Three Things Every Desk Analyst Should Know

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The Clock Is Ticking

When a trader asks you for an idea, she needs it now.

It might be for an institutional client who'll give the trade to the first dealer who calls back with the volatility spread trade he needed ahead of non-farm payrolls. Or your desk trader might have ridden a winner past her upside target and is looking for something to swap into. In either case, your advice won't do any good if delivered first thing tomorrow, or even near today's close. You must develop it within minutes.

No Dissertations

Unlike the traditional sell-side analyst role, your reports aren't published outside the firm. So when communicating your idea, go easy on the tables and charts (unless your trade is chart-based), skip the backstory and cut right to the chase.

Of course, as a responsible professional you must have a reasonable basis for every recommendation you make. But the amount of research that's considered sufficient varies with context: An opinion designed to trade on a real-time event such as an earnings or economic report can't be as detailed or rigorous as an analysis of a company's competitive strategy or 10-year cash generating ability, for making long-term investment choices.

It's rather like buy-side work, of which I once heard a research director say: "It's not chess, it's speed chess."

Don't Be a Shrinking Violet

Sometimes, as in the film Wag the Dog, it's wise to let someone else take credit. That won't work if you're a desk analyst. Your paycheck rests in large part on the number and size of trades your ideas generate - which can land you in bruising arguments over money with the traders you sit next to. So before accepting a job as a desk analyst, make sure you and the firm agree (in writing) about exactly how they'll track who brought in a trade and how commissions get divvied up between you and the traders. Then, assert yourself if you get shortchanged. And be ready to jump ship fairly quickly if that becomes a regular thing and your protests fall on deaf ears.

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