Sales & Trading

How a trading floor works, desk by desk: rates, credit, FX, equities and options, and the markets questions they ask.

1
What is sales and tradingUpdated
The sales and trading division from zero: what a desk does for clients, how it makes money from the bid-ask spread and the inventory flow leaves behind, principal against agency, why banks stopped making proprietary bets, the desks on the floor and what each trades, the seats people sit in, and how to answer why S&T, sales or trading, and whether you suit a desk.
16 min readAI AssistantPreview
2
Who trades with the deskUpdated
The clients behind every trade: asset managers and mutual funds, ETFs and the growth of passive investing, pensions and insurers, hedge funds and the strategies they run, corporates and official institutions. What each one wants from the bank, and how to read a hedge fund's gross and net exposure, beta and alpha.
14 min readAI AssistantPreview
3
Life on the trading floorUpdated
What a day on a desk looks like hour by hour, what a summer analyst does and how one stands out, how electronic trading and the post-crisis rules (the Volcker rule, Basel III capital and liquidity, central clearing) changed the business, how a bank's balance sheet differs from a company's, the rules on information and ethics, handling a furious client, and keeping up with markets.
14 min readAI AssistantPreview
4
The 3 questions that start all interviews, Part 1: Walk me through your resume
The first question in almost every interview, and the one most people prepare least. It is not a recital of your bullets. It is a two-minute argument that ends facing forward, and every stop on it has to earn its place.
8 min readPreview
5
STAR is missing a step
Every prep resource teaches STAR, and the gap it leaves is never where you would expect. Students tell a complete, well-organized story that contains no evidence they could do the job. The I in STARI is not a line you say. It is the breadcrumbs you plant so the interviewer reaches the conclusion themselves.
9 min readPreview
6
Do you have any questions for me?Updated
The last question of every interview is yours, and most candidates waste it. What to ask, what never to ask, how to turn it into a real conversation, and how to tailor your questions to an analyst, a VP, or an MD.
9 min readPreview
7
Making a market and trading mathUpdated
How to make a two-way market on a number you are unsure of, why the width should match your uncertainty, how to skew your price after someone trades with you, and the fast math a desk expects without a calculator: basis points, percent against percentage points, the rule of 72, present and future value, and a bond's approximate yield to maturity.
11 min readAI AssistantPreview
8
Brainteasers and market sizing
Brainteasers are a small slice of IB interviews, usually filler. The one that actually shows up is market sizing, and it's graded on your structure and stated assumptions, not the exact number.
7 min readAI AssistantPreview
9
The Fed and the data that moves marketsUpdated
What the Federal Reserve is trying to do and how it actually moves rates, the economic releases a trading floor lives by, how the market prices the Fed and inflation, why the Fed watches long yields, what happens at zero and below, and how the other big central banks fit in.
17 min readAI AssistantPreview
10
How markets move togetherUpdated
How to answer 'what is going on in markets' like someone who sits on a desk: why stocks and bonds sometimes hedge each other and sometimes fall together, the risk-off playbook after a shock, what drives gold and oil, how to talk about credit, currencies and stock valuations without stale numbers, why a stock can fall on a beat, and how to invest for steady income.
15 min readAI AssistantPreview
11
Talking about markets: deals, stocks and ratesUpdated
Tell me about a deal you have followed. Pitch me a stock. Where are rates going. How to keep two deals, one stock and one view ready in twenty minutes a day, a structure for every market question, and what to say when the follow-up goes past what you know.
12 min readPreview
12
Pitching a stock, a short and a tradeUpdated
The three pitches a trading interview asks for, each in our PITCH framework (Position, Insight, Target, Catalyst, Hazards): a long stock pitch, a short pitch with the borrow, the squeeze and the choice between shorting and buying a put, and a macro trade with the view against what is priced, the instrument, the size and the stop.
15 min readAI AssistantPreview
13
Derivatives, forwards and futuresUpdated
What a derivative is and why clients use one, when an option beats a forward, how a forward differs from a future (where it trades, daily margin, the clearing house and counterparty risk), how a forward is priced from the cost of carry, and what basis, contango, backwardation and roll yield mean.
13 min readAI AssistantPreview
14
Bonds, yields and the FedUpdated
Why bond prices fall when rates rise, the difference between coupon, current yield and yield to maturity, what duration measures, and how the Federal Reserve actually moves interest rates, including how QE differs from a rate cut.
9 min readAI AssistantPreview
15
Treasuries and money marketsUpdated
Bonds from zero: why price and yield move opposite, coupon against current yield against yield to maturity, the kinds of fixed income and the risks of owning a bond, how the Treasury market is organized and quoted in 32nds, the money market instruments and repo.
17 min readAI AssistantPreview
16
The yield curve and interest rates
A bond's yield is the return you earn holding it to maturity, and plotting yields against maturity gives the yield curve. Here is how it slopes, what inverts it, and why every deal reads it.
5 min readAI AssistantPreview
17
Duration, DV01 and curve tradesUpdated
How a rates desk measures risk: Macaulay and modified duration, DV01 in dollars per basis point, convexity, and hedging a bond DV01-neutral. Then the yield curve's shapes and how a desk trades them, with a steepener sized and run through four scenarios.
14 min readAI AssistantPreview
18
Swaps, SOFR and rates futuresUpdated
How an interest rate swap works and who uses one, swap spreads and basis swaps, why LIBOR ended and how SOFR works, floating rate notes and when fixed or floating suits a borrower, Treasury futures with the conversion factor and cheapest to deliver, and reading the market's rate path off SOFR futures.
15 min readAI AssistantPreview
19
Credit spreads, ratings and new issuesUpdated
What a credit spread pays you for and what moves it, the spread measures a credit desk quotes, how ratings work and why the investment-grade line matters so much, how a new corporate bond is priced and sold, who buys it, and how a credit analyst reads a company.
16 min readAI AssistantPreview
20
Bond features, covenants and munisUpdated
Callable, puttable, perpetual and Eurobonds and who each feature helps, yield to worst, maintenance and incurrence covenants and covenant-lite loans, municipal bonds and the tax-equivalent yield, and convertible bonds and how a desk trades the option inside them.
14 min readAI AssistantPreview
21
Credit default swaps and hedging creditUpdated
How a credit default swap works, its premium and protection legs, credit events and auction settlement, why clients buy protection, how CDS compares with the bond (the basis), the credit indices, and how a desk hedges a corporate bond's rate risk and credit risk separately.
11 min readAI AssistantPreview
22
Mortgage bonds and CLOsUpdated
How securitization pools loans and slices the risk into tranches, how agency mortgage-backed securities work and why prepayment gives them negative convexity, CMOs, the TBA market and OAS, how a CLO is built from leveraged loans, the coverage tests that protect its senior notes, who buys each tranche, and what 2008 actually taught.
15 min readAI AssistantPreview
23
How the FX market worksUpdated
How an FX quote reads, what a pip is worth, how to build a cross rate, what spot, forwards and swaps are, what moves currencies, how the carry trade works and why it unwinds, what a stronger dollar does to a US multinational, and why corporate clients hedge.
15 min readAI AssistantPreview
24
FX forwards and optionsUpdated
How an FX forward is priced from interest rate parity, with a worked example, how forward points are quoted, outright forwards against FX swaps, covered against uncovered parity, how FX options work when a call on one currency is a put on the other, how a desk delta hedges an option it sold, and what a risk reversal tells you.
14 min readAI AssistantPreview
25
How stocks tradeUpdated
How a stock order actually gets filled: the order book, market and limit orders, exchanges, dark pools and wholesalers, how a client gets exposure or goes short without trading the shares, and how a desk measures a portfolio's return and risk with Sharpe, beta, correlation and VaR.
16 min readAI AssistantPreview
26
Options payoffs and strategiesUpdated
What an option is and what its premium pays for, intrinsic and time value, moneyness, the four basic positions with payoff tables, put-call parity and how to use it to spot a mispriced option, and the main strategies (spreads, straddles, strangles, butterflies and collars) with the view behind each.
16 min readAI AssistantPreview
27
The Greeks and delta hedgingUpdated
What delta, gamma, theta, vega and rho measure, their signs for long and short calls and puts, where each one peaks by strike and time to expiry, how a market maker delta-hedges an option it has sold, and why rebalancing that hedge turns into a bet on realized against implied volatility.
12 min readAI AssistantPreview
28
Volatility, Black-Scholes and skewUpdated
The Black-Scholes inputs and what each does to an option's price, where the model's assumptions break, implied against realized volatility, what happens to options around earnings, skew, term structure and the volatility surface, variance and vol swaps, and what the VIX measures and how volatility is traded.
14 min readAI AssistantPreview

Sales & Trading

What is sales and tradingUpdated

Who trades with the deskUpdated

Life on the trading floorUpdated

The 3 questions that start all interviews, Part 1: Walk me through your resume

STAR is missing a step

Do you have any questions for me?Updated

Making a market and trading mathUpdated

Brainteasers and market sizing

The Fed and the data that moves marketsUpdated

How markets move togetherUpdated

Talking about markets: deals, stocks and ratesUpdated

Pitching a stock, a short and a tradeUpdated

Derivatives, forwards and futuresUpdated

Bonds, yields and the FedUpdated

Treasuries and money marketsUpdated

The yield curve and interest rates

Duration, DV01 and curve tradesUpdated

Swaps, SOFR and rates futuresUpdated

Credit spreads, ratings and new issuesUpdated

Bond features, covenants and munisUpdated

Credit default swaps and hedging creditUpdated

Mortgage bonds and CLOsUpdated

How the FX market worksUpdated

FX forwards and optionsUpdated

How stocks tradeUpdated

Options payoffs and strategiesUpdated

The Greeks and delta hedgingUpdated

Volatility, Black-Scholes and skewUpdated