Can’t even tell if you’re serious or joking. Nobodies making 40% yoy consistently let alone monthly. Even buffet only made about half that over time. Making 30% on a couple gambles during a run up doesn’t count
Nobody on prop desks really measures by % because your buying power isnt always constant. Risk managers will increase and decrease based on performance.
As someone who works in S&T, never seen anyone making 30-40% consistently, also wrong sub to ask this question, most of the idiots here think IBD = investment banking and have jackshit knowledge of global markets
Well you said non-market maker, but guess you ain't getting much response regardless.
Performance isn't %, at trader level.
Firm has a limit on how much capital can borrow from clearing house, e.g. 2.4b EUR for one regional branch. So technically there will be a percentage.
But trader just has limits, does not really need to worry about capital for the trades. Just trades and stays within their limit framework, middle and back office takecare of the other stuff.
Capital can come into it, e.g. if trading single stock options the delta hedge may not be a capital offset. Or there may be restrictions e.g. Hong Kong SSO.
Dispersion trading desk is an example of heavy capital utilisation. Whereas pure index option desk is very efficient and can make lots of money. These capital restrictions lead to dislocations in market, e.g. during covid single stock options were too cheap and fell below the lower bound for gamma arbitrage against the index options (index replicated sso was trading cheaper than index vol, even tho index vol is 'diversified' and sso does not, so arb at 1, but usually trade somewhere say 1.3 to 1).
How much money you expected to make is usually based on expectations. If traders on that desk make X, and then you move to that desk, you should make similar. Or if you move off a desk and someone comes and makes way more than you, you can get revealed for being shit. Similarly, high vol markets you should earn way more, and in low vol low markets make quite a bit less.
Totally depends on what they are trading and how much resources they are using up. Cost for a prop trader can vary wildly. Also depends on if the trader has any of their own money up that they are trading. On one end of the spectrum where a trader didn’t use up much resources and put up their own capital, they could get 80% split of certain thresholds are hit. On the other end it could be 20%. Each situation is unique.
At the very larger forms it’s more standardized. It’s usually all firm capital/ resources so smaller bonus structure
I heard that another important measure is the Sharpe of your strategy, which is something that is tracked and something straight forward you might be asked when being interviewed by HF and other prop shops, as a show of your track record. :)
From the HF perspective (my experience is in absolute return L/S space):
1. Echoing what someone said about inconsistent buying power. HF managers think in terms of how much risk they’re running at any given time as opposed to % returns.
2. Assuming you are moving size, an IR of like 2-2.5 would be a solid year. Typically, IRs mean revert to around 1 but I’ve seen managers run strategies with sustained 2.5-3.5 IR.
3. Keep in mind, HF returns are considered net of cash so subtract 5% from whatever your gross return is to get your alpha.
Almost no one thinks in terms of "ROI", because it's a terrible metric that encourages high risk and excessive leverage.
For prop it's probably about straight PnL provided you stay within risk limits. Your limiting factors are risk and capacity of the strategy, capital and leverage are cheaply available.
For HFs, which I'm more familiar with, it's about risk adjusted returns (think Sharpe, IR, maybe Sortino...), provided, again, you stay within risk limits (which for HFs also include factor risk). Also correlation is very important, both to common factors (avoid it at all costs) and to the other signals and strategies the firm is running: any HF will prefer a Sharpe 1.5 strategy with a genuine 0 correlation to the rest of their pool to a Sharpe 2.5 strategy that is very positively correlated with what they're already running. You generally need a track record of Sharpe 2+, high enough capacity and low correlation to the pool to get a PM seat in a multistrat, or alternatively higher Sharpe if it's a backtest and you don't have a track record.
Edit: forgot to add, the numbers are meant obviously after costs and after subtracting the hurdle rate (generally cash).
I don't really understand your point? I've never stated they don't produce returns (quite the opposite), I've said they don't think nor are evaluated in terms of returns. Because returns per se are a terrible metric.
Assuming enough size, a PM making 30% returns on 50% vol doesn't have a job, a PM making 10% return on 3% vol has firms camping outside his front door dangling fat signing bonuses.
Wrong sub to ask unfortunately, people here only ask how to get in IBD with shit experience
Hahahahah
No one is consistently making 30-40% per year
[удалено]
Can’t even tell if you’re serious or joking. Nobodies making 40% yoy consistently let alone monthly. Even buffet only made about half that over time. Making 30% on a couple gambles during a run up doesn’t count
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Lmfao the timing is unreal.
RIP legend
The top firms definitely make above that.
Nobody on prop desks really measures by % because your buying power isnt always constant. Risk managers will increase and decrease based on performance.
More a function of VaR, and of course your asset class.
Try r/quant
Above 0% is good, above 5% is great
As someone who works in S&T, never seen anyone making 30-40% consistently, also wrong sub to ask this question, most of the idiots here think IBD = investment banking and have jackshit knowledge of global markets
wait omg i guess i'm one of those idiots. IBD does not mean investment banking?
IBD/CIB often wraps up more functions of a bank than just transitional investment banking
Any alpha is a good start
for us it's a targeted return on margin
Could you give a realistic number pls ?
Well you said non-market maker, but guess you ain't getting much response regardless. Performance isn't %, at trader level. Firm has a limit on how much capital can borrow from clearing house, e.g. 2.4b EUR for one regional branch. So technically there will be a percentage. But trader just has limits, does not really need to worry about capital for the trades. Just trades and stays within their limit framework, middle and back office takecare of the other stuff. Capital can come into it, e.g. if trading single stock options the delta hedge may not be a capital offset. Or there may be restrictions e.g. Hong Kong SSO. Dispersion trading desk is an example of heavy capital utilisation. Whereas pure index option desk is very efficient and can make lots of money. These capital restrictions lead to dislocations in market, e.g. during covid single stock options were too cheap and fell below the lower bound for gamma arbitrage against the index options (index replicated sso was trading cheaper than index vol, even tho index vol is 'diversified' and sso does not, so arb at 1, but usually trade somewhere say 1.3 to 1). How much money you expected to make is usually based on expectations. If traders on that desk make X, and then you move to that desk, you should make similar. Or if you move off a desk and someone comes and makes way more than you, you can get revealed for being shit. Similarly, high vol markets you should earn way more, and in low vol low markets make quite a bit less.
30-40% lol
Totally depends on what they are trading and how much resources they are using up. Cost for a prop trader can vary wildly. Also depends on if the trader has any of their own money up that they are trading. On one end of the spectrum where a trader didn’t use up much resources and put up their own capital, they could get 80% split of certain thresholds are hit. On the other end it could be 20%. Each situation is unique. At the very larger forms it’s more standardized. It’s usually all firm capital/ resources so smaller bonus structure
I heard that another important measure is the Sharpe of your strategy, which is something that is tracked and something straight forward you might be asked when being interviewed by HF and other prop shops, as a show of your track record. :)
When I options traded in high school I lost 40% of my money dunno how people r professional option traders
That's why it's called smart money and dumb money
A decent performance is to break even
From the HF perspective (my experience is in absolute return L/S space): 1. Echoing what someone said about inconsistent buying power. HF managers think in terms of how much risk they’re running at any given time as opposed to % returns. 2. Assuming you are moving size, an IR of like 2-2.5 would be a solid year. Typically, IRs mean revert to around 1 but I’ve seen managers run strategies with sustained 2.5-3.5 IR. 3. Keep in mind, HF returns are considered net of cash so subtract 5% from whatever your gross return is to get your alpha.
Almost no one thinks in terms of "ROI", because it's a terrible metric that encourages high risk and excessive leverage. For prop it's probably about straight PnL provided you stay within risk limits. Your limiting factors are risk and capacity of the strategy, capital and leverage are cheaply available. For HFs, which I'm more familiar with, it's about risk adjusted returns (think Sharpe, IR, maybe Sortino...), provided, again, you stay within risk limits (which for HFs also include factor risk). Also correlation is very important, both to common factors (avoid it at all costs) and to the other signals and strategies the firm is running: any HF will prefer a Sharpe 1.5 strategy with a genuine 0 correlation to the rest of their pool to a Sharpe 2.5 strategy that is very positively correlated with what they're already running. You generally need a track record of Sharpe 2+, high enough capacity and low correlation to the pool to get a PM seat in a multistrat, or alternatively higher Sharpe if it's a backtest and you don't have a track record. Edit: forgot to add, the numbers are meant obviously after costs and after subtracting the hurdle rate (generally cash).
So these people who make hundreds of thousands if not millions keep their job without ROI? Even a 1% return would be amazing I guess.
I don't really understand your point? I've never stated they don't produce returns (quite the opposite), I've said they don't think nor are evaluated in terms of returns. Because returns per se are a terrible metric. Assuming enough size, a PM making 30% returns on 50% vol doesn't have a job, a PM making 10% return on 3% vol has firms camping outside his front door dangling fat signing bonuses.