GoodBread:
G.M.Trevelyan:
lol call one up. I think there's a docu. on the Chicago Live Cattle pit called... something forgot. Google it.
Are you talking about Floored? That's not physical commodity trading.

Intuition is similar buddy. Most commodities traders forget what product they're trading when they're really in it. It boils down to trends, break-outs, and so forth. Sure, the actual commodity matters -- but if you're looking for behaviour then there's little difference between physical and non-physical traders. I really wish college juniors would stay off the forum.

 

I just want to know this:

Do physical oil traders visit oil refineries?

Do grain traders visit Grain elevators, farmlands?

Or do physical traders spend their entire day at the desk just like paper traders?

thank you

 
G.M.Trevelyan:
GoodBread:
G.M.Trevelyan:
lol call one up. I think there's a docu. on the Chicago Live Cattle pit called... something forgot. Google it.
Are you talking about Floored? That's not physical commodity trading.

Intuition is similar buddy. Most commodities traders forget what product they're trading when they're really in it. It boils down to trends, break-outs, and so forth. Sure, the actual commodity matters -- but if you're looking for behaviour then there's little difference between physical and non-physical traders. I really wish college juniors would stay off the forum.

you're a dumbass buddy. Most commodities traders do not forget.

It boils down to whether or not you can source 2 million barrels of crude out of west africa, finance the purchase, find a way to get that crude to a port, charter a tanker, inspect the tanker, pay tarriffs, load the crude, insure the cargo, ship it across the ocean, make sure everything goes smoothly, hedge the cargo properly, have a certain buyer set up or confidence that you'll be able to find a buyer, pay any tariffs, and that the physical market you trade in won't go against you despite you being hedged. (is the spread between bonny light and LLS going to change en route?) then you have to make sure you're able to make a (usually) trading).

and I know I missed or fucked up at least a few steps/details. you just got schooled by a college junior.

corneliustone:
I just want to know this:

Do physical oil traders visit oil refineries?

Do grain traders visit Grain elevators, farmlands?

Or do physical traders spend their entire day at the desk just like paper traders?

thank you

do they visit refineries? i had never heard of it happening but i'm sure there are times when they do. not knowledgeable enough to know why, unless they are a trader there to optimize refinery inputs/outputs, etc.

see above, don't know ags.

no, they travel significantly more and have a lot of relationships to maintain. but if they aren't traveling in my experience they were at their desk.

 
Tupac:
G.M.Trevelyan:
GoodBread:
G.M.Trevelyan:
lol call one up. I think there's a docu. on the Chicago Live Cattle pit called... something forgot. Google it.
Are you talking about Floored? That's not physical commodity trading.

Intuition is similar buddy. Most commodities traders forget what product they're trading when they're really in it. It boils down to trends, break-outs, and so forth. Sure, the actual commodity matters -- but if you're looking for behaviour then there's little difference between physical and non-physical traders. I really wish college juniors would stay off the forum.

you're a dumbass buddy. Most commodities traders do not forget.

It boils down to whether or not you can source 2 million barrels of crude out of west africa, finance the purchase, find a way to get that crude to a port, charter a tanker, inspect the tanker, pay tarriffs, load the crude, insure the cargo, ship it across the ocean, make sure everything goes smoothly, hedge the cargo properly, have a certain buyer set up or confidence that you'll be able to find a buyer, pay any tariffs, and that the physical market you trade in won't go against you despite you being hedged. (is the spread between bonny light and LLS going to change en route?) then you have to make sure you're able to make a (usually) trading).

and I know I missed or fucked up at least a few steps/details. you just got schooled by a college junior.

corneliustone:
I just want to know this:

Do physical oil traders visit oil refineries?

Do grain traders visit Grain elevators, farmlands?

Or do physical traders spend their entire day at the desk just like paper traders?

thank you

do they visit refineries? i had never heard of it happening but i'm sure there are times when they do. not knowledgeable enough to know why, unless they are a trader there to optimize refinery inputs/outputs, etc.

see above, don't know ags.

no, they travel significantly more and have a lot of relationships to maintain. but if they aren't traveling in my experience they were at their desk.

Great answer, I think the guy was talking about trend following CTAs though it should be clear that they're vastly similar animals from physical commodity guys and simply don't blindly buy breakouts all day.

 
Tupac:
G.M.Trevelyan:
GoodBread:
G.M.Trevelyan:

lol call one up. I think there's a docu. on the Chicago Live Cattle pit called... something forgot. Google it.

Are you talking about Floored? That's not physical commodity trading.

Intuition is similar buddy. Most commodities traders forget what product they're trading when they're really in it. It boils down to trends, break-outs, and so forth. Sure, the actual commodity matters -- but if you're looking for behaviour then there's little difference between physical and non-physical traders. I really wish college juniors would stay off the forum.

you're a dumbass buddy. Most commodities traders do not forget.

It boils down to whether or not you can source 2 million barrels of crude out of west africa, finance the purchase, find a way to get that crude to a port, charter a tanker, inspect the tanker, pay tarriffs, load the crude, insure the cargo, ship it across the ocean, make sure everything goes smoothly, hedge the cargo properly, have a certain buyer set up or confidence that you'll be able to find a buyer, pay any tariffs, and that the physical market you trade in won't go against you despite you being hedged. (is the spread between bonny light and LLS going to change en route?) then you have to make sure you're able to make a (usually) <1% profit on the whole thing. all while maintaining the personal relationships and expert knowledge it takes to do all of that. oh, and then also keep an eye on that behavior you're talking about (even though you don't just "watch a trend" in physical trading).

and I know I missed or fucked up at least a few steps/details. you just got schooled by a college junior.

corneliustone:

I just want to know this:

Do physical oil traders visit oil refineries?

Do grain traders visit Grain elevators, farmlands?

Or do physical traders spend their entire day at the desk just like paper traders?

thank you

do they visit refineries? i had never heard of it happening but i'm sure there are times when they do. not knowledgeable enough to know why, unless they are a trader there to optimize refinery inputs/outputs, etc.

see above, don't know ags.

no, they travel significantly more and have a lot of relationships to maintain. but if they aren't traveling in my experience they were at their desk.

college junior? if i was hiring....

 
corneliustone:

I just want to know this:

Do physical oil traders visit oil refineries?

Do grain traders visit Grain elevators, farmlands?

Or do physical traders spend their entire day at the desk just like paper traders?

thank you

I spend a LOT of time visiting mines and processing facilities (whom I buy product from / extend financing to). Sometimes I visit ports too. Every once in a while I get to travel to smelters for big meetings. Once or twice a year I go to industry conferences and such (LME week).

I imagine that if I eventually become a senior trader based out of London/Switzerland/etc (instead of an on the ground trader in some shit hole mining country) I will be making less site visits (unless we are signing a big financing agreement w/ a producer or something) and making more biz trips to visit corporate HQs / banks.

 

SIt at desk in front of a screen all day, the fewer humans I have to talk to the better. Click green/red all day.

What do you want to know in particular?

I have visited physical sites, though that is more of a personal interest in the engineering behind what you see. A job of a trader is to optimize or find value, you do not need a full understanding of the physical world to do that though it certainly helps that.

My favorite line is commodity traders love to become experts..."What we are having a strong La Nina, ok everyone go off and study weather models and become short-term weather experts". "What a nuke went down, ok everyone go become nuke experts, how many rods were broken cuz if its 2 vs 1, that nuke is off two more months", "what there is some regulatory law to increase demand, ok everyone pull up the contracts become legal experts", "What water levels are low relative to historics, ok everyone go learn geology of water/streamflows/how damns work", "What there is some labour dispute delaying rails for in the Northeast, ok everyone go become labour experts and figure out how long this dispute lasts". "what organic demand stopped growing, cuz small industrials going bankrupt, ok everyone go learn how GDP works, assumptions, survey how many ppl are buying shit etc..."

I could go on the amount of time spent understanding how one factor can break your S/D and then becoming an expert at it at times is funny...

 
marcellus_wallace:
SIt at desk in front of a screen all day, the fewer humans I have to talk to the better. Click green/red all day.

What do you want to know in particular?

I have visited physical sites, though that is more of a personal interest in the engineering behind what you see. A job of a trader is to optimize or find value, you do not need a full understanding of the physical world to do that though it certainly helps that.

My favorite line is commodity traders love to become experts..."What we are having a strong La Nina, ok everyone go off and study weather models and become short-term weather experts". "What a nuke went down, ok everyone go become nuke experts, how many rods were broken cuz if its 2 vs 1, that nuke is off two more months", "what there is some regulatory law to increase demand, ok everyone pull up the contracts become legal experts", "What water levels are low relative to historics, ok everyone go learn geology of water/streamflows/how damns work", "What there is some labour dispute delaying rails for in the Northeast, ok everyone go become labour experts and figure out how long this dispute lasts". "what organic demand stopped growing, cuz small industrials going bankrupt, ok everyone go learn how GDP works, assumptions, survey how many ppl are buying shit etc..."

I could go on the amount of time spent understanding how one factor can break your S/D and then becoming an expert at it at times is funny...

Marcellus, you are absolutely right, but may I ask you something? If it is not by understand the fundamental (yet as you point out, infinite) variables involved in the supply/demand pricing, how are some of the traders more profitable than others.

thank you

 

Trading commodities like anything if you read "Market Wizards" has many different styles and formats.

You have some very good momentum traders who as I said could pinpoint what is the one factor that breaks and ride that wave up/down better than anyone. You have traders who will only trust 1 weather source, weather model and refuse any other fundamental, you have traders who can source/lock-down customers better than anyone (Glencore model), You have guys who pick two ranges and go all in at one level, and all exit at another.

Whatever works for you, works for you. But yes a majority of the top traders will base most of their trades off some real fundumental background/support similar to most top bond/equity guys.

 
marcellus_wallace:
Trading commodities like anything if you read "Market Wizards" has many different styles and formats.

You have some very good momentum traders who as I said could pinpoint what is the one factor that breaks and ride that wave up/down better than anyone. You have traders who will only trust 1 weather source, weather model and refuse any other fundamental, you have traders who can source/lock-down customers better than anyone (Glencore model), You have guys who pick two ranges and go all in at one level, and all exit at another.

Whatever works for you, works for you. But yes a majority of the top traders will base most of their trades off some real fundumental background/support similar to most top bond/equity guys.

Agree completely...to each their own.

That's the beauty of trading.

I trade fin power/gas. I've worked with people who swing massive size on fundamental views of what gas or power will index, and I've worked with pure technical "market movement" traders who could care less about the index. I would say that, in a good market, neither is better than the other. In illiquid markets, fundamental traders may do a bit better, but in irrational "hype" markets, market view traders do better.

If you ask my honest opinion of what makes the best traders, though...I will say this -- Willingness to stop out when underlying assumptions are bunk. Be it a technical indicator that doesn't hold, a weather model that comes back cold when you thought it would be warm, etc. The unwilling generally add instead of subtract from position, and losses go from small to large. It's all about keeping losses small, and letting winners run. But that's just my opinion, and largely subject to financial trading. What makes a good physical trader? Likability, Market savvy, contract/regulation knowledge, etc.

 
 
Best Response

Clean Products

6:30 AM: Wake up and start getting ready for work; quickly check Bloomberg to see if corn or RBOB moved heavily in the over night. Watch the news briefly to see if there are any events that might move the markets for the day

6:50: Out the door and driving to work. Call broker to get an idea on where the market are and hear any information about cargos/delays/plant issues (I trade a lot of physical and it's good to know what's going on production end)

7:30 Sit down at my desk and start booting up my system; open Outlook, Bloomberg, Excel, TT (trade execution) and scan through the emails I received--most of it's research which gives you just a flavor of what the market might do. Call up and yahoo messenger a few brokers and other traders to get their thoughts on the market--physical trading is very collaborative and market intelligence is key; any plant maintenance or CPL outage could have an impact. By now the other traders (crude, harbor, Argo, etc) are at their desks and we start talking and taking bets on where a particular market will close. Review current positions and start formulating a tentative game plan for the day.

8:00: Talk with ops/schedulers to see if there are any issues in end markets and review balances on what I might have to cover that day--a good OPs guy will be your eyes and ears in the local markets and provide intel on where I can optimize or make profit.

8:30: CME opens and I'll start reading 5-10 broker wires while talking on the phone to find values/trade for particular pieces. This might be ethanol railcars, batches on Colonial, barges for blending, paper, or anything I might need to cover/feel like I can make a profit off of. Market is usually most active at the open and close as everyone is digesting information.

9:00: Market is a bit calmer and I might day trade/scalp to make a quick buck--nothing super fancy but just buying support and selling resistance. Might net a mere $1000 or so but it keeps the lights on.

9:30: DOE reports comes out--I try to be flat position wise before going into it since the market tends to move regardless of the findings; I don't trust the EIA for all their numbers but either way the market will trade off of it. Seems there is a big draw in inventories and ethanol paper/rbob start soaring--analyze the numbers to see if there are any anomalies.

10:30 Still on phone/yahooing other traders--in my physical world one has to have great client relationships to continue to do business; lots of shooting the shit with people but even the smallest nugget of market intell can be helpful

11:30: Lunch time--if the market is active I'll eat at desk, but today it isn't. Meet up a refiner for a quick sandwich and discuss a JV project on allowing unit trains for crude. Ask about their current cracks and pepper him with questions about GC vs NYH basis--CPL line space might become valuable.

12:30 OPs have a fire drill about a customer being short on product--hit up another trader to procure product and leave it to OPS to negotiate a freight rate, hoping that they can squeeze a penny to make the deal viable. While one might strive to make money off every trade, sometimes it's more about providing value/helping a counter party out, even if you lose a few dollars. You can't trade with yourself.

1:00 Markets are closing and Platts EOM window will happen soon, usually the most volatile and interesting times for the market

3:00 Discuss with other traders about the daily events and chat with reporters (OPIS, ARGUS, PLATTS) about commentary--typically have a position report meeting to review exposures and get a game plan for the following day. Double check with ops to see where we stand on balances/supply needs.

4:00: Finish writing trades for the day up and review contracts negotiated throughout the day. Return calls to various counter parties and schedule time with business development guys for further project. Usually by now new research is being distributed and I peruse it while comparing it to internal models. Talk with junior traders about their projects (researching news arbs or expansion) and chat with other firm traders about their market view.

5:00 Finished for the day and off to drinks with a Brazilian sugar importer

 

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