Hi guys,
I am curious to hear the perception of someone managing a structurally short book (managing crude inventory for a refinery, gasoline inventory for a consumer fuel retail operation, iron for a steel mill, etc.) within the market and that persons skillset and attractiveness to the more aggressive shops.
On the one hand, you are an extremely active participant within the market, deal with a lot of counter parties, and can presumably take on quite a bit of supply optimization. On the other hand, first and foremost your objective is to "feed the business" and you will not be able to fully utilize optionality or play around with different strategies given that your shop relies on you to secure rateable volume regardless of market conditions.
I'm interested to hear anything anyone has to offer on this, both from an experience standpoint as well as cultural differences and the relative "fun" involved in the workday of both. Thanks a lot.
Bump
Are you asking whether this is a good background in order to move to a physical trader?
I think he/she is trying to ask which one is more "fun"..
Trader vs buyer role in commodities both have there pros n cons. People who I work with (buyers of commodities for assets) have all sorts of stories.. From having to travel to inner parts of Mongolia and drinking to the stage of blindness, and sleeping in a teepee with a cotton cloth as a mattress.. Some enjoy it and others not so much.
The risks are the same from what I hear. They could have secured and signed on an amazing price for raws on a 12 month supply contract for $120p/kg (compared to $190p/kg) before an export quota becomes effective. Then all of a sudden spot price drops dramatically because WTO intervenes, as countries all lobby on the impacts to the world economy. Price for raws now adjusts to $7p/kg and you have locked yourself for 12 months at $120. We can assume at this stage you're jobless. The example was based on REs - and obviously prices are made up.
Not sure is there is a massive difference on culture, but both play in the same volatile markets.
Thank you guys. To refine the question/situation - I currently have an offer to leave my current role scheduling/blending/doing some strategy at a physical trading shop (a shop that I love and pays well) to go trade full time for a risk averse, but very large player in the fuels market. My medium term goal is to trade at a Trafi, Mercuria, etc.
All things considered, do you think this is a positive step in moving towards that goal?
The downsides that I am curious about are:
1) Although I am being told I can take small positions, my main objective is to secure supply and I do not know if this will feel like "trading" as it does at my current shop. I am scared it may be boring just sourcing supply (I'll be trading the pipe to start) and I would not truly be a trader. 2) It is not in Houston and it will be marginally more difficult to develop and maintain my relationships. Plus the town is much smaller than any that I have ever lived in and will take adjusting to from a personal perspective. 3) I have concerns about my ability to learn creatively and try new strategies out (or be taught them by more senior traders) given the risk profile AND the fact that I will need to constantly be sourcing supply.
The upside ultimately boils down to that I would be 1)trading full time(or at least in the market) 2) the product that most appeals to me 3) at a major player that moves big volume.
I need to stress that I only plan on spending a couple of years at this shop before moving towards my medium term goals - my fear is that the experience is not valued by the shops that I want to work for and I will have wasted time in a city that I would have preferred not to be in. Sorry for the length, hope this clears things up.
I moved to power trading (prop) from utility hedging.
Biggest difference is obviously P&L generation vs. optimising the hedging of your position i.e. locking in margin/risk mgt and maybe making a little on top. The funny thing is the latter tends to be far, far weaker in actually understanding the risk(s) to their position(s). Even if they do they won't have the remit to act upon it.
You likely won't be learning from senior traders proper i.e. those that make significant £ generating P&L: they would either be on prop desks at the moment or retired.
Your current position sounds ideal. I'd stay there and get good. Do you have any P&L exposure i.e. a book for yourself or traders acting upon your strategy stuff?
This may not be applicable in crude/products but at a Glencore/Trafi, traders who haven't done their whole career at the company are probably likelier to come from a BHPB/Rio Tinto than a smaller trader like Gerald Metals at this point because those guys will have a wider spread of contacts.
I would weigh the risks of your opportunities getting into a trading role at your current shop. Does your shop promote within or look externally for traders? How many other schedulers/ops are you competing against?
I'd be more focused on where I would learn the most from and if your current role offers further expansion. Let's say for example you take the offer from the other shop. By sourcing and supplying you will understand the market you're in (major ports/pipelines, asset availability/requirements, price fluctuations/movements). This sort of experience helps you understand the purpose behind blending.
The question for the other shop would be the location it transacts in. Is sourcing and supply restricted to only a certain geographic region/city/town? Does your current shop trade in a wider region compared?
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