Saturday, September 14, 2013

A day in the life of an FX and Rates Strategist

Strategists in the financial services sector are of different types depending on the asset class they cover and whether they operate on the buy- or sell- sides of the business. This role is different from the one business strategists perform in various firms in that it is focused on capital markets.

Typically a strategist does not trade, but comes up with (strategizes) trade ideas that the traders can put on and portfolio managers can consider. Usually strategists look at various types of indicators as they perform their duties - indicators like macroecnomic news and numbers releases (e.g. India's RBI likely to intervene in FX markets by selling $10 B to help bolster the rupee), quantitative signals (e.g. the volatility of MYRUSD returns is much higher than that of the USDIDR), and technical indicators (e.g. the ichimoku cloud indicates that the move in USDJPY is well supported with a likely move yet higher in the coming days).

As with all else, strategists also vary widely in quality. Here, we focus on the role of FX & Rates strategists on the buy-side. A typical day might be something like this:

0700: Get to work, read up news stories on what happened overnight, and potential changes
          to views currently held. Also, familiarize yourself with the current trade book
          including trades executed in the overnight hours

0800: Look across markets to determine where any important economic numbers are going to
          be announced. Prepare notes for the morning call.

0830: Go to morning call, discuss current positions, corrections to previously expressed
          views, pending news and numbers releases, changes in technicals for various markets,
          favorite trades if any etc

0900: Study Bloomberg screens and sales side analysts' research to identify and analyze
          potential trade ideas.

1100: Write-up investment theses carefully focusing on which trade ideas make sense for
          which funds (since different funds are run to different mandates), and in what
          market contexts. Focus on what the entry and exit levels are appropriate.

1400: if you manage a paper portfolio, put your trades in there. track P&L carefully

1500: take calls from portfolio managers, pitch ideas to them, meet with sell-side analysts
          learn more about your markets, pending central bank actions, macro-economic
          developments etc

1800: send out end of day commentary, list important news stories and events to watch for
          the next day, and over the rest of the week, with updates.