Focus on Exotic Derivatives Trader

The job of an exotic trader is interesting to know in finance, and especially in market finance. But how does one become an exotic trader? What is his role? How does he work daily?

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What is the job of a trader?

A trader is a financial professional who places buy and sell orders to make a profit. These financial products can be stocks, bonds, currencies, commodities, and derivatives, with the aim of making a profit.

To profit from price fluctuations in the financial markets, traders must constantly analyze the financial markets and follow trends to make informed buying and selling decisions.

What are the differences with 'traditional' trading?

Unlike a bank trader who will provide liquidity to the market in his or her product of choice, trading often involves more complex and less liquid financial products: such as derivatives, exotic options, and exotic swaps, which can present greater risks than standard financial products...

As a trader on an exotic desk, you are responsible for trading complex financial products, such as exotic options, credit derivatives, structured products, etc. In this context, investors seek to boost their investment performance by buying products that pay large coupons. However, investors must be aware of the specific risks associated with these products, such as credit, counterparty, liquidity, and market risks.

When an exotic trader buys options from his clients, there may also be a residual risk. For example, the option purchased from the customer may have a different expiration date, a different underlying asset, or a different strike price than the option sold in the market to cover that position. Therefore, the exotic trader must constantly monitor the risks associated with his positions, including market, credit, and operational risks.

What are the salaries offered for this type of job?

The average salary for an exotic trader in London is around €172,000K, with a potential bonus of up to 500% of salary for a manager or trader with less than 5 years’ experience, depending on their performance.

For an Assistant Trader in exotic derivatives, salaries range from €48,000 to €52,000/year.

These figures are only an estimate based on data provided by employees and Glassdoor users, and actual salaries may vary depending on many factors such as positions, levels of experience, and the type of job.

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How does the recruitment process work? 

The recruitment process consists of four steps. First, candidates must apply online via the bank's dedicated website. The CV must be designed to catch the recruiter's eye, to make him/her want to spend a few more seconds on it and that these few seconds make him/her want to meet us. Therefore, it is not uncommon to spend dozens of hours on a CV and a cover letter.

Then, their application is analyzed by the recruitment department, which contacts the candidates within four weeks if their application is shortlisted. Shortlisted candidates for a pre-selection interview. This interview requires a lot of preparation and time.

Finally, you must be aware of the number of hours required for this job (12 hours on average per day).

A trader's day is structured as follows:

·      7:00 am: Review of the previous day and collection of the day's information

·      9:00 am: Taking positions at the opening of the markets

·      5:00 pm: Analysis of gains and losses after the markets close.

What skills do I need to become a trader?

Exotic trading is often considered to be the most technical trading. Indeed, the exotic trader has much more to manage in terms of risk (dividends, interest rate risk, repo for stocks, volatility, correlation etc) than any other desk. In addition, the job of an exotic trader requires a high level of concentration, quick decision-making skills and a high ability to handle stress and pressure.

Exotic traders must be able to understand the risks associated with each financial product and be willing to proactively manage risk to protect their business and their clients. They must also be able to follow the rules and regulations imposed by the bank to ensure compliance and avoid financial or legal penalties.

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