Ask me about working with derivatives for 'retail' clients

[KLLions]

I worked for some years for two large I-banks with good PCS/HNW retail divisons. I sold to, and traded for, very high-net-worth clients [generally $100mm+ and up] various derivatives, and structured products, including interest rate notes, swaps, currencies, collars for equities and FX, etc. Not as a broker, I worked with the PCS gang, but I was paid salary+ year-end bonus, not 30-40% commission like they got.

Many of these clients just liked to trade very large sums of money, often using leverage, even if they had no perceived 'edge,' in whatever market was hot or on the front page of the WSJ, so we obliged them.
Ask away.

[JasonK]

What's the most you ever lost for somebody?

[KLLions]

Generally, we didn't have/want discretion with this stuff. For clients where we would just execute buys and sells for them, the largest would be around $750k in a single trade, but during the course of a year certainly more than that [net], but I didn't have too many big losing trades in a row - if you do, clients just stop trading.
Each year, I was profitable over the entire client base that traded, ranging btw $8-15mm Net.

More usually - they had discretion and often ignored my advice, I'd say several million dollars, perhaps $12mm or so.

Now, on a straight hedge [buying puts, using forwards] the loss on the put/call purchase could be tens of Millions, but no economic loss as they had equivalent gain on other side. I spent a lot of my time meeting with clients and explaining risks of unhedged positions [say you got 500mm CAD from a sale] for USD-based investors. [And vice versa.]

One of my co-workers 'hid' losses by not closing out a client position and lost $50-100mm for a client. He was fired of course, and there was some sort of settlement with this client.

[KLLions]

Mods - this thread is not about 'money-making', it is about working in derivatives, just like the OOT thread about working with mortgages. Could someone pls move it back?

[RacersEdge]

What kind of skill set do you need? Are you going through the math of designing these derivatives, or just trading them?

Also, what's PCS?

[KLLions]

PCS is private client sales.
Most derivatives are pretty vanilla at heart, to design a 'new' one you're normally talking about the math/physics PhD's who are off on another floor somewhere geeking out.

Skill set for a salesperson: smart, knowledgable & well-read in general, expert on your asset class[es], honest, like working with people, ability to think on feet and deal with stressful situations, able to talk about other topics - 'How does drop in price of oil affect USTs affect USDollar, and if economy slows what does that do to price of USD/Yen.'
Able to control both fear and greed of self and client.

[RacersEdge]

Do you have to work in NY to do this?

Is your bonus based on performance of your investments or total dollars you got invested?

[KLLions]

[ QUOTE ]
Do you have to work in NY to do this?

Is your bonus based on performance of your investments or total dollars you got invested?

[/ QUOTE ]

absolutely not. But a big city, generally.

Volume of trades/profitability to the Firm, but that's driven, generally, by helping my clients in whatever way they need help.

[BigBiceps]

1) how do I see what future options are offered to insiders and others in the first few years after an IPO?

2) how do I see what different brokerage houses, most specifically the original IPO issuer, has in the near future after the IPO issed in the forms of convertible contracts, for example like bonds that pay x% with the option or forced option to buy the issue at y date.

3) what other pertinent information, similar to the 2 questions above, can help me with my goal below.

I am trying to find this information specifically to know when the optimum time is to short the stock after the IPO based on when the insiders will cash out, and the brokerages will dump the shares on the "investors" that have purchased the convertibles, etc.

[AvivaSimplex]

How do people get that job? What did you do before you worked there?