S&T Equity Derivatives Trader.. AMA
Hey all, new-ish around here. Been hearing/seeing recruitment for trading has gotten really tough these days. Was hoping to just put this out there and answer any questions pertaining to S&T/Derivatives trading roles to serve as a resource for someone out there trying to break into the industry.
Feel free to ask me anything from recruitment to best habits, and everything in between.
i know very little about the role but interested,
1. what are the different type of equity derivative traders? as in what are the different products/markets being covered usually
2. is it very quantitatively-intense and/or fast paced? what sort of skills do you need to do well on the job
1. This can depend a lot from desk to desk and also your role on the desk. But typically, IED covers a wide range of products like index options, swaps, futures, forwards, cliquets, some exotics. Our desk has a structured equity/structured product business as well so think MLCDs, convertibles, total return swaps, single stocks etc. For most EQD desks their largest books are going to be in index options, especially if they have client flow.
2. It is definitely quantitatively intense in the sense that a lot of the products and elements behind it are a bit more complex. For example, understanding/building pricing and volatility models is going to require a relatively strong quantitative background, but it is definitely not as quantitatively demanding as outright quant or HFT positions. I often describe it as a hybrid role where there are a lot of quantitative components to it without losing focus of the greater market at hand. It's fast paced, but not all the time. It's more like several moments throughout the day that are fast and there are moments when I can definitely start to feel the pressure but it's not 100mph all day.
As far as skills go, think strong quantitatively, handling/interpreting data, good under pressure, coding, soft skills like efficiency and strong work ethic go a long way too. I'd also highly recommend you have a solid understanding of how the products and basic elements work before you step into your interviews. At the very least, you should have read Natenburg, know how BSM/pricing works, the greeks, hedging, an understanding of things like volatility, skew, kurtosis etc in the context of vol and risk. The learning curve tends to be steep at first, but with enough time and effort it all starts to click.
Many thanks for doing this! About to start FT on S&T desk in a derivatives trading similar to yours, I have two questions in mind:
1. What's your suggestion and experience on quickly getting up to speed with the team's work? Line manager has suggested I will be given a small book to trade around 6 months - 1 year in.
2. Both my desk and some other teams we frequently interact with has seen layoff at junior level in the past two years. What are the best practices to prepare for such an event (product knowledge/skillset/networking?) - Asking this as someone on visa sponsorship so need to quickly land another role in case things happen
Congrats on the new role! Welcome to the industry!
1. Your main job for the first year is to be a sponge and try to soak up as much information as possible, every day. Your first few months in S&T, particularly derivatives can be daunting because the learning curve is pretty steep, but come with a growth mindset and accept that it's an uphill battle until you get your feet wet. With the right attitude, effort and time things will fall into place in no time. Learn from your teammates and try to actively take on more responsibility when you feel you are ready for it. Having the opportunity to trade/manage a book early on is the best way to really learn and will be a great opportunity for you to get up to speed as fast as possible. Take full advantage of it, and don't be afraid to screw up. You're not expected to generate huge alpha and never take losers, especially in your first year. Once you've been managing a book for a few years, you'll realize that losing trades here and there isn't that big of an issue if you're doing everything else properly, and managing your risk. You won't get fired for losing, but you will get fired for mismarking your trades. Never let the pressure and disappointment of bad stretches compromise your decision making, in that regard.
2. Unfortunately, this is a volatile industry and the headcount/hiring at most places across the industry have been going through a difficult stretch, as you pointed out. It sounds cliche, but try to aim to be irreplaceable. This can honestly mean a lot of things, it could be having extensive knowledge in a niche product but I'd say there's a lot of other ways to provide a lot of value to your team/other teams. There's a piece of advice that I got from my director several years back that's always stuck with me-- get really good at identifying business needs early on, and fix them. Whether that's in terms of workflow, inefficiencies, processes etc. People really really like it if you can make their lives easier lol.
I obviously am not too sure of the outlook at your desk in particular, but in any event I would continue to keep networking regularly and in general aim to form relationships with those in the industry. You actually get a decent amount of opportunities to interact with more people in the industry than you would think, in the day to day. Also, especially for full time roles, if you're looking to get hired make sure you are reaching out to VPs and above. I still have very little pull when it comes to getting someone hired; I'll get asked to provide insight and feedback, but that's about the extent of it. The final say is up to the MD at the end of the day. But then again, not every networking attempt should be with the intention of trying to get hired, either. Be real, be genuine-- people value that a lot.
Hey, thanks for doing this and sorry if my questions don't make sense (just getting into the field).
1. What do you trade? Single stocks, indices, exotics? Do you think theres a difference in workflow between these desks?
2. It seems like a popular exit for eqd guys are shops like Optiver, but is it common for equity derivs guys exit to macro funds?
3. What percentage of your trades would you say is based on conviction/analysis vs managing risk/offsetting positions?
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