Hello, had 2 questions around Trading compensation.
I'm an energy derivatives trader at a physical shop. We kinda operate like an internal prop shop. We have targets set and we need to hit them each year. I have 5-10 years of overall experience in the industry but just got my trading seat beginning of 2019. My boss didn't set a PnL target for me but I'm on pace to hit $2M this year. I'm not taking too much risk and have made the PnL on small clips here and there .. didn't have any major drawdowns all year.
Compensation is a voodoo topic (no trader at work feels comfortable talking about it) but I need some info from more experienced guys/gals. Should I expect 5% of book?
Also, what kind of yearly PnL numbers get the attention of outside firms? I'm pretty sure making $2M is not a major deal, so just trying to figure out what kind of PnL goal I should have in 2020.
Hard to diversify trading strats when I have to play within the energy sandbox, can only do cracks/cal spreads/arbs ... hoping someone here has some good info, really would appreciate some solid feedback. TIA.
what kind of risk numbers were you given? how much can you lose?
I think i get cut off if I'm $1M in the red.
i just re-read your OP...with a 1mm stop...2-3mm is probably on target...and i would expect you to make closer to 5mm next year...and then 6-10mm the year after...ect...
What is your seat cost.
How much margin do the products you trade require. Ie how physical and how volatile.
What % of the subscription/ vendor fee is allocated to you.
If you are a east gas trader that works in gas and power group. Is gas and power on track to make budget. Then is overall gas on target. Then is your desk on target. Then are you on target. Not saying it’s fair but these are all factors when your bone is discretionary.
Is your var 1 million ?
our overall seat cost is around 500k, inclusive of vendor/subscriptions.
We are currently hitting our target as a squad but just wondering what kind of % of book I can expect. Recruiters have told me physical shops usually dole out 5-7% while HF's are above 10% .. just trying to confirm that with actual traders here.
in general....just like a good trade...you should be risking 1 to make 2-3, at a minimum...so a 1mm stop, you are expected to make 2-3mm
next year, if you have a 2mm stop, then you are expected to make 4-6mm
so is hitting 2-3M considered respectable on a prop desk within a much bigger physical shop?
Biggest drawdown I had this year was around $200k, which I don't consider very high. Beginning of year I had a personal goal of hitting $2M and looks like I'm going to get there (currently 75% there). Going to add a few more strats next year and also lever up a bit on my current strat and try to hit $5M.
At what PnL level would I become more attractive to HFs?
Thanks again for the good info.
HFs won't be interested until after you are making 20mm+ per year (with an associated max 5mm drawdown)
Based on?
i've interviewed with a bunch of funds...they were all looking to risk 5-10mm to make 20mm+...and they were all looking to hire guys who had made 20mm+ from the ibanks. obviously, this is not a full market sample...its just what the large MM funds told me
are you sure they spoke in absolute numbers? 20 mil. with what capital? 100, 200, 1000??
if you can't make 20mm...the MM funds aren't interested in you....they have billions of capital to deploy, and smaller traders would be a waste of their time...they don't want to go hire 100 more PMs each making 2-3mm...its a logistical nightmare..they would rather hire 10 PMs each making 20mm.
Now, if your strategy is not constrained...and your only limit is capital to deploy...then ask for larger risk limits at your current shop, so that you can make more P&L.
Can i pm?
Dude get me a job... I traded natty derivatives for a hedge fund. Or we can we start our own fund like Ron Ozer lol
So do you only trade pure paper? I assume you trade only futures and swaps? Not so much vol?
I trade either relative value or direction view across the curve... flat prices, EFS, TAS, spreads, combos, flies, strips, strip spreads... positioning my book for day to day moves. Not so much a long term guy just because of the unexpected volatility with natty on a given day
Your cut of PnL is dependant on the shop, and how much support they provide. You get a lower cut at a super major because they have great assets and a full team supporting you. You get a larger cut at no-name shops, where there's no support. I've heard 3.5-15% of the profit, but 4-7% seems like a good range. It's taboo for traders to talk about cut.
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