SB6 and TIP that are both out-of-market impacts to the grid. Batch Study Zero is currently going on (or is getting planned, haven't really followed in a few months), but I thought I read something the other day that a large number of data centers were rejected in this process. They're looking to move to 12CP from 4CP. Everything ERCOT is doing is directly aimed at reducing the probability of another Uri.
TLDR: Insane gas/solar/battery build-out, regulators targeting lower volatility through out-of-market actions, data centers probably going to undershoot leading to excess generation capacity. ERCOT's probably dead till early 2030s.
Is it possible to go from PUI at a bank to trading?
Honestly, a bit beyond my experience, but I think I can speak to it generally.
Let's assume a few things:
With this background, I don't think a shift from IB -> Power trading is a crazy jump, not common but also not crazy. Your best bet is to go to a more traditional fund/trading house that trades mainly term and not FTRs, Virts, or Cash. I know of a handful of traders who specialize in understanding market rules and changes in regulation, so this isn't an unheard of approach. Your experience would give you a lot of insight into how participants are going to react to market conditions and regulation changes, and how that might change price formation in the future.
Now I wouldn't say this is an easy transition, and you're likely going to need to really convince someone to take a shot on you, but I think with the right firm and some work on your own to follow the market and regulation it's not even a long shot (just a matter of time IMO).
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