Any derivatives traders?

Arcade Fire

Arcade Fire

Arcade Fire

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Bit of a long shot I know, but I thought I'd give it a try. I'm looking into going into derivatives trading in the next 2-3 years, perhaps working for a hedge fund, and I thought that now's probably the time to bone up.

What sort of things would it be useful to know? In terms of mathematical knowledge, general financial and economic knowledge and programming knowledge? Are any of these things more/less important than the others?
 
I'm not a trader (hence why i'm typing this reply and not shouting at my minions to do it for me :D) but I do work in that area on the IT side for one of the big US IBs.

To be blunt, if you want to be a trader in most big firms you'll have to "know somebody" and have the "right" background. Sad but usually true.

However there are many many jobs in and around that area that may suit (and can pay the big bucks).

If you are into finance / maths & programming then perhaps your suited to be a quant - checkout http://www.wilmott.com/

They have a free video on the site which is one of their training sessions which talks about the basics of option pricing (put/call parity etc). Find it here: http://www.wilmott.com/cqf.cfm

To help me in my job/career (and just for fun) i'm currently studying this:
http://www.7city.com/sii_uni3_dervivatives.php?area=exams&outline=siicer&course=derunit2&oid=103

It is at a fairly basic level but is a good intro and useful as background.

Anything else you want to know? (I'll be meeting with our head equities trader next week so I could always ask :D)
 
Thanks, that Wilmott site looks helpful.

I probably should have said that I wasn't thinking that I'd actually become a trader - I don't think I'm quite cut-throat enough for that, although I suppose it's something I could work on! I was thinking more like quant, or doing modelling for a hedge fund.

What do you mean by the "right" background?
 
In terms of what you need to know it is very varied. It is good to know as much as possible about mathematical finance, economics and a bit of corp fin and current events to show your interest and enthusiasm for the subject/career.

But when it comes to interviews it usually goes two ways either fit questions and personality and friendly type ones or fiendishly hard questions. You have a math/physics backright (I think?) so if it goes the second way they could test you hard with those kinds of questions.

It is all a bit random and you have to know someone or just be lucky. A lot of people apply and try to get it but it isn't easy.

It is worth knowing basic math fin i.e. stocastic calculus, black scholes stuff etc and also programming languages just C++ and strong excel/vba stuff is enough.
 
The two books generally considered assumed knowledge for quants are

C. Hull, Options, Futures and Other Derivatives

M. Baxter and A. Rennie, Financial Calculus: An Introduction to Derivative Pricing
 
Quant devs is probably one of the high paid jobs you could do in IT, but like others have said you need to a bit of a guru in maths & progamming.
 
Why a hedge trader? A hedge fund is run by a fund manager, traders in this field are not going to acting upon your own judgements, but those based on PM decisions who in turn rely on extensive knowledge of both research and models designed by a mathematical genius. Henge funds are generally setup by fund managers from a asset management background intent on making money creating there own fund based on years of experience. If you are thinking being a trader for a hedge fund is anything like IB, it is not, you are a grunt acting on pre considered transactions. New legislations will come into place so hedge funds will be less transparant in there approach to making money because they do not follow indice benchmarks but are gauged on absolute returns. I would if I was you looking into getting into portfolio management start within an asset management firm, study for your IMC, then maybe your CFA, then in a few years go into the niche hedge fund world mostly of which are run in the west end as opposed to the city.
 
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carvegio said:
The two books generally considered assumed knowledge for quants are

C. Hull, Options, Futures and Other Derivatives

M. Baxter and A. Rennie, Financial Calculus: An Introduction to Derivative Pricing
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Bonus - I just got the first one out of the library and the second one is published by CUP so I can get a discount on it. Cheers for the recommendation; I'd heard about these two books already but thought that there might be better ones.
 
thepharcyde said:
Why a hedge trader? A hedge fund is run by a fund manager, traders in this field are not going to acting upon your own judgements, but those based on PM decisions who in turn rely on extensive knowledge of both research and models designed by a mathematical genius. Henge funds are generally setup by fund managers from a asset management background intent on making money creating there own fund based on years of experience. If you are thinking being a trader for a hedge fund is anything like IB, it is not, you are a grunt acting on pre considered transactions. New legislations will come into place so hedge funds will be less transparant in there approach to making money because they do not follow indice benchmarks but are gauged on absolute returns. I would if I was you looking into getting into portfolio management start within an asset management firm, study for your IMC, then maybe your CFA, then in a few years go into the niche hedge fund world mostly of which are run in the west end as opposed to the city.
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I suppose that it's showing my ignorance about the way the 'system' works, but I hadn't planned on being a trader - I want to be the guy making the models! I've definitely got the right maths background (although not the knowledge in the right areas yet) but I don't have the programming experience. I've done a little C++, but no VBA at all.
 
nealw said:
The school tie network is undoubtedly evident in top City jobs.
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That's interesting, and obviously true, but kinda pointless to say really - a friend got an excellent maths degree, got a job in the city, and has worked up over the past few years.

Obviously because he "knows people", but he "knows people" because he's good.

Yes you can get to high places just by knowing people, but if that happened all the time then we'd be in trouble :p
 
Something I've always wondered about... when people refer to the old school tie network, are they referring to Eton/Winchester/Harrow, or to Oxford/Cambridge?
 
Beansprout said:
That's interesting, and obviously true, but kinda pointless to say really - a friend got an excellent maths degree, got a job in the city, and has worked up over the past few years.

Obviously because he "knows people", but he "knows people" because he's good.

Yes you can get to high places just by knowing people, but if that happened all the time then we'd be in trouble :p
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Agreed, investment banking is intensively competitive these days, banks are looking to pick the best, not just old boys as it were.
 
Trimbo said:
but I do work in that area on the IT side for one of the big US IBs.
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If you don't mind me asking, which bank do you work for?
I also work in IT for one of the big US banks!
(email in trust if you don't want to disclose it on a public forum)

AF - If you want the big money and can talk the talk then trading would be the way forward. If you want to do the models and the heavy maths side then analyst or quant would probably what you want to do.

One of the areas I would like to go is Quant Developer, I'm currently a front office developer for one of the large banks but, to be honest, it's not exactly that challenging.
I've got a degree in mathematical physics so hopefully that combined with my knowledge of IT in the financial markets will stand me in good stead (even though ideally they would want a PhD)
 
JUst a thought, but I work for a large IB in the areas of Corp Fin, Syn Fin and all sorts of capital markets. When we develop option/deriv pricing tools they are all written in Java - which of course C++ would help with if your strength is in the maths. My strength is in the tech side so C++ and Java are worlds apart..

I am also looking at the SI level 3 exam, although I have completed level 1 and am studying for level 2 now. I would say business qualifications or skills are essential in this game.

Best of luck!
 
I am a trader - cash equities. Sure, I work for PMs, and follow what they want to do. But for example, I can buying £500m's worth of stock in a day, and stocks can move 3%.. so its my judgement to know when is the right time to buy and sell. Although im not making the actual decisions, i can save millions on buying/selling at the right time. Very exciting job, very good pay..
 
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