Torchora
Back to Home

Key Responsibilities and Required Skills for Derivatives Trader

💰 $ - $

TradingFinanceDerivativesQuantRisk Management

🎯 Role Definition

As a Derivatives Trader you will originate, price, hedge and manage derivative positions across exchange-traded and OTC markets (options, futures, forwards, swaps, and structured products). You will be accountable for P&L, risk limits and execution quality while collaborating with quant research, sales, risk and technology teams to design, implement, and automate trading strategies. The role requires deep market knowledge, strong pricing and risk modeling skills, and fluent use of trading systems and programming tools to deliver continuous alpha and robust risk controls.

📈 Career Progression

Typical Career Path

Entry Point From:

  • Trading Analyst / Junior Trader (options / futures / FX)
  • Quantitative Analyst / Researcher (pricing models, algorithmic strategy)
  • Sales Trader / Structurer (derivatives desk support)

Advancement To:

  • Senior Derivatives Trader / Desk Head
  • Portfolio Manager / Principal Trader
  • Head of Trading / Global Head of Derivatives

Lateral Moves:

  • Quant Research / Quant Developer
  • Structuring / Product Development
  • Risk Management / Market Risk Lead

Core Responsibilities

Primary Functions

  • Manage daily P&L and trade lifecycle for a portfolio of derivative instruments (options, futures, forwards, swaps, convertible bonds and structured products) and take direct ownership of execution decisions to meet risk/return targets.
  • Price complex OTC and listed derivatives using industry-standard models (Black‑Scholes, SABR, Heston, local volatility, Monte Carlo simulation) and produce independent valuations for trading and risk reporting.
  • Build and maintain intra-day and end-of-day hedging strategies to control Greeks (delta, gamma, vega, theta, rho) and minimize realized and potential losses under stressed market scenarios.
  • Monitor market microstructure and liquidity across venues, dynamically adjust quoted spreads and sizes in market making activities, and manage inventory to optimize balance between flow capture and risk.
  • Execute high-quality trades across multiple execution venues (exchanges, ECNs, broker platforms, voice brokers) ensuring best execution and minimal slippage while meeting compliance and regulatory obligations.
  • Collaborate with quantitative researchers to design, backtest and implement algorithmic trading strategies, including signal generation, execution algorithms, and automated hedging routines.
  • Maintain strict risk controls: enforce desk-level and firm-wide limits, monitor intraday VaR, stress tests and limit breaches, and escalate issues promptly to risk and senior management.
  • Conduct rigorous scenario analysis and stress testing (historical and hypothetical) to identify tail risks and recommend adjustments to trading strategies and capital allocation.
  • Negotiate and manage OTC counterparty relationships, execute documentation (CSA, ISDA), and manage credit exposures, collateral postings and margin calls to minimize counterparty risk.
  • Prepare and deliver daily and ad-hoc P&L attribution, risk reports and trade commentary for desk heads, risk committee and senior stakeholders, including analysis of drivers and explanatory narratives.
  • Design and implement pricing model enhancements, perform model validation, and liaise with model risk teams to ensure model governance and regulatory compliance.
  • Optimize and automate trading workflows by working with developers and quant engineers to integrate strategies into production trading systems, OMS/EMS, and risk engines (Murex, Calypso, Bloomberg AIM, in-house systems).
  • Use programming languages (Python, C++, Java, R, MATLAB) and data tools (SQL, Pandas) to prototype trading ideas, automate pipelines, and build interactive analytics for real-time decision-making.
  • Manage order book and delta-hedge operations across multiple asset classes to ensure coherent cross-product hedging (e.g., options vs. futures, swaps vs. forwards).
  • Participate actively in pre-trade and post-trade compliance checks, trade surveillance, trade reconstruction and remediation for regulatory audits (MiFID II, Dodd‑Frank, EMIR).
  • Liaise with Sales and Structuring teams to customize solutions for clients, provide indicative pricing, and support structured product origination with market color and risk assessments.
  • Continuously monitor funding and margin requirements (initial margin, variation margin), optimize collateral usage and funding strategies to reduce financing costs and maximize capital efficiency.
  • Track implied and realized volatility surfaces, skew dynamics and correlation matrices, and translate those signals into actionable trading opportunities, relative value trades, and volatility arbitrage.
  • Lead or contribute to trade idea generation sessions and cross-functional strategy reviews; mentor junior traders and trading analysts on execution tactics, risk management and market intuition.
  • Maintain comprehensive trade documentation, ensure accurate trade capture, and work with operations to resolve breaks, reconciliations and post-trade settlement issues.
  • Stay current with macroeconomic drivers, monetary policy, credit events and equity/commodity fundamentals that impact derivative pricing and market liquidity; produce market commentary and trade rationale.
  • Assess transaction costs and performance metrics across strategies and execution algorithms and implement process improvements to reduce slippage, latency and operational risk.
  • Implement and monitor electronic market-making infrastructure, including quoting engines and risk filters, to ensure uptime, scalability and adherence to regulatory quoting obligations.
  • Coordinate with technology and infrastructure teams on low-latency connectivity, FIX integration, co-location and disaster recovery plans to ensure robust trading operations.

Secondary Functions

  • Support periodic desk-level reviews, monthly P&L deep dives and regulatory reporting requests; prepare materials for risk committee and audit exams.
  • Contribute to the desk’s roadmap for automation, model upgrades and trading platform modernization; help prioritize technical projects with measurable ROI.
  • Train, mentor and provide on-the-job coaching for junior traders and analysts to accelerate their development and desk resiliency.
  • Assist in business development initiatives by providing market intelligence, product tutorials and pre-sales pricing support to the sales and structuring teams.
  • Participate in cross-desk working groups for margin optimization, capital allocation and counterparty management to improve firm-wide efficiency.
  • Help define and document operational procedures, contingency plans and trade handling protocols to reduce settlement risk and operational errors.
  • Provide ad-hoc analytics support and structured datasets for quant research, compliance investigations and internal audits.
  • Engage with external vendors and platform providers to evaluate new data feeds, analytics solutions and execution tools that can enhance desk performance.

Required Skills & Competencies

Hard Skills (Technical)

  • Deep derivatives pricing knowledge: options (Vanilla, exotics), futures, swaps, swaptions, and structured products with mastery of Black‑Scholes, local vol, stochastic vol, SABR and Monte Carlo frameworks.
  • Risk modeling and analytics: Greeks management, portfolio VaR, stress testing, scenario analysis and margin modeling.
  • Trading systems and infrastructure: experience with OMS/EMS, FIX protocol, market data (Bloomberg, Reuters/Eikon), and trade capture systems.
  • Programming & scripting: proficient in Python (Pandas, NumPy), C++ or Java for low-latency systems, SQL for data queries, and MATLAB/R for prototyping.
  • Quantitative skills: stochastic calculus, numerical methods, finite difference and Monte Carlo simulation techniques for pricing and risk.
  • Execution algorithms & microstructure: understanding of market making, smart order routing, TCA and minimizing market impact.
  • Collateral & funding management: practical experience with ISDA/CSA, margin calls, initial/variation margin, and repo/funding strategies.
  • Model governance & validation: building defensible models, backtesting, documentation and working with model risk/regulatory teams.
  • Electronic market-making and automation: experience building or operating quoting engines, risk filters and automated hedging systems.
  • Familiarity with trading platforms and middle/back-office systems such as Murex, Calypso, Bloomberg AIM, FIS, or in-house trading stacks.

Soft Skills

  • Strong commercial instinct and P&L accountability — ability to make rapid, high-consequence decisions under pressure.
  • Excellent communicator: clearly explain pricing, risk and trade rationale to sales, risk, compliance and senior management.
  • Analytical problem-solver: distill complex quantitative topics into actionable trading ideas and risk mitigations.
  • Team player with cross-functional collaboration skills — work effectively with quants, developers, risk and operations.
  • High attention to detail and process orientation to avoid costly trade errors and ensure regulatory compliance.
  • Adaptability and continuous learning mindset — keep pace with market structure changes, new products and technologies.
  • Leadership and mentoring ability to grow junior team members and improve desk knowledge transfer.
  • Time management and organization skills to prioritize competing demands in a fast-paced trading environment.

Education & Experience

Educational Background

Minimum Education:

  • Bachelor's degree in Finance, Economics, Mathematics, Statistics, Physics, Computer Science, Engineering, or a closely related field.

Preferred Education:

  • Master's degree or PhD in Financial Engineering, Quantitative Finance, Mathematics, Physics or Computer Science.
  • Professional certifications such as CFA, FRM or specialized derivatives training are a plus.

Relevant Fields of Study:

  • Financial Engineering
  • Mathematics / Applied Mathematics
  • Statistics / Data Science
  • Computer Science / Software Engineering
  • Economics / Finance

Experience Requirements

Typical Experience Range: 2–10+ years in derivatives trading, sales trading, quantitative trading, or structuring roles.

Preferred:

  • 5+ years of direct derivatives trading experience with P&L responsibility in options, futures, swaps or structured products.
  • Demonstrated track record managing desk-level risk, designing hedging programs and producing consistent P&L contribution.
  • Prior experience in both listed and OTC markets, familiarity with regulatory regimes (MiFID II, Dodd‑Frank, EMIR) and working with ISDA/CSA documentation.
Explore More Careers