Physical commodities - how do you overcome the operations trap?
WSO has touched on this a lot, as a fundamental "problem" of careers in physical commodities trading.
This is the dynamic I've observed in my specific product/region.
Operations/scheduling is very important, if not THE core driver of how my shop generates PnL. It's a fairly well paying job (probably $90 - $120 K all in), but doesn't have the upside and excitement trading does.
Where trading is primarily a relationships job. Although the financial/analytical side does matter too. The vast majority of traders in my industry are 35 - 60 year old people that have been doing it forever, and know everybody. There's also definitely optics reasons why shops don't want a very young person to be the face for dealing with 50 year old counterparts, etc.
So let's say I'm a really good, but very young, ops person. I have the quantitative skills to be a trader, and I'm good with people. But I don't have an established network like the old guys do (which would admittedly make it hard).
I've been doing scheduling a few years now, and want a trading role.
My company is basically steering me into a role that's essentially a glorified senior scheduler/scheduling supervisor. The rationale is that I can make more of a PnL difference in operations than trying to compete internally with other senior traders.
It's honestly a good job. Comp is very good, hours are good. I have another scheduler(s) below me to take the most menial parts of the job, or some of the on-call stuff. I absolutely get dialled in on commercial discussions, and entrusted with understanding it. But it's still a glorified ops job; I won't really be doing my own deals.
So I feel like I'm at a bit of a crossroads.
My particular gig is great job by conventional definitions, but I'm quite dead set on being an actual trader. I feel like doing operations is ultimately settling on what I want, even if I'm making money for myself and helping my shop save money.
There's really no way for me to fully overcome the lack of connection problems, other than sticking it out for many years and hustling to meet people.
So does anyone have career advice for me?
Step 1: Develop a relationship with the traders and trading managers
Step 2: Ask them to put you on a path to become a trader
One thing I have noticed is that people are way too busy to design a career path for someone. If you never bring it up, no one will dangle it in front of you. Ask and you shall receive... or not, but at least it puts you into consideration.
best reply.. No one knows your goals unless you tell them
Just here to comment I feel the same way. Want to do something more but keep getting told I’m in a great spot. It all seems like a waste of time if I never have the opportunity to actually make a trade. It may be the grass is greener mentality considering who knows if I’ll actually make money trading but still frustrating either way to not be given a chance.
Why trading? Money? Prestige? Boredom? A great ops guy is worth more than 3 traders and a great structurer is worth 3 ops guys! (Humor on the structuring guy).
It has been said many times here. Without killer ops guys, you are not maximizing profit and leaving valuable p&l on the table. Same for credit guys in my opinion.
If you are unhappy, find a shop who will take you, but understand that your value will only keep getting higher over time.
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You don’t need a degree in chemistry or chemical engineering. Few traders I work with actually has this. But on the oil and products side, an understanding of refining technology, the functions of the units, how those link to crude valuations and product make is essential.
My view is that you can make do with practical working knowledge vs a deep theoretical background for every day tasks. It's not like you will be building or maintaining the refinery.
This is job is just econ 101 where supply meets demand. You can learn the special relationships on the fly be regulatory rules, how different blends, how contracts work, how demand works etc…
But key is always finding supply meet demand.
Assuming you're talking about oil I would say this is about the extent of technical knowledge you would ever need to trade it.
https://www.thriftbooks.com/w/petroleum-refining-for-the-non-technical-…
Why not look externally for a entry level trading job? if you are in the physical space you should be a competitive applicant for those roles.
in my 16 year career.. you dont really "earn" a trading seat.... you need some things to happen that are outside of your control.. your firm buys some assets, someone leaves on their own, someone is fired, your boss is promoted, lay offs etc etc .... its a given you work hard and smart... everyone is... but you need a few things to fall in your favor that you really have no control of... keep working, keep networking and let traders and managers know you want to grow your career into a commercial role ..
I am going to take a bit of a different viewpoint with this question, because personally I think the myth of the "killer ops dude" is dead nowadays and will continue to be so.
To begin, any of the larger firms now have established new grad programs and a talent funnel that is managed by HR now and do not need most of the time to look beyond that talent pool to fill roles. These programs are also run by Traders and as part of their goal they want the people coming up to spend time in operations/support roles to essentially almost brain-drain the special skills that a "killer ops person" would have. Along with this same theme a lot of senior people came up through these programs now exist and any of them who see a "jr trader/cash person" who knows less than a ops person would take them aside and say "learn that stuff ASAP, this is your responsibility end of the day". So what happened to those "killer ops dudes" who knew specific things about the tariff/systems well OP you already answered it they got moved along to roles where they take very little risk and mainly optimize the specific tariff knowledge they hold and usually that comes with building relationships, truly every commercially minded ops person has been moved to these roles in the last 5 years at the larger firms.
Lots of highly skilled ops people used to be annoyed with TDP types and did not understand why the firm no longer focuses on hiring from ops...but now 5-10 years later lots of the firms main groups are run by former TDP stars be it in a originator or trading role. So now these firms see the thinking and why the talent funnel has changed.
I do not think anyone is going to pay "P&L" to an ops person for long-term now since that is no longer the firms run and as mentioned they would acquire that knowledge or use tech or get around that position. The people left in ops, are people who very "process driven, attention to detail, focused" it is no longer how do we make "more money" its more of lets secure the bag types that are senoir people who run ops now.
So you may ask why is ops such an attractive job now? The reason is cause front office traders hate training new ops people, nothing is more frustrating than a minor error from ops or intrepetation angering you. For this reason, ops people are paid the minimum you can get away without losing them, you give them flexible schedules, if they work weekends you give more time off, the work life balance is hard to pass up.
So to your point OP how do you avoid this trap...well as mentioned first you need to make it clear what your end goal was and see if people actually think you are any good..see if people think you can take the next step and are already doing the extra mile, or if you are just a very good ops person. After that you probably need to move your focus to leaving the firm for a chance towards trading in either another group or firm all together totally different product maybe, you have to be proactive to take a risk. This is just like the young bankers/pe folks who debate corp dev/stay in banking etc...You need to be ready and push to take a risk.
But yes truly you are very expensive hired help till some blockchain/endur-upgrade or so can do your job.
Glencore was known to develop traders from ops ground up if the individual proved their worth. Do you think that is still the case of them being a outlier? I ask because I may have an opportunity to jump into a Ops function, and the risk being having to restart again to learn a new product at not such a younger age.
Agree with this entirely. It is a case by case basis with no one set formula.
In my experience in the physical natty space, the most talented and successful phys traders were at one time schedulers. No matter where they started in energy, they were schedulers before traders. ( a few quants were the exception) The one commonality was that they are masters at the pipelines they trade on. They understood the flow, economics, tariffs, asset management agreements, etc.. but each one of them immersed themselves in a niche market region with the lower 48/Canadian gas markets. Some former schedulers-turned-phys-traders moved on to financial trading but the majority just run their arenas at the top of their weight class. Gas is a different beast, however.
I agree with Mr. T - no one size fits all. But that's why we adapt.
What product are you scheduling natty/crude/power? and how many years in ops? Also depends on your definition of "actual trader". It's really a lot of right place right time. You just have to let your aspirations be known and put yourself in the best position and then hope the cards fall right. Are you at a shop full of young hustlers or old heads and you're the youngest? If the latter stick it out and let them know your goals if the former well you really better be the rock star you say you are because the odds are stacked against you.
Lots of good replies. I know someone whose career was also going down the same path. He did marine ops and then was being pushed towards a blending terminal ops role. On the other hand other less experienced people were being pushed towards junior trader roles. During his review he made it clear that he was done with ops and he only took the role since its useful but he did not want to do it long term.
Also he was talking to different desks over a year and had people pushing for him. Ultimately a position came available and with enough people name dropping him he got the role.
Think you need to do the same. Have people drop your name for different roles. Also look outside the firm. You should be pushing for the next role almost 1 year in advance. As you have correctly pointed out the firm does not want to move you because you are experienced and most people do not want to go into ops because though you learn a lot it is a shitty role at the end of the day.
in need of a change as operations is really not where I want to be. What are some easier paths out or exits that you know of since trading isn’t a likely possibility? I’ve tried getting into consulting and more biz ops/ strategy oriented positions at other companies but it’s been tough given commodities ops is so niche. Anything I might be overlooking?
It's a very niche skillset. Unlikely someone external will hire you to be an industry consultant or make presentations about the energy transition based on experience as an oil/gas scheduler. You will likely have more flexibility internally- get to know the team leads of everything. You should be able to network into a risk or analytics, particularly if you upskill beforehand on tech.
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