Tips for S&T

Hey everyone,

I found a plethora of IBD learning websites (WSO, M&I) and material (Wall Street Prep, BIWS etc...). However, I'm more interested in S&T / AMPWM and was wondering if there were equivalent packages to prepare myself for an internship for make myself stand out ?

There are plenty of trading courses, but most seem to be for retail hometraders and I'm not sure which one are reliable, any advice ?

These forums, once upon a time, helped me quite a bit in applying for internships and grad positions and getting to know the industry. I thought I'd give back a little.

The short answer to the above question is no.

The long answer is that S&T is a hyperspecialised environment. On a money markets desk, you'll be head deep in following EONIA and its interdependence with the depo and refinancing rate, and how reserve requirements cause backloading so that EONIA sometimes spikes above the refi rate (looks like arbitrage, but isn't). On an FX options desk you'll be looking at vol surface evolutions over time, and coming to understand that vega is in fact not very useful if calculated analytically because it doesn't take into account second-order derivatives; the difference between analytical and shocked vega has blown up FX options desks in the past.

The point is that the former is of no use to the latter, and the latter is of no use to the former, even though they are absolutely fundamental basics for their own desk.

Moreover, very little of the above is knowledge available outside the desk. You're not going to find a detailed discussion of EONIA fixing patterns in a textbook or on the internet. That is kind of the whole point of an S&T internship: you get thrown on to a desk with minimal prior knowledge and have to show them that you can learn new concepts quickly (of course this is easier on cash equities than inflation swaptions, but you have to play the hand you're dealt; plus the latter get paid more). Why is this important? Because market paradigms often change a hell of a lot. Between my internship and my grad, the entire system of pricing swaps changed - from single curve no arbitrage and LIBOR discounting to multiple curves delineated by basis swaps and OIS discounting. The financial crisis made existing chapters on swaps pricing in textbooks completely useless. I don't even want to think about how much CDS desks (those that survived anyway) had to reapproach things.

Now, all that said, there are a few fundamental things that are pretty much universally important across desks.

First, understand - properly - stocks, bonds, FX, forwards, futures, and get a basic idea of what options are. These are the fundamental building blocks of the majority of derivatives. John Hull's textbook is considered the 'bible' here. Note though that some sections of it may be outdated nowadays e.g. section on swaps as I said above.

Second, stay on top of Fed and ECB decisions. Watch the presentations live if you can. Read analysis of them in FT Alphaville. Observe how the S&P, bonds, and FX move in response to their announcements. If you are keen you can do the same for the BOE and BOJ, but the former two are really the major drivers of macro trends. They have an enormous impact on pretty much every market, and hence every desk.

It's not absolutely necessary to do the above prior to your internship - I didn't - but it will make life easier for you.

Finally, remember to try and enjoy your internship. You're getting to sit on a desk with experts in their field without any real responsibility, getting paid probably more than you've ever been paid before in your life, and are under no duress to accept an offer should you get one. If you approach it in the right way, it can be a lot of fun.