Switching from prop trading to physical trading
Currently work at a prop shop (one of JS/Citsec/DRW/SIG) trading options and have done so for around a year. Have recently become interested in trading physical commodities and was wondering if I could get any insight into pay/what it’s like to work trading physical commodities and more specifically I saw Shell has a TDP that says it requires 3-5 years work experience, is this a set in stone requirement or is it worth applying anyway?
If you make the switch are you ready for the commodity bubble to pop in 3-5 years and you're stuck trading a boring market where everything is over supplied for the next 5 years after that? That is how these things tend to go.
uh are you joking? have you seen the majority of the comms supply data?
No, I am not joking.
Yes, I have seen the data.
I was speaking to the fact that there are commodity cycles and periods of high vol/prices are followed by periods of low vol and low prices.
If you want to argue about what the timeframe of this exact cycle is going to be then A) you need to define the commodity you’re talking about since grouping them all together makes the conversation impossible to have and B) no one actually knows how long this cycle is going to last despite what they tell you. You can look at all the supply data you want but that doesn’t tell you about about the demand side or what the supply side will look like in 5 years.
Crops are subject to weather. Crude and its products are subject to political behavior that is impossible to predict as well as global GDP. Metals demand is linked to global GDP which is, once again, an unknown to say the least right now.
If you want to act like you have a crystal ball and know how all of that is going to play out then all the power to you.
I mean same argument applies for trading anything where periods of high vol like rn in basically all markets bring in new entrants to the markets boosting liquidity and kicking down vol. Heck the process for markets to become “boring” should be even faster in non-physical commodity markets where there is a lower barrier to entry
I would agree but I think the difference is exactly what you touched on. The barriers to entry and the time lag for commodity market investment make those cycles more like "super" cycles. The highs are higher and longer and the lows are lower and longer than you see in most other traded markets. The Fed can step into equity and debt markets pretty quickly if needed and it doesn't take much for a bank to open a new trading desk to take advantage of an opportunity. There is no central bank printing oil/copper/wheat, etc. and you can't just decide to grow more corn or mine copper somewhere even if you want to so the cycles tend to me more structural. Everyone knows about the Fed put but you never hear about the wheat or oil call option.
Pay starts lower than market makers but can definitely "hockey stick", personally know a couple of people that clipped over 8 figs last year though of course you have to be good (and negotiate a good amount of risk and a solid % of pnl) and actually have a trading seat to begin with.
Curious to know why you're looking to leave market making though, I heard those shops paid very well for good performance.
how much experience did these guys have?
Beware it's waay more corporate BS, less analytical, and takes longer to actually become a trader (you're a trainee for like 3-5 years)
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