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How do I Become a Derivatives Trader?

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  • Written By: N. Kalu
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 26 November 2016
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To become a derivatives trader, you must have an incredibly strong background in mathematics, particularly in statistical modeling and financial calculations. Learning a computer programming language is also useful. As a professional who will be buying, selling, and trading derivatives, it is important that you understand all aspects of the derivative asset market, including the risk and return on investment associated with each transaction. Such understanding is gained by securing a bachelor's or master's degree in a mathematical or financial discipline or by going through comprehensive derivatives training with an accredited program.

In order to have a secure grasp of mathematics, a degree in one of its disciplines is often necessary. Nearly all aspiring derivatives traders major in a subject involving math such as statistics, operations engineering, or finance. Majoring in these fields will prepare you to manage complex financial models and they will also give you a solid foundation in predictive modeling and forecasting, which is very important to the professional derivatives trader. During the summer you can extend your knowledge by working through an internship at an investment bank. Whether you work in a large, well-known firm or a boutique firm, an internship will show you how derivatives trading works in real-life business applications.

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Getting a master's degree is not essential for those who want to become a derivatives trader, but it makes those who secure one more attractive to prospective employers. Derivatives traders with master's degrees in mathematical subjects also command higher salaries than their counterparts with only bachelor's degrees. In a master's degree program, you will learn more advanced theories behind trading derivatives as well as analysis specific to determining the risk profile of any derivative.

If you are seeking to become a derivatives trader, it is beneficial to learn a computer programming language, such as C++ or Visual Basic for Applications (VBA), during your undergraduate or graduate years. Universities which offer comprehensive mathematical and computer science programs of study will often offer classes in computer programming which you can take. If your university does not offer classes in these languages, you can learn them on your own by progressing through a self-study course or an online tutorial.

Formal derivatives trading training is required for anyone who is successfully working to become a derivatives trader. There are a number of financial institutes and independent programs that offer specialized training for the derivatives trader professional. You can find out more details about these programs by doing a quick Internet search. After completing the derivatives training course, you will be well on your way to becoming a derivatives trader.

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