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Derivatives Quant or Algo Trading?

Hi,

I have a career path question, and I must confess I don't know much about this area, and all my knowledge is hearsay-based.

I am trying to choose what career path to go for, being a classical derivatives pricing quant in an IB
or going for algo trading in hedge funds.

My impression is:
Algo trader:

It's not as complicated mathematically, but might involve more coding and statistics.
It can pay a lot more.
The atmosphere in hedge funds is more relaxed.
Not able to move to derivatives pricing afterwards, or go back to academia.
Much more of a flat hierarchy, less career progression

Quant:

More academic, possibility of eventually returning to academia.
It's possible to become an Algo trader afterwards.
IB positions = longer hours or at least more stressful
The good times are over -> pay is unlikely to be stellar


Like I said, this is what I gathered from forums and friends, but I would appreciate as much input about the comparison as possible. Thanks!
 

Yike Lu

Finder of biased coins.
That sounds pretty accurate. Only thing I'm not sure about is exit opportunities.
 
If you think being an algo trader is going to be "more relaxed", i have two anecdotes from personal experience interviewing and chatting with guys in this profession.

One company (predominantly pairs trading, statistical correlations, matlab, etc) would hire 16 "candidates" and give them extensive hands on custom training ... for a month. At which time they'd fire 8-10 of them. At the end of the second month, they'd fire almost all of the remaining members, and retain at most two. After another week or so, they might make 1, and almost never 2, job offers. Their strategies were typically shortlived, and usually optimised themselves out of existence in the space of several weeks. So - always struggling to invent new strategies, find new correlations etc, before competition ran its course. That said, you got to wear jeans and a t-shirt to work, and all the jelly-beans you would wish for.

Second company, was a 24 hour round the world trading operation, where for the most part guys would code up strategies through the day, set them to run overnight, and the "newer" guys had to work night shifts to watch those strategies run over foreign markets, basically sitting staring at a console waiting for bugs to show up in the hacked-together-code or a market shift to suddenly unbalance everything, at which point they would frantically try to halt or unwind positions.

Neither of those lifestyles particularly appealed to me personally.
 
Last edited:
Thanks!
Yike Lu: How do you mean exactly?

daleholborow: Would you consider this be an industry standard? Do you think this depends on location as well? For example, how do you think New York, London and Hong Kong compare?
Thanks!
 
Let me pose it to you as a question: In an ever increasingly connected world, in which its possible to trade all markets, all the time, as those anecdotes suggest, what makes you think that operations in any particular major financial hub could/would/(should?) operate significantly differently to the others? Would trading operations be significantly *lazier* (for want of a better word) in London, compared to those in New York, for example, and continue to survive for long?

I personally, doubt it.
 
Hi,

I have a career path question, and I must confess I don't know much about this area, and all my knowledge is hearsay-based.

I am trying to choose what career path to go for, being a classical derivatives pricing quant in an IB
or going for algo trading in hedge funds.

My impression is:
Algo trader:

It's not as complicated mathematically, but might involve more coding and statistics.
It can pay a lot more.
The atmosphere in hedge funds is more relaxed.
Not able to move to derivatives pricing afterwards, or go back to academia.
Much more of a flat hierarchy, less career progression

I work in algo trading and I love it and also everyone in our team love it.

less career progression

mate, you will become a king with algo trading knowledges.
 
daleholeborow: I see what you mean, so does that mean there are no differences regulation wise for Hong Kong or Singapore for example? I heard lots of funds are expanding there, but don't know why. I was thinking of moving there, but not sure whether it's more difficult to get in than London.

OilCrock: Cool, always good to see people who are enthusiastic. How did you get into it, if I may ask? Do you have a Stats background? Did you come straight from university?
 
OilCrock: Cool, always good to see people who are enthusiastic. How did you get into it, if I may ask? Do you have a Stats background? Did you come straight from university?

No, not after univ, occasionally, because has some specific skills, also some math skills and good programming skills, but they hired me because liked me, not because of the skills set.
 
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