adehbone Wrote: ------------------------------------------------------- > One OP is not working for GS > TMT/Evercore/Moelis/Greenhill. So he is not even > getting top of the street pay. Next if you > seriously think ANY analyst leaves a wall-street 2 > year stint with 200k saved up you have no idea the > costs of living in a major city and how M&A guys > spend $$$. The hours and abuse they take, they > need to spend $$$ when available to relax and > enjoy life. Just consider NYC rent, suits, food, > dry cleaning, nights out etc… > > Exactly Ken Griffin was a total trade junkie, > traded in school in his dorm room. Between > classes, he lives, eats and breaths the markets. > He would never tell a young trader to go do M&A > for 5 years and waste valuable time learning to > save up and trade later one day. > > Lastly yes you do need some serious capital, to > make a good return and take well calculated risks. 200k is serious capital, IMO. I have friends here in Chicago who did M&A and lived with their parents. They basically banked 2 years worth of paychecks in their entirety. I know you’re trying to play Devil’s Advocate with me but if you want it, you can do it, and fairly easily.
I am playing devil’s advocate. But I am sorry the oppturunity cost is much higher than you are pointing out. Quite easily in some eyes, most people would say that is borderline pathetic to be living on your parents dime when your working those hours and banking that kind of cash. The one night a week you get to even spend with a gal, you going to take her home to the parents? Most people working those hours and getting that high of pay are quite the opposite and want to be independent and enjoy life a bit more. Likewise instead of mooching off your family you actually start to give back and try to help out or buy them nicer and better gifts. Since your family is the reason you are the place you are and able to bank such a high salary.
adehbone Wrote: ------------------------------------------------------- > I am playing devil’s advocate. > > But I am sorry the oppturunity cost is much higher > than you are pointing out. Quite easily in some > eyes, most people would say that is borderline > pathetic to be living on your parents dime when > your working those hours and banking that kind of > cash. The one night a week you get to even spend > with a gal, you going to take her home to the > parents? > > Most people working those hours and getting that > high of pay are quite the opposite and want to be > independent and enjoy life a bit more. Likewise > instead of mooching off your family you actually > start to give back and try to help out or buy them > nicer and better gifts. Since your family is the > reason you are the place you are and able to bank > such a high salary. You’re arguing ethics now. If parents don’t mind their son/daughter living with them while working full-time, why should you?
My whole point is you are not understanding the true opportunity cost of the decision, your making it seem like someone like the OP can have their cake and eat it too. That is not possible or easy to do. Most analysts have maybe 80-100k saved up, saving 200k even when your making 150k before taxes in 3 years is not exactly easy or come with a ton of sacrifices. Sacrifices most people working 80-100 hour weeks would choose not to take. Understand your friends are not the norm, heck how long of a taxi ride did they have home every night at 1am, that is valuable time and leisure lost. Same with why you give 50% of your P&L to a firm willing to bank roll you. There is reason for that 50% opportunity cost. Things that will make it easier and make you a better trader. Yet you magically think if you sit at home and do it yourself you will perform the same and reap 100% of it. Even if you go do M&A for 3 years those skills you gain would only ever really help you trade merger arb, stat arb or long/short equity which most former bankers do. If you wanted to trade global macro, commodities, fx or options those skills would have little value. Again this is a plus if you want to trade merger arb but a con if you want to trade bonds.
adehbone Wrote: ------------------------------------------------------- > Even if you go do M&A for 3 years those skills you > gain would only ever really help you trade merger > arb, stat arb or long/short equity which most > former bankers do. If you wanted to trade global > macro, commodities, fx or options those skills > would have little value. Again this is a plus if > you want to trade merger arb but a con if you want > to trade bonds. Certainly but if someone is motivated enough, you can teach yourself how to trade, especially in products that you’re interested in. Trading is an entrepreneurial field, as other many aspects of business. You don’t need to sit at a desk and learn from someone else. Usually the best way to learn is to do it yourself, risking small sums of money at first. You pick up things and get very good over time.
So you are saying that you can better learn trading from reading books than from working in a pro trading environment ?
Exit opportunities for trading are slim to none. If you are among the select few that can make a very good living out of it, then the sky is the limit. For the majority that don’t, there are very few transferrable skills.
Viceroy Wrote: ------------------------------------------------------- > So you are saying that you can better learn > trading from reading books than from working in a > pro trading environment ? I think learning how to trade is about the amount of effort you put into it. The best way to learn, IMO, is to open up a small account of your own money and learn the hard way.
As a follow-up, yes if you can get a trading job at Citadel or some other top quality hedge fund, jump at it. But Trillium isn’t that, not even close to that. At most prop shops, you’re most likely going to be sitting to next to some guy who thinks he’s a stud because he can scalp futures and make $500 a day.
ManMythLegend Wrote: ------------------------------------------------------- > As a follow-up, yes if you can get a trading job > at Citadel or some other top quality hedge fund, > jump at it. But Trillium isn’t that, not even > close to that. At most prop shops, you’re most > likely going to be sitting to next to some guy who > thinks he’s a stud because he can scalp futures > and make $500 a day. You really have no idea what a prop firm does. Do you even work on a trading desk of any sorts? Do you know anything about Citadel’s culture or how it is setup and works. Or you just like to post random advice to people? While Trillium is more short-term than some other places, it is not a scalping shop. FNYS/Jane Street/Jump/Trillium are legit trading shops. A hedge fund or Citadel will take a way bigger % of book than a prop firm would, so this post totally goes against all your other posts. Tons of people would never want to work for Citadel, same as lots of people would never want to work for GS. In trading name brand does not matter as much. It just depends what fits for what people. Trillium may not fit for OP, but another firm may. You cannot compare a hedge fund and prop trading firm. They are different in their strategies, risk/reward, compensation, culture and overall structure. Again these are all thing the OP needs to weigh to see what he/she wants and if it fits for them. But to keep mentioning that working at any of these firms is a crappy job is an idiotic view and makes little sense maybe go talk to a half decent trader at one of these shops and you will see how good they got it.
adehbone, can you elaborate a bit more on the differences between hedge funds and prop trading? I know that a lot of global macro hedge funds are run by people with a prop trading background, and I can see why that might be the case. But it sounds like there are other differences, and I’m curious as to how you see them. I can see that event driven hedge funds and long-short equity might be a different skill set than pure trading, because it involves more valuation stuff. Anyway, I’m not challenging your logic, I’m just curious about what you’re thinking and how you see it.
adehbone Wrote: ------------------------------------------------------- > ManMythLegend Wrote: > -------------------------------------------------- > ----- > > As a follow-up, yes if you can get a trading > job > > at Citadel or some other top quality hedge > fund, > > jump at it. But Trillium isn’t that, not even > > close to that. At most prop shops, you’re most > > likely going to be sitting to next to some guy > who > > thinks he’s a stud because he can scalp futures > > and make $500 a day. > > You really have no idea what a prop firm does. Do > you even work on a trading desk of any sorts? Do > you know anything about Citadel’s culture or how > it is setup and works. Or you just like to post > random advice to people? While Trillium is more > short-term than some other places, it is not a > scalping shop. FNYS/Jane Street/Jump/Trillium are > legit trading shops. As someone who worked at Spot Trading, you should probably keep your mouth shut. I think I just a little bit more than you on this subject and so far your advice has been down right pathetic. Hedge funds will take a bigger % of your pay, they will also pay you a damn good salary, which most prop firms will NOT. You will also be on a team managing a VERY, VERY large capital allocation which dwarfs the 500k you would get at Trillium. This can result in 6 to 7 figure bonuses. Yes you have to work hard at a hedge fund and the culture might be a bit more stuffy than you would find at a prop firm. You want to know why? Because MOST prop firms aren’t paying you salaries or benefits. So they could care less what you’re wearing to work, what hours you’re pulling, or whether you take Friday off each week because you want to go hit the tee. If you want to learn about the markets, both from an analytical and trading perspective, nothing beats working at a hedge fund. I get the feeling that adehbone worked at a scalping shop and is trying to defend the honor of his profession.
Quite the exact opposite always worked at banks and large firms. Which care about what you wear and when you poo. But know friends who went to prop places and there sure is some pluses I would say. Not sure why it took 8 posts for you to actually post something relevant. If you worked at one of these places why don’t explain to the OP your experience, what you disliked or liked. Versus all your posts just dogging it right out. There must have been something you like’d if you took a job to begin there no?
bchad, as already mentioned it has to do with the amount of capital allocated. A hedge fund has a much larger capital base and clients. Therefore you require more of a portfolio approach and strategy. Be it long/short, event driven, merger arb or so on. When your dealing with 500mm to 20 billion you really need to find an efficient overall way to deploy all that capital. This is why you have economists and analysts looking at long-term and short-term strategies. While at a prop firm, you have silos of people running let’s say a 500k size book. They are simply looking for an edge be it HFT, some sharpe ratio, some patterns and so on. They are looking to deploy that capital over and over using that same edge. This also allows more autonomy and cowboyness. A hedge fund will always be hierarchial, and the main strategy and main guy who gets paid is the dude(s) at the top, everyone else needs to apply and use that strategy. While a prop firm they don’t care what your game is as long as you have an edge, they may let you trade anything you want options/commodities/equities/etc anything that you think you had an edge and can make $$$. Let’s say you see APPL options real cheap and you think you risk/reward is worth it before earnings come out. You can go out and buy those all up like mad. Most funds will never let you do stupid/cowboy things like that. Lastly the prop trading your talking about is more along prop trading at a bank. Prop trading guys don’t really end up at hedge funds, unless they open their own. Prop trading a bank is a large portfolio approach as well usually similar to hedge funds and long-term focused.
Good points. I had always thought of prop trading in a banking context, which is a little closer to a HF approach to trading. It’s only recently that other kinds of prop trading have even been on my radar as organizations in the investment space; I’ve often dismissed them as chop shops that are designed to get you to pay commissions to a BD by offering you the ability to apply unusually high leverage. Obviously, if you have talent, that’s great for you, but if you can’t manage your own risk, it won’t be long until you’ve lost all your capital. Now, maybe that’s an unfair characterization - I’m happy to admit that my view on that is not particularly informed and I’m willing to change it - but that’s the way it comes across to me in the few contexts where I’ve seen it.
bchadwick Wrote: ------------------------------------------------------- > Good points. I had always thought of prop trading > in a banking context, which is a little closer to > a HF approach to trading. > > It’s only recently that other kinds of prop > trading have even been on my radar as > organizations in the investment space; I’ve often > dismissed them as chop shops that are designed to > get you to pay commissions to a BD by offering you > the ability to apply unusually high leverage. > Obviously, if you have talent, that’s great for > you, but if you can’t manage your own risk, it > won’t be long until you’ve lost all your capital. > > > Now, maybe that’s an unfair characterization - I’m > happy to admit that my view on that is not > particularly informed and I’m willing to change it > - but that’s the way it comes across to me in the > few contexts where I’ve seen it. Bchad, most are chop shops. There are only a handful of prop firms that are legitimate and I only consider the shops that pay salaries legitimate. Spot, Peak6, CTC, Jump, Wolverine, Jane Street, Infinium, Ronin, DRW, Group1… As far as my experience at Spot, I enjoyed my time there. Learned about vol arb on the equity options side, made a decent chunk of change… the problem was when the firm decided to let a TON of people go. Then what do you do? Most of the other prop shops won’t touch you because they want to hire directly out of college and train you themselves. Your skills don’t transfer well to corporate finance so that’s out. You basically have one option and that’s to go get your MBA so all that money you just made is going to get washed away. Not to mention the COUNTLESS people who enter the prop world and don’t last a year. These people are really SCREWED. And it happens to more, rather than less.
Yeah, that’s a big point, what are the exit opportunities to trading? Yes, as adehbone says you can make an n-figure salary as a trader, but that’s only the best, there are plenty that wash out within the first year. NFL quarterbacks make a lot of money, so should we all become NFL quarterbacks? I think the M&A position is better. Since you don’t know what you want to do, a wider array of exit opportunities will really help you out.
Good stuff, I’m learning a lot about parts of the industry I don’t know that well. Thanks!
ManMythLegend Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > Good points. I had always thought of prop > trading > > in a banking context, which is a little closer > to > > a HF approach to trading. > > > > It’s only recently that other kinds of prop > > trading have even been on my radar as > > organizations in the investment space; I’ve > often > > dismissed them as chop shops that are designed > to > > get you to pay commissions to a BD by offering > you > > the ability to apply unusually high leverage. > > Obviously, if you have talent, that’s great for > > you, but if you can’t manage your own risk, it > > won’t be long until you’ve lost all your > capital. > > > > > > Now, maybe that’s an unfair characterization - > I’m > > happy to admit that my view on that is not > > particularly informed and I’m willing to change > it > > - but that’s the way it comes across to me in > the > > few contexts where I’ve seen it. > > Bchad, most are chop shops. There are only a > handful of prop firms that are legitimate and I > only consider the shops that pay salaries > legitimate. Spot, Peak6, CTC, Jump, Wolverine, > Jane Street, Infinium, Ronin, DRW, Group1… > > As far as my experience at Spot, I enjoyed my time > there. Learned about vol arb on the equity > options side, made a decent chunk of change… the > problem was when the firm decided to let a TON of > people go. Then what do you do? Most of the > other prop shops won’t touch you because they want > to hire directly out of college and train you > themselves. Your skills don’t transfer well to > corporate finance so that’s out. You basically > have one option and that’s to go get your MBA so > all that money you just made is going to get > washed away. > > Not to mention the COUNTLESS people who enter the > prop world and don’t last a year. These people > are really SCREWED. And it happens to more, > rather than less. This is great advice. I have a friend and colleague who’s now doing his MBA; smart guy (passed all 3 levels of the CFA on first attempt), amazing trader (highly profitable for years and even ran a large 8/9 figure account at one point), perfect disposition, great personality - everything you could want in an employee - but still couldn’t land a call back for an inst. trader position. The exit options for prop trading really is scary; the stigma attached to it supersedes the ‘greatness’ some traders have. It really boggles my mind. Now having said all that, having traded for years and learned the strategies you mentioned here, really taught me to think outside the box. And by creating that learning spark ingrained some very important lessons I apply outside of work to all facets of life. For example, trading instilled resiliency in me that I never had before. So it’s up to you to figure out if these internal benefits compensate for the external (real) risks.
spreads Wrote: ------------------------------------------------------- > ManMythLegend Wrote: > -------------------------------------------------- > ----- > > bchadwick Wrote: > > > -------------------------------------------------- > > > ----- > > > Good points. I had always thought of prop > > trading > > > in a banking context, which is a little > closer > > to > > > a HF approach to trading. > > > > > > It’s only recently that other kinds of prop > > > trading have even been on my radar as > > > organizations in the investment space; I’ve > > often > > > dismissed them as chop shops that are > designed > > to > > > get you to pay commissions to a BD by > offering > > you > > > the ability to apply unusually high leverage. > > > > Obviously, if you have talent, that’s great > for > > > you, but if you can’t manage your own risk, > it > > > won’t be long until you’ve lost all your > > capital. > > > > > > > > > Now, maybe that’s an unfair characterization > - > > I’m > > > happy to admit that my view on that is not > > > particularly informed and I’m willing to > change > > it > > > - but that’s the way it comes across to me in > > the > > > few contexts where I’ve seen it. > > > > Bchad, most are chop shops. There are only a > > handful of prop firms that are legitimate and I > > only consider the shops that pay salaries > > legitimate. Spot, Peak6, CTC, Jump, Wolverine, > > Jane Street, Infinium, Ronin, DRW, Group1… > > > > As far as my experience at Spot, I enjoyed my > time > > there. Learned about vol arb on the equity > > options side, made a decent chunk of change… > the > > problem was when the firm decided to let a TON > of > > people go. Then what do you do? Most of the > > other prop shops won’t touch you because they > want > > to hire directly out of college and train you > > themselves. Your skills don’t transfer well to > > corporate finance so that’s out. You basically > > have one option and that’s to go get your MBA > so > > all that money you just made is going to get > > washed away. > > > > Not to mention the COUNTLESS people who enter > the > > prop world and don’t last a year. These people > > are really SCREWED. And it happens to more, > > rather than less. > > This is great advice. I have a friend and > colleague who’s now doing his MBA; smart guy > (passed all 3 levels of the CFA on first attempt), > amazing trader (highly profitable for years and > even ran a large 8/9 figure account at one point), > perfect disposition, great personality - > everything you could want in an employee - but > still couldn’t land a call back for an inst. > trader position. I know 4 people in the same position. They even have close to 6-9 years of proven trackrecord, yet can’t get anything ouside of a prop trading desk.