Transferability of Commodity Trading
I’m about halfway through my masters studies and am heavily involved in the energy trading industry niche. I’m worried about this being such a specific niche that it doesn’t present exit opportunities? any advice or thoughts?
What is the niche? Electricity market?
No specification yet, i'm still fairly early on. Energy markets in general from trading crude, to power generation, and supply chain optimization are all roles that seem prevalent. I've done my research on the industry and I have a positive outlook, but I like to ponder.
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Depends on the niche. Not impossible but it also depends on what kind of change you are talking about. You could make a switch as a junior trader but I wouldn’t want to make a switch much later, you essentially start all over in terms of relationships, which is the heart of the business.
Exit opps are fairly poor... If towards the quant side you could probably transition to another quant role in a different discipline. If on the macro side could probably find a job in economics and forecasting, but if your performance or the firms performance is poor finding a related job gets harder and harder.
I worked for a CTA with very strong performance, and got some bites on other quant roles / more general junior sell side roles, but ended up taking a step back to pivot away from it.
That being said, the job is a lot of fun, and if you're good at it there is a lot of money to be made. But if you look at ex traders on linkedin a lot of them end up as headhunters.
In physical commodities a lot. From my extremely brief experience, a pretty natural transition is to end up in commodity marketing/origination since you are trying to optimize your output or inputs rather than putting on risk. I did an internship in commodity marketing and there were a couple former traders and of course people trying to become traders. Logistics is another avenue for former traders. Working at a research/analytics company is a viable path. Bear in mind, there is a lot more to trading commodities than clicking a button since you have to perform and procure/deliver the goods so you are dealing with a lot more moving parts where things can go wrong. That seems to lend itself well to developing transferrable skills.
What about moving to the corporate side in risk management?
Yes, this would be a viable option if the risk management position is in the energy sector. Risk management is one of those roles that some energy traders transition to if/when they are tired of trading.
The head of risk (all risk, not just trading) at my current shop is a former trader.
On the ag side I was more thinking of going over to a risk management team for Pepsi, foster farms, or another non trader market participant
https://hcinsider.global/changing-the-course-of-your-career-in-commodit…
I don't know why people say that its not possible to move from one commodity desk to another. Check out this interview article of one of the Citi MD.
Exit ops? There are going to be THOUSANDS over the next 20 years. The issue? They will all be in the same discipline.
Let me briefly explain with examples in my contact pool.
DTE origination to Amazon energy buyer. AEP trader to CFO. Barclays IB to solar CEO. Barclays Natgas trader to Solar CEO. Barclays NG to hedge fund and author. Oil trader to Bloomberg. Power trader to Genscape. Oil trader to refinery owner. Structuring/trading to consulting. I can keep going...
The point? If you have a skill set, the ESG trend in corporates will provide exit ops for the forseeable future. There are only a few left that follow the "standard path theory" espoused by this site in other sectors. (Target - BB - PE - Profit).
A career path? Many. Plentiful and most are fun.
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