S&T Equity Derivatives Trader.. Q&A

1. This can depend a lot from desk to desk and also your role on the desk. But typically, IED covers a wide range of derivative products like index options, swaps, futures, forwards, cliquets, some exotics. Might sometimes have opportunities to face CMs as well.

2. It is definitely quantitatively intense in the sense that a lot of the products and elements behind it are a bit more complex. For example, understanding/building pricing and volatility models is going to require a relatively strong quantitative background, but it is definitely not as quantitatively demanding as outright quant or HFT positions. I often describe it as a hybrid role where there are a lot of quantitative components to it without losing focus of the greater market at hand. It's fast paced, but not all the time. It's more like several moments throughout the day that are fast and there are moments when I can definitely start to feel the pressure but it's not 100mph all day. 

As far as skills go, think strong quantitatively, handling/interpreting data, good under pressure, coding, soft skills like efficiency and strong work ethic go a long way too. I'd also highly recommend you have a solid understanding of how the products and basic elements work before you step into your interviews. At the very least, you should have read Natenburg, know how BSM/pricing works, the greeks, hedging, an understanding of things like volatility, skew, kurtosis etc in the context of vol and risk. The learning curve tends to be steep at first, but with enough time and effort it all starts to click.

Congrats on the new role! Welcome to the industry! 

1. Your main job for the first year is to be a sponge and try to soak up as much information as possible, every day. Your first few months in S&T, particularly derivatives can be daunting because the learning curve is pretty steep, but come with a growth mindset and accept that it's an uphill battle until you get your feet wet. With the right attitude, effort and time things will fall into place in no time. Learn from your teammates and try to actively take on more responsibility when you feel you are ready for it. Having the opportunity to trade/manage a book early on is the best way to really learn and will be a great opportunity for you to get up to speed as fast as possible. Take full advantage of it, and don't be afraid to screw up. You're not expected to generate huge alpha and never take losers, especially in your first year. Once you've been managing a book for a few years, you'll realize that losing trades here and there isn't that big of an issue if you're doing everything else properly, and managing your risk. You won't get fired for losing, but you will get fired for making bad/illegal decisions under pressure. Take the losses to the chin, and don't ever let it compromise your decision making.

2. Unfortunately, this is a volatile industry and the headcount/hiring at most places across the industry have been going through a difficult stretch, as you pointed out. It sounds cliche, but try to aim to be irreplaceable. This can honestly mean a lot of things, it could be having extensive knowledge in a niche product but I'd say there's a lot of other ways to provide a lot of value to your team/other teams. There's a piece of advice that I got from my director several years back that's always stuck with me-- get really good at identifying business needs early on, and fix them. Whether that's in terms of workflow, inefficiencies, processes etc. People really really like it if you can make their lives easier lol.

I obviously am not too sure of the outlook at your desk in particular, but in any event I would continue to keep networking regularly and in general aim to form relationships with those in the industry. You actually get a decent amount of opportunities to interact with more people in the industry than you would think, in the day to day. Also, especially for full time roles, if you're looking to get hired make sure you are reaching out to VPs and above. I still have very little pull when it comes to getting someone hired; I'll get asked to provide insight and feedback, but that's about the extent of it. The final say is up to the MD at the end of the day. But then again, not every networking attempt should be with the intention of trying to get hired, either. Be real, be genuine-- people value that a lot. 

No worries, man! Solid questions.

1. I went to a semi-target school, double majored in finance and computer science. I studied a bit of math in school as well and made it a priority to self-study things like stats and machine learning. My plans at grad were to pursue an MFE degree, before I landed a few offers. As for your particular scenario, I think it definitely helps to have some sort of STEM experience, but it's not an automatic deal breaker especially if you can show that you're knowledgeable and quantitatively competent. The industry is sort of pivoting towards a more technical/quantitative hiring pool these days. 

2. For places like Optiver, you'll have to go through the online assessment and will get called for an interview depending on your results for that. Most quant roles like that do this, and even prop shops like Akuna. It's quantitatively demanding and ensures you are strong quantitatively, mental math, stats, pattern recognition and analytics. There's lots of resources out there with sample OA questions and practicing those regularly can be helpful to prepare for these. On top of that, make sure you're well versed in market making, dynamic hedging and derivatives theory

You're definitely studying the right things. It's good to get your feet wet and gain some experience, if you have the capital and risk tolerance for that. Keep doing all of the things you are already doing, for sure. EQD desks can sometimes run a pretty tight ship, a lot of times, and given the way the hiring situation is right now it makes a bit harder. These things tend to swing like a pendulum though, and things can change pretty quickly so don't lose hope and maintain the connections you build. As a rising sophomore in college, you're still young. Don't discount looking at middle office roles too during your internship search. It might not be as glamorous as securing a front office gig right away, but there are tons of people at every firm that move up into a front office gig. They also tend to be stronger traders right off the bat, because they've already leveled out the learning curve. 

Depends on how you define "decline", I suppose. There are definitely certain products and specific desks that have shrunk and gotten less volume over time, but as a whole, S&T has operated in a very organized and institutional manner that I'm not sure it would ever completely vanish as a profession/industry. The way I see it, the two biggest threats to the industry are regulation and automation. The floors definitely run a bit leaner now than they did back before the GFC, but I don't think it's currently at risk of going away any time soon. 

As for your other question, it really depends on your interests and how passionate you are about trading/the products. It's not like IB where a lot of the work is the same across all coverage and products (obviously there's some variance), but with trading, each desk is vastly different from one another in terms of products, workflow, strategies etc. Trading is a super specific industry, and a lot of people have said that it's easy to get pigeonholed in this industry-- with little room to pivot elsewhere especially with seniority. But, for me, I really did not have much interest in practicing finance in any other career, and if trading hadn't worked out I would be taking bigger advantage of my CS background in a tech-related field. I've dabbled with corp fin in an internship and networked with a lot of folks in M&A but it never particularly caught my interest. But throughout college, I loved trading. I loved derivatives, and I love my job now. 

Can you share a bit more about your experience? What sort of work do you do on the day to day? Correct me if I'm wrong, but I'd imagine you are client facing w traders regularly.

If I'm not mistaken, I believe you're referencing a reply that I gave above when I said some desks/products are declining. I meant that in a very broad and general sense. For example, CDO desks are almost all wiped out after the GFC, but the product still exists in much lower volume-- someone's gotta run them. And also these desks can fluctuate with the market... RRP's across the country this past year or so has been in a decline.. partially due to the TGA refill I imagine. Some FI teams across the nation during the rate hiking cycle/SVB/FRC days. A big portion of layoffs after the feds banned banks from prop trading.. My main point being, it just changes with the market, regulations and evolution of the industry and products.... Unfortunately, I don't have the foresight nor your personal context to tell you what the "next big desk" is going to be. 

Automation in the sense of some firms having proprietary HFT MM models, automated pricers.. etc. But to clarify my perspective, I think that all industries are affected, to some degree, by the way technology can improve workflows for that industry. It doesn't necessarily mean less roles nor is it indicative of a shrinking industry imo. In the 70s, trading was done physically, w physical order tickets and fills. Then the computer became a thing so it pivoted to primarily being done through computers + over the phone, and with that pay increased. Now there's electronic platforms, so on and so forth. The industry still handles more notional value than it did in the 70s, just the skills, expertise and focus has changed. 

Hey! Really cool to hear about your experience, seems like we're opposite sides of the same coin. I'll try my best to answer these, but feel free to dm me if you'd like me to expand or clarify on a few points.

1. If you join S&T, I think you could definitely start at the associate level given your experience. I'm not sure analyst would make sense for you, both from a comp and experience perspective. Having that strong programming background would probably be helpful on all desks. That being said, as a trader, you'd probably end up putting the programming in the back seat. You're going to deal with a lot of stuff that's not specifically programming related or coding related. You'll still have opportunities to use it, and honestly hiring managers would probably gush at the opportunity to swoop someone up with a SWE background as you'd be really helpful in improving workflow/automation. 

2.  The only concern is that in S&T there's a preference for folks to enter early to cover the learning curve that's associated with the work. That being said, you have experience in another technically dominant field to where I would think there's not a huge concern whether you can pick it up or not. I would recommend that if you're interested in breaking in, I'd network with the hiring managers to communicate your situation and see if there's middle ground in terms of what they need and how you can ease your way into the work.

3. This is going to vary case by case. Both of those paths are valid ways to break in. Your finance experience/knowledge would be a big player here. I would continue to network, though, since you're in a more unique situation than most. 

4.  To a loose degree. Big banks tend to be a bit more structured/organized with how they recruit talent (ie robust recruitment processes during college) but by no means is it a dealbreaker there. Many of the really strong programmers end up going prop/quant because there's a much larger opportunity to use their skillset in those roles. That being said, it just really depends on what the firm/desk needs at that point in time. They might need a programmer/others might need a RFP. You can't have enough people with a strong coding background though, these days...

5. Regret is a really heavy word.. The way I see it, I get to spend my days in a fast-paced & mentally stimulating field where I have a really niche interest in a specific product group. I get paid much more than the average American, the culture on my floor is solid, and all of these makes it really easy to love what I'm doing. I wouldn't say that I regret anything, in that sense.

There's of course a couple "is the grass greener on the over side" moments, but I'm very grateful for the position I'm in. Big tech has always been really interesting to me, and if not for trading, I'd probably be trying to break in there. I've also considered careers in fintech and crypto, as I'm very big on the "entrepreneurial vibe" but I'd imagine that buys me even less stability than an already volatile industry in trading.

EDIT:

I have been hearing about these algos and seen similar ones. I think that we are a long ways away from the entire job becoming automated using algos and things of that nature. Each firm/team would have to build something proprietary due to security/regulatory concerns. I also think that regulations, in general, will slow down the adoption process another decade. I remember there was a huge wave of worry whenever GPT came out and AI was just starting to buzz. I'm really not worried about it currently. That might change down the line, might not be as bad as anticipated, might be worse-- who knows.

I'm a big fan of math degrees. Even if you don't end up using it for trading (which you absolutely could do) you have so much more flexibility to choose a career that's right for you, as opposed to MFE where your options are not as vast. 

Hey man,

I'd recommend you expand your horizons and look outside S&T if you haven't already. Look at middle office, MM, BDs, props, clearing houses so on and so forth. Just getting your foot in the door in this industry is going to teach you a ton and will give you opportunities to network and move to a front office role down the line, if it's something you still want to do. A lot of these firms requiring STEM degrees, I'm not sure how helpful getting a minor in a STEM related field would be in a quant role vs a similar candidate with a STEM major. I don't say that to discourage you, but to encourage you to study whichever catches your interest-- particularly for a minor designation. I think quant would be a very difficult role, not just to get but to excel at, if you don't have a strong STEM background in your undergrad studies, but if it is something that you ultimately really want to do, I'd look into MFE programs. It's a great segway for someone that studied finance in undergrad but is looking to approach it from a STEM/quantitative perspective.

This question caught my eye, so I'll give my thoughts on the matter.

First off, congrats on the role! You're going to learn a lot and I hope that you have a really valuable experience on the floor.

My biggest piece of advice is keep an open mindset. Now, I'm not that old, but I'm older than you and old enough to know how valuable these years are, when I look back at them. You have a rotational internship, your foot is already in the door. The thing about trading and all of these desks is that it's incredibly hard to know if you're going to like working at a specific desk, let alone be good at it. It might be the case that you think you're interested in EQD now, but you have the best experience with the FX team or the FI team etc. The point I'm trying to make, and really want to hammer home, is to not make the mistake of discounting the other desks/being disengaged from the other desks, because you have your eyes set on EQD. Now don't get me wrong, I love my desk, the products, the team and my work. But that is absolutely not going to be the case for everyone, and in your shoes, because you have the privilege of being at a rotational program, make the most of it and really try your best to stay engaged at every desk and learn as much as you can. 

The other part of this, too, is that securing an EQD role from a rotational program might not be up to you. It's going to depend on each desk's headcount policy, current needs, and resources. Timing and a bit of luck will matter here too. This doesn't mean you can't do things that can increase your chances like networking properly, being engaged/helpful, and having a learner's mindset. Just keep an open mind, you're in a really great position right now where you have the opportunity to see what the WHOLE floor/industry is like. Take advantage of it man, live in the moment, and appreciate your youth!

Best of luck!! 

Not the OP, but FX Options / Vol is more global than Equity Derivatives desk & Rates vol desks so you get to travel around more between offices. However, FX Options has significantly more tedious/annoying tasks than other vol desks and the market has fewer risk taking opportunities. Better off moving to equity vol (if you like the micro), or rates swaps / vol trading (if you like/don't mind macro econ), unless you absolutely love the currency markets... PM if you want more info, but thought that is the most direct answer I can provide

Math better to have, paired with either econ or CS. Finance not really needed for trading but the logical reasoning of a math background and/or some ability to code will serve you well. In the past, many more traders came from non-technical backgrounds, but it looks like the space has shifted more technical over time.

Hey!

1. Those two are a great foundation and should be sufficient to tackle most of the data oriented needs of a team. If you want to add more languages to your arsenal (though I think getting really proficient and r/python is good enough), VBA and C but most shops are going to have dedicated developers and/or quant teams that will handle the bulk of this.

2. This is a massive rabbit hole, and is a never ending one at that. I'm always seeing new academic papers leveraging novel and creative techniques to derive options pricing models. But, the main priority is knowing BSM like the back of your hand. As far as other notable models: Heston, GARCH, Bergomi, SABR are all great and were designed to tackle some of the downsides of the original BSM. 

3. Even larger rabbit hole! First, all of the greeks are important. While vega drives most of the pnl and voltrading tends to be the center of options trading strategies, you need to learn how th eother greeks affect market dynamics and positioning. For a simple example, how does gamma affect positioning? Does the market move differently when dealers are predominantly long gamma? What about when they are predominantly short? How does this move in conjunction with vols? And why is it strange to see massive dealer long gamma in periods of extended high vol? What about Vanna? Charm? etc etc. Everything matters and it is a mistake to focus on just vega because you miss a lot of context that the other greeks might be trying to tell you. As far as learning more about vega, I'd focus on volatility trading and the mechanics behind it.

4. I think most of my general recommendations I can think of have already been said in some of my previous replies. If you have any other specific questions feel free to DM!

Good luck!

I think you should go for eqd for your internship. MS is great at equities, and imo options desk are just the best since it teaches you the most. Eqd gives you the most fundamental options knowledge so you can do well even if you switch to rates vol (imo the only desk more "prestigious") down the line. Plus it also unlocks some exits in vol/macro hfs and market makers.