How are investment bank traders' bonuses calculated? Is it a percentage of profits generated for the bank? Like lets say an equities trader trades, on average, 1.5 million shares/day and makes a profit of $.05/share, making $18,900,000/year for the bank. Would the trader get a bonus of 5% of that, or $945,000? Or would it be much smaller? Are bond and derivatives trader bonuses calculated similarily? What is the average yearly compensation for an investment bank equities, bond, or derivatives trader w/ 5 years experience?
I think a salary of $300k is highly unlikely. Salary is what a company will pay you no matter what - whether you gain or lose money for the company. Can you imagine? Losing money and still take a $300k salary? That maybe the salary level of some directors or top executives.
So all those job offers I've browesed are referring to total compensation then...what's the base salary then?
out of college or w/out experience a bit older i doubt you'd find anywhere that paid a salary greater than 60k and to get that you'd have to be going to a real nice place (trading) bonuses are calculated differently everywhere, the higher your base salary the lower your bonus. i work for no base salary and 50/50 split profits.
I plan on getting my Master's in Financial Engineering, and get a job as an assistant derivatives trader for a prop trading firm in San Fran, work there for a few years while earning my MBA part-time, and then become an associate at an investment bank's derivatives trading desk. How would my pay be then? Would I be well-qualified for a derivatives trading career w/ an MFE and MBA?
Bonuses or commisions are often the main portion of most traders comp at IBs. That said it all varries from desk to desk and bank to bank - and why wouldn't it - sales traders, equity mm, derivatives mm, fi, structurers, prop all have very different rolls, capitalization and motivation. Compensation contracts reflect that and are designed to motivate in specific directions. So, it is a little hard to ballpark a salary, but from what I've seen an entry level derivatives desk position at a us ib could be in the 60-80k range depending on ed and experience (not going to pretend to project an av bonus). I might suggest that doing both an MFE and MBA would not just be costly (esp in time) but overkill. Trading managers may value pragmatism. Quant skills are important for trading, particularly in derivatives. Why not do the MFE and go for the IB derivatives desk directly (prob easier to get in off a grad recruitment route anyways)? A bit of commentary, IMHO - Trading is a risky career choice - its hard to get in, hard to make it, and once your there and can be hard to handle day to day because your career will be based on taking risk - and that's very important to factor in. If you think you will be fine handling the risks and stresses involved and are passionate about trading then pick the most efficient route to get there and go for it. I recommend going for an IB because they tend to have a real training program and high success rates at training traders. What you learn in the first couple years and doors that a first position will open are far more important than salary.
Wolverine Trading LLC in SF has a good training program; the associate programs at most of the IBs I know of require 3-5 years of work experience in the industry to get in. I'm currently studying to be an echocardiographer, so I know how to handle pressure. I plan on trading my own options account while I'm getting my BS; would that look good on my resume, esp. if I'm consistently profitable and show good risk management.
Nebulous, could you give some insights on how the training programs to teach individuals how to trade are different at an investment bank? What techniques do they use to trade in the first place?