Why Commodity Traders Make Millions

Summary

In this video, the speaker discusses the high salaries and bonuses in commodity trading, particularly among energy traders. They explain how these traders are able to earn massive bonuses due to the enormous volume of commodities they deal with, unlike other financial roles where the focus is on margins. The speaker compares commodity trading to other high-value industries like real estate and insurance, where selling expensive products results in large commissions. The video offers insight into the dynamics of the commodity trading world and the factors that contribute to traders' significant earnings.

Takeaways

• 😀 Commodity traders, especially in energy, can earn massive bonuses due to the high value and volume of the products they trade.
• 😀 One trader received a $500,000 bonus this year, highlighting the vast difference between traders' earnings and those of other employees in the company.
• 😀 At a company Christmas party, traders were showing off their new properties, not luxury items like watches or cars.
• 😀 In Geneva, one-bedroom apartments cost between $700k and $800k, with traders investing in properties like $50 million houses.
• 😀 The surge in commodity prices due to market volatility, such as the pandemic and war, led to record profits for commodity trading companies.
• 😀 Despite the growth of large corporate trading firms, traders still take home the lion’s share of the profits, which is surprising to some.
• 😀 The high earnings of commodity traders are similar to those in real estate or insurance, where selling expensive products yields large commissions.
• 😀 Commodity trading is primarily a volume game, meaning that the more product traded, the higher the earnings for traders.
• 😀 Energy traders, handling high-volume products, are the ones who earn the most in the commodity trading world.
• 😀 The high-value nature of commodities, particularly in energy, is what drives the significant bonuses for traders, who capitalize on the volume of trade.
• 😀 If you want to maximize your earnings in trading, choosing high-volume commodities like energy is crucial for securing large bonuses.

Q & A

Why do commodity traders receive such large bonuses?

Commodity traders receive large bonuses because they handle high-value, high-volume products, particularly in energy sectors. The significant profits made by their firms, especially during times of market volatility, are shared with the traders who generate those profits.

How does the bonus structure for commodity traders compare to other industries?

In commodity trading, the traders who sell high-value commodities earn substantial bonuses, similar to how salespeople in industries like real estate or insurance earn large commissions for selling expensive products. The key is the high value and volume of the commodities being traded.

What does the speaker mean by 'commodity trading is a volume game'?

The speaker is referring to the fact that in commodity trading, the traders who handle large volumes of goods, especially in energy, tend to earn the most money. It's not just about the profit margins but the sheer size of the transactions involved.

What are some examples of traders showing off their new assets at the Christmas party?

At the Christmas party, traders were showing off photos of their new homes and apartments rather than luxury items like watches or cars. This illustrates how their large bonuses are often reinvested into significant real estate purchases.

What is the significance of the $50 million house purchased by a trader?

The purchase of a $50 million house by a trader highlights the immense wealth generated within the commodity trading sector. The buyer, a trader from a Geneva-based commodity trading firm, illustrates how traders in this field can afford luxury properties due to their significant earnings.

How did the pandemic and geopolitical instability affect commodity trading profits?

The pandemic and geopolitical instability caused extreme market volatility, which significantly boosted the profits of commodity trading firms, especially those dealing in energy. These conditions led to high performance, and a portion of those profits were distributed as large bonuses to traders.

Why does the speaker refer to commodity traders as 'selling expensive stuff'?

The speaker emphasizes that commodity traders deal with high-value goods like oil, gas, and metals. Similar to industries like insurance or real estate, the higher the value of the product being sold, the higher the earnings or commissions, which in the case of traders translates to large bonuses.

What is the key difference between energy traders and soft commodity traders in terms of earnings?

Energy traders typically earn much higher bonuses than soft commodity traders because energy commodities, like oil and gas, involve much larger transaction volumes. While soft commodities may have higher margins, energy commodities generate bigger profits due to the scale of the trades.

What comparison does the speaker make with the movie industry in relation to commodity trading?

The speaker initially compares commodity trading to the movie industry, where the lead actors often earn a large portion of the profits compared to the supporting crew. However, he later clarifies that the better comparison is with industries that sell expensive products, such as real estate or insurance.

Why does the speaker say that traders 'sell expensive stuff'?

The speaker's point is that commodity traders sell products with extremely high market values, which directly correlates with the large bonuses they earn. Like other high-stakes sales industries, the financial rewards for selling these expensive commodities are substantial.