Relevant Background for Physical Commodities Trading

Hi,
I'm currently taking part in a selective finance master's program. I don't have any noteworthy experience in the physical commodities space. Generally, is it even possible to enter this sector without a degree in engineering/chemistry? \

If yes, how should one best prepare (other than of course relevant internships)?

Thanks!

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Comments (13)

Dec 13, 2018 - 5:47pm

Prospectivestudent123, bummer your thread hasn't had a response yet. Sometimes bots are smarter than humans anyways:

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If those topics were completely useless, don't blame me, blame my programmers...

Dec 20, 2018 - 5:18am

I got an offer recently to work for Exxon in Europe in risk in their trading department, however, I did not take it due to an incredibly shitty salary, barely liveable (1 000 euros/month). Seems like there are opportunities if you really look for them :)

Dec 23, 2018 - 1:22pm

I'm guessing that was an internship offer that you got. It is actually very easy to live in Brussels for 1000 EUR/month since SocGen offers 1400 EUR/month to EQD interns in Paris which is far more expensive than Brussels.

Dec 26, 2018 - 10:33am

Yes it was for an internship. I did some research on living costs in Brussels and did not come to that conclusion. Also, just because SocGen offers 1400 in Paris doesn't really make that a fair or liveable salary there...

Dec 20, 2018 - 7:25am

I did an internship at a hedge fund specialized in commodities trading. It was a small fund with around 12-15 traders and I really got along with the owner who started the fund by himself and had been a commodities trader for +30 years. He got a degree in business and marketing and started as a clerk at one of the largest physical commodity trading firms (think of Cargill/Louis Dreyfus/Glencore) and spent several years until he got his first job as a real trader. He made so much money that eventually he started his own physical commodities trading house and then a hedge fund. The traders there had degrees in engineering/physics and some of them in economics but the head of trading had a degree in business and a masters in agricultural products (and he was relatively young) so I guess you don't need to study hard sciences to get into physical commodities trading (I got the internship and studied economics). However, you must be able to show real interest and that you are capable of developing investment theses and prove yourself to be right. In the hiring process, I had to write a 1-paper recommendation on gold, they wanted to see my reasoning. I think physical commodities trading is about knowing the fundamental drivers of the product and then, using quants to develop trading strategies and make money trading

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Most Helpful
Dec 20, 2018 - 5:33pm

I don't know where chemistry would even fit into the overall spectrum?

Physical trading is bread and butter economics and mid level calculus. Options knowledge is as complex as the maths has gotten for me, and I am 90% sure having studied finance would have helped more than engineering has.

Gets more quantitative with certain products (think power - where they are running complex quantitative models) however your average hard or soft commodity doesn't require that much in terms of mathematical ability. Looking around my office and my previous office it's essentially economics majors, a few engineers, and a few management masters types.

  • 3
Dec 20, 2018 - 6:01pm

Physical still has a pretty varied background. Today I sit across from a guys who studied, agricultural econ, biology, history, and finance. I've worked with guys who didn't even go to college. If you are in the UK there are more apprenticeship opportunities that would allow you to skip college. like the other comments on here, econ is probably most applicable to the industry. that said, if a resume hit my desk and the candidate spoke more than one language, has traveled, and had good grades, I'd probably at least give him a call. In the Ag space at least, your major hardly matters. I just want to see that you are smart, curious about the world, and know how to speak with people and build relationships.

Feb 28, 2019 - 8:45am

Absolutely. The first trader I worked with was programming satellites before joining a large physical trader as trade support. However, there are few places as meritocratic as trading houses; if you do well you'll be given more accounts and responsibility very soon.

As you say too, many others (particularly the most successful) came from less top environments, many even without uni degrees, but lots of energy and a sharp commercial understanding. It's a mix of shark-ism and nerd-ism.

Anyone who's been in a commodities trading desk will probably agree, i'd say the most important aspects are commercial awareness (good at numbers, common sense, skeptical, good forecaster) and people (networking, trust, team work, etc).

Dec 21, 2018 - 12:42pm

On our desk: Two Finance Master Graduates, one Sociology Bachelor, one LLM, one has one year of medicine studies and our head of trade studied Management Master.

It really doesn't matter what you studied if you can show curiosity and basic match calculus.

Dec 26, 2018 - 11:19am

It mostly depends on which commodities you trade.

I'm enrolled in a master that combines quant finance and chemical engineering, with big focus on energies and can say that as far as I've seen mostly crude traders have finance degrees whilst gas traders have mostly engineering-wise degrees

But mate trust me, commodities (especially O&G) is a cowboy world, ie as long as you bring and make money you're good. Mostly of them don't care about your background, uni prestige, how you dress up and so on, as long as you make it rain.

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