I'm going to be in a trading internship over the summer with a BB. Surprisingly, I was considering banking but somehow ended up in trading. I've been going over books on trading and it seems far more complicated than the stuff that I used to read up on banking. I'm reading a book on fixed income securities and derivatives by Moorad Chaudary and it clearly isn't a walk in the park. It's highly quantitative and I don't mind that but it's just that there are so many concepts in this book, I'm a bit concerned I might not remember them all in the future. Do traders really need to know all this stuff? If they do, isn't banking easier because it's far more methodical?
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Can i ask why you put this in ibanking forum? I mean seriously?
FI is just much more quantitative in general. Equity/Spot FX/ and commodity are not quite as quant. You may not be a good fit for FI if your having that type issue.
What are you looking for in trading. What products interest you and why? I will try to dig some answers out of you that should help you answer your own questions about what path you want to go on.
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
Most suprising is that he already has a spot with a BB...
Not really. I've seen far less qualified get SA offers. You don't need to know anything coming in - just the desire to learn it.
hes got the internship in hand, is reviewing the right material and made me laugh out loud when i read the subject line and post...that last thing has got to count for something, right? Ha ha. Dont worry indian-banker, you dont have to memorize everything. We dont expect you to know everything. Something would be preferred though, so be try to get familiar with the concepts and use your internship to ask questions about what you didnt understand and to see whats written in kick@ss action.
Trade4Size--I wouldn't put commodities in the same group as Equity/FX Spot. 100% of commodities trading at investment banks is in derivatives, and about 50% of it is in structured products. Commodity derivatives in general is less quant than some of the exotic rate derivatives products, but because so many of the commodities products are new (and thus many of the pricing models are still being developed), much of what you do on a daily basis on a commodities desk will be more quant that what you do on a daily basis on FX, Rates, Credit derivatives, etc.
To the OP: spot FX, cash bonds, cash equities, etc. are no longer major desks on the trading floor. Derivatives and structured products, in all asset classes, now make up the majority of products traded at all major investment banks (and at some banks, as much as 3/4 of products traded). As a result, "Sales & Trading" as a career field is becoming increasingly more quant by the day, and yes, is far, far more quant and complex than standard I-banking.
And to your second question--YES, traders/sales/structurers really do need to know all this stuff. How much depends on the product and on your desk's culture. In my case, as a post-MBA level sales person I was building option and swap pricing models from scratch my first few weeks on the job, always had textbooks on finance and fixed-income securities within arm's reach because I was referencing them very often, etc.
Skins- You mean all those derivatives that the banks lost all that money on because the traders didnt even understand what they were trading? hahahahaha. What are you talking about spot fx and equities no longer being "major trading desks".
As far as commodities, front month futures trading I do not consider very quant. I stay the hell away from all the quant stuff because i want to trade not do math.
Indian-Banker in general the "quant spectrum" is really goin to range based on what you want to believe. Despite what a lot of silly wso posters say not everything is sitting at their computting chugging models all day. Find something you enjoy and go from there.
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
No, I'm not referring to front-month futures. Trading desks at banks do not usually deal with exchange-traded products (traders can obviously use them to hedge, but they are not covered by sales or structuring)--everything is OTC. The most basic products traded are swaps and options. Yes, some are simple, but unlike in equities or credit, these desks are not "selling" the physical underlying.
Then there are two types of structured products: bespoke hedging solutions for corporate clients ("structured" not just in a financial sense, but in tax, regulatory, etc. ways--this is the area where S&T/IBD/LevFin, etc. all collide).
The second type of structured products would be for investors clients, and could be anything from basket options, commodity-linked notes, CCOs, etc. Yes, the business here has fallen slightly, as investors have been scared away from complex products. But you have to realize that even if investor flows dry up, commodities as an asset class will always be supported by corporates who use various derivatives for hedging.
What I meant by spot fx and equites not being "major trading desks", was that if you look at the profit breakdown of any investment bank, the bulk of revenue is no longer coming from the trading of cash equities, bonds, or spot FX, but rather from some form of derivatives. Similarly, look at the headcount on the trading floor--cash equities desks are much smaller than they used to be, and are dwarfed by desks dealing with commodity derivatives, rate derivatives, etc.
That said, many of those derivatives are not all that complex (CDSs, for example, are really a flow-trading product, but nonetheless, are still derivatives). Again, at every Ibank, derivatives & structured products make up between 1/2 and 2/3 of S&T revenue. Look at equities--banks make far more from equity derivatives than from trading cash equities, as an example.
And if you don't want to be doing math all day then stay away from Sales & Trading--the career field is changing drastically, and if you are not quantitatively-inclined, then your future career prospects may be limited. I know my desk puts a focus on hiring people with engineering ugrad degrees and quantitative masters/PhDs.
I see what your saying, i just dont think its fair to generalize and say ALL desks are very quant. Also i never implied the size of cash desks being that large to begin with. They are part of a whole, just like every other desk is part of the whole.
"And if you don't want to be doing math all day then stay away from Sales & Trading"
I intend to stay on the cash side. I have no desire to do anything in fixed income out in commodities outside of futures. My interest lays in the mechanics of trading itself. Thats means i enjoy the voodoo technical analysis and game theory.
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
No bank really changed commodities futures...that's what skins is saying. It's swaps and options - which are derivatives. That doesn't mean they are quantitative though. You can certainly become a very wealthy and successful trader doing outright swaps without even getting into vanilla options. There's really no money to be made in futures trading and it's generally done through brokers.
However skins it's not true that 100% of commodities is derivatives though. Most banks do physical power and gas, some physical metals, and the top commodities houses do some physical oil as well.
Well, I was a math major for quite a while so the quant stuff really won't bother me so much. As I stated earlier, the mathematics behind isn't that complicated at all.
skins, can you give a specific example of something you consider quant that you as a salesman and/or a trader on your desk does? Can you explain what type of math is needed in that example? I think that would greatly help college students like me understand the extent of how quant commodities s&t is. Thanks.
Define "no money to be made in futures", we might have different definitions of good money.
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
You need to refine "complicated" though...in a math sense, sure almost all trading related functions require more numbers and math than banking.
but banking i'm sure can be complicated in it's own way.
i know almost nothing about navigating the footnotes and accounting ramifications of the various financial docs.
and i'm sure bankers have no idea how to calibrate exotic skew.
Obviously traders need to be more comfortable on the quantitative side. I do not believe the whole industry is heading towards a bunch of PHDs creating models and trading. Most PHD's I know would be destroyed in any sort of trading role. The only thing that matters to a prop trader is which direction the market is going to go next. No amount of math will tell you this.
fp175--that's a good point. Let me clarify what I meant. The biggest commodities desks (i.e. J.Aron/GS, MS, Barcap, with Merrill coming in very close these days) definitely have big physical presences. But, your average ugrad/MBA coming in to do Sales/Structuring will never see that side, and neither will most of the traders.
Physical trading at an Ibank is often relegated to a secondary role, and is often not even on the main trading floor. The bulk of the bank's personnel and effort will go into the financial side, not the physical side. And all sales/structuring will be with financial derivatives, not physical commodities.
And as to the complexity of products, I'm coming from the sales/structuring side, where about 50% of my experience has been in more complex products. While there is definitely plenty of business in swaps, collars, and three-ways, there is also a ton of business (especially on the corporate side), with much more heavily structured products (heat rate options and tolling agreements, especially when linked to project finance; CCOs; commodity-linked notes; basket options, dispersion options, various types of extendibles, etc.). Remember, the majority of the business in commodities is with corporate clients, so you are not usually creating a generic trade that anyone can put on, but rather taking a generic swaption, option, extendible, etc. and then specifically customizing it to a specific client's needs.
"What I meant by spot fx and equites not being "major trading desks", was that if you look at the profit breakdown of any investment bank, the bulk of revenue is no longer coming from the trading of cash equities, bonds, or spot FX, but rather from some form of derivatives. Similarly, look at the headcount on the trading floor--cash equities desks are much smaller than they used to be, and are dwarfed by desks dealing with commodity derivatives, rate derivatives, etc..."
skins... trade4size and i both agree that you are a cocky fucker that doesnt know half the shit he is talking about.
if you look up your revenues correctly, you will notice that EQUITIES is usually ahead. not commodity derivatives, rate derivatives, or whatever your talking about. despite being smaller, equities is in no way "dwarfed." Even with the recent commodity boom, commodities is in no manner the biggest. unless your at deustche bank or a firm that has been traditionally strong in shit like rates, equities is most likely going to be ahead.
Prime example.. Morgan Stanley equities... still very much alive and very much profitable.
by the way deutsche is a sick ass trading shop
but at the same time, its good at rates, commodity derivatives, and those strategies are the bread and butter of the firm
but 4 out of 5 times, you will see bigger equities desks and revenues at other banks
Skins- At first I decided to take what you say at face value about equities being a very small part of the whole. Then i decided to see just to get an idea what the revenue was like.
Below are the Q1 2008 results for the 9 BB. As you can see with the exception of GS and DB Equities are larger. Really only DB is equities a clear laggard. And please do us all a favor and dont even say "subprime" because i do not want to hear it.
Revenue in millions for Q1 2008
Bank Equity Fixed income Citi $979 $(6,925) Morgan Stanley $8,700 $700 Goldman Sachs $2,510 $3,140 Lehman $1,410 $262 Merrill Lynch $1,883 $(3,378) JP Morgan $976 $466 Credit Suisse CHF 1,379 CHF(1,440) UBS CHF1,948 CHF(19,113) Deutsche Bank €417.00 €1,185.00
Trade4size > you Ship it
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
sorry to get in the middle of your quarrel with skins, but why not look at the results from previous years....that would be a better indicator.
No money in trading physical commodities? Or futures?
I will be sure to give John Arnold the memo....
Also managing storage and physical basis in nat gas, I would say is very quant.
dar some of these firms gave back everything they made and then some, I dont think its particularly fair to use the hyperinflated returns these firms made in the exotic products that all backfired on them. UBS, C, MER, MS for example. I just wanted to put things into perspective that equities are not as "dead" as everyone thinks.
John Arnold is the 800 lb gorilla, watch out
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
hmmm....im going into banking so im not as expert on this....but aren't the equity division figures including OTC equity deriv. and orther structured products which are the huge revenue generators skins was talking about? I thought all skins said was that cash equities is dying, which from everything i know is true.
It's clear where the experience lies on this thread. Anyone should know not to make their argument on one year of sample data. Always good to be aware of your own biases, b/c everyone else sees them.
Kingbling - you're still an idiot. DB's cock still tasty? 4 out of 5? Still making up stats, I see.
ny.. where do you work? it seems every time i say something good about a bank, as in "DB is a sick shop" you like to come on and say something like "oh your all over DB's cock". seriously, would you like to tell me so i can come up with something about how good your firm is instead?
and i dont work for DB, and i have no bias for or against that firm other than i met some good traders there
and look, im not coming up with any type of exact stats, and 4 out of 5 is probably an exaggeration. but your in the industry, dont you agree that equities desks are bigger?
The point also was that, all these high margin products have backfired and ended up causing many of the banks to give back everything they made and then some. Its clear also what division me and kingbling work in. I get tired of hearing the equities is dead misleading bullshit on wso.
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
My point is that you don't even listen, dude. He never said the products were dead. You're too quick to go on the defensive regarding your product w/o even listening to what he's saying. Clearly S&T is shifting away from equities and spot fx, and these products don't generate the margins or % of revenues that they once did.
Kingbling is a sophomore who hasn't even had a SA experience yet. From my understanding, you're about to start yours. You're a smart kid, but here's my advice: know what you don't know and be willing to be more open minded, you'll be much better off.
also.. i had an SA experience last year and i'm half way through an internship this summer
no offense but i think its interesting how you are giving advice "know what you dont know" but at the same time you made a guess about my experience (which, at this point, is little but not nonexistent) without even knowing who I am.
Fair enough, shifting away yes, but dead not quite. Just like any other business that develops new product lines. I posted those figures so people would get an idea behind how much which banks make typically. Yes those figures do include equity deriv and structured products. Probably is 40% cash, 40% equity deriv, and 20% structured products. Equity structured products are still pretty young so doubt they make up more than 20% of the equity pie.
Kingbling is the smartest sophomore on this board! I wish i knew half what he knows when I was a soph.
I put the facts on the table no more flaming.
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
kingbling you are a soph dude you really have no right to talk shit or be cocky at this point to NY who actually WORKS at a bank. feel free to ask questions but do not pretend to be an expert on shit which you are NOT with one most likely BS summer job (dispute this but i doubt you worked as a trading SA as a freshman)
to trade4size, you cannot look at 1q08 data as fixed income clearly got smoked at every bank. no equities is not disappearing but margins are deteroriating (.01 spreads), although vol will be strong as long as there is movement in the mkts. also dont go around making shit up (40%, 40%, 20%), that is clearly a random guess and inaccurate info.
DB is a good FI shop and have some good credit prop desks but they are certainly not the best all around and they have gotten smoked this yr.
oh and king
"skins... trade4size and i both agree that you are a cocky fucker that doesnt know half the shit he is talking about.
if you look up your revenues correctly, you will notice that EQUITIES is usually ahead. not commodity derivatives, rate derivatives, or whatever your talking about. despite being smaller, equities is in no way "dwarfed." Even with the recent commodity boom, commodities is in no manner the biggest. unless your at deustche bank or a firm that has been traditionally strong in shit like rates, equities is most likely going to be ahead."
this is so fucking absurd, skins is an experienced S&T professional and your are a sophomore in college, seriously man get off your high horse.
dude i never said i was an expert. from my own words "my experience, which at this point, is little but not nonexistent", i obviously realize this. im simply defending my own viewpoints and pointing out NY's inaccurate statements just like he pointed out some of mine. how is this talking shit and being cocky? just because i have not worked for a year+ in the industry doesn't mean im clueless about what is going on. and again, i never said DB is the best either. and i never stated i worked for trading SA as a fresh.. lol that would be ridiculous. but at the same time, how do you know it is BS?
Bateman those figures are ballpark estimates that I came up with based on a cross section of reports I am fairly confident this is about the industry wide breakdown.
AGAIN the point I am also trying to make is, 2005-early 2007 we saw a a ballooning of bank profits as a result of trading operations particularly in these newer derivative products. In the recent quarters a lot of banks have given back everything they made.
About equity spreads being so narrow, most equity desks are doing majority of trades as agency and NOT principal.
Just because im not in the business on a desk does not mean I dont know what im talking about here.
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
If you look at earning from 2003 and 2004 then you'd see FI brings in more revenue at almost every BB. You're attempting to rationalize the earnings from 2005-2007 as those from risky FI activities, but prior to that you can still see that FI contributes more revenue...
>>>Can i ask why you put this in ibanking forum? I mean seriously?
ANSWER: "indian-banker"
x35109, you're a dickhead.
I see what your saying but I think actually posting SOME data can help give you a RELATIVE idea.
"Oh - the ladies ever tell you that you look like a fucking optical illusion?"
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