Interview

Joshua Fernando on trading: career, challenges and success of the youngest institutional commodities trader in the world

September 6, 2023

 

“I am very grateful to be recognized in such a way at such a young age (I was minted Vice President at 24), but at the same time the title brings quite a bit of expectations and, coupled with my age, it leaves a lot of people wondering how it even happened.”
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In the world of financial markets, the intensity of the work is sometimes extreme. Joshua Fernando, a young prodigy in the financial industry, provides useful insights into this dynamic field. At the remarkable age of 24, Joshua has achieved what many only dream of: a position as a Vice President at JP Morgan, one of the most influential financial institutions in the world with $3,9 trillion in assets.

What distinguishes Joshua is not just his youth, but also his exceptional ability to navigate the intricacies of the financial markets. Balancing the demands of a full-time trader with the pursuit of an MBA, he showcased an incredible dedication to his craft. Joshua’s expertise lies in the trading of swaps and options, specializing in the volatile sectors of crude oil, natural gas, and an array of commodities, including pentane, isobutane, natural gasoline, and ethane.

Joshua holds numerous records in the financial industry.

He holds the world title of youngest institutional commodity derivatives trader, as well as many records within his current company (BOK, one of the top US regional banks), such as most profitable trade ever, most profitable NGL trade ever, youngest Vice President ever and youngest derivatives trader ever.

Soon, Joshua will be joining JP Morgan as the youngest Vice President ever. A very remarkable result.

In this exclusive interview, Joshua Fernando shared invaluable insights into his experiences in the fast-paced realm of trading, emerging trends reshaping the industry, and much more. Join us as we explore the perspectives of a young trader who is already making a significant impact within one of the world’s largest financial institutions.

Hi Joshua. Thank you for once again giving us the opportunity to do an interview together! For those who don’t know you yet, can you briefly explain who you are, the evolution of your career, and what you do?

“Not a problem, you all were the first of many to interview me, so I’m more than happy to speak with Nabila once again. In terms of an introduction:

My name is Josh Fernando, I am 25 years old, and I am currently the Vice President of Derivatives Trading at BOK Financial (Nasdaq: BOKF).

My career came to where it is now in a rather unorthodox/lucky way. I interned with my current company about 5 years ago (same boss, even the same exact desk) in Oklahoma City. At the end of my internship, they gave me an offer to return as a full-time employee. I declined their return offer and went on to work in oil & gas-focused investment banking while also simultaneously completing my first degree in 3 years, at 20 years old. Shortly after graduating, I left IB and went on to work for S&P Global Platts, the division that works with energy/commodities. I started with them in London before returning to Houston to work as a Senior Associate covering the Americas. Once the pandemic hit, I decided that I would do an MBA since I no longer had to spend ~ 3 hours each day commuting to the office. Part of the school application required recommendation letters. Naturally, I asked for a recommendation letter from my old boss from the internship in Oklahoma, among a few other people. He not only gave me a recommendation letter but another offer to come back and work for him. I didn’t say no at that time. In a way, the pandemic actually resulted in me getting my dream job, like I said before, a good amount of luck was involved in this.

In terms of what I do at work:

My day typically includes trading swaps and options on crude oil & natural gas, with notional individual trade values as high as $100M. I also have experience in periphery commodity complexes such as pentane, normal butane, isobutane, natural gasoline, and ethane. Nowadays my day-to-day is less involved in trading and more involved in miscellaneous management-related items for my team.”

We know that you pursued an MBA. What are the main advantages of this choice? Would you do it again?

“The main advantage is that it sets you up to get put into a management role, which is exactly what happened to me since I was minted as a VP shortly after I completed it. If you do not want to move up in your current company, an MBA could also be helpful in pivoting to another company, and in some cases a completely different industry, however this was never my intention so I can’t speak to it from personal experience, only from anecdotes from colleagues.

An MBA also teaches you to think and communicate in a way that many undergraduate degrees do not, which is crucial when working with C-suite members who typically also have an MBA.

Lastly, the networking aspect of an MBA is crucial, you will make many lifelong business connections as well as friends. I was actually a groomsman for one of my friends whom I had met in my MBA program. Interestingly enough, being a part of his wedding forced me to bring a plus one. The girl I brought to the ceremony is now my girlfriend, funny how life works out like that.

If I knew what I knew now I would still do it again. The only difference is that I would not underestimate how taxing it is to do an MBA while working full-time in one of the industry’s most intense jobs.“

You became one of the youngest institutional commodities traders in the world. But that’s not all. Recently, you became the Vice President of Derivatives Trading. What does it feel like to have such a vital role in your company at this age?

“I am very grateful to be recognized in such a way at such a young age (I was minted Vice President at 24), but at the same time the title brings quite a bit of expectations and, coupled with my age, it leaves a lot of people wondering how it even happened.

It is a nice feeling though, but it really just means that I have to work quite a bit harder to justify my career progression to everyone who also knows my age. This is because the baseline perspective is that people see my age, and then my title, and are trying to figure out how that makes any sense. So I am constantly in a state of quasi “proving myself” to various people I meet.

My workload itself didn’t change all that much though, however, the gravity of the work I do increased quite a bit, along with my interpersonal leverage. Most of my work was self-directed, so the amount I work was never really dictated by my title, it was just a function of what I thought needed to be done to better the business. When I tell people this, they often mention that it sounds like I could get away with doing nothing at work. In theory that’s true, but if I took advantage of that I probably would have never progressed the way I did. A big part of why I believe I got promoted, was because no one above me feels the need to check up on me, they trust that I am using all my time to create value for the business, and they periodically are reminded that is true when my work comes to fruition. In short, having such a vital role at this age makes me feel trusted and fortunate.

A fun fact:

Part of the reason I initially grew a beard was so that I would look older, and people would assume that I was closer to the average age of someone doing the work I was doing, and therefore be less concerned with how I got my title and more concerned with whatever it was that we were working on. This worked until I would go to happy hour with my work colleagues, and be unable to drink because I was still 20 years old at the time (the drinking age in the US is 21).“

What does your typical workday look like?

“There are two facets to my workday, trading and management. Nowadays my management work takes most of my time and I trade only occasionally.

In terms of trading:

I have 7 screens with Bloomberg and a bunch of Excel documents open, and two phones on my desk. Typically, I will be on the phone with a counterparty while modeling prices out in Excel to formulate bids and offers for a client who is on my other phone. I have a headset connected to each phone and wear them both at the same time, so I have my client in one ear and my counterparty in the other ear. I am then rapidly muting and unmuting each headset while talking to both people at once, the reason for this is so each side doesn’t know the margin I am charging on the trade by hearing my conversation with the opposite party.

Once a trade is on the verge of getting executed, I get laser-focused on what I am doing and just kinda shut out the world. Once we have executed the trade and everything checks out, I come back to reality and take a few breaths while my heart rate comes back down haha… Then I just repeat all of that every time there is a trade to be done. Sounds boring now that I say it, but I really do enjoy it, there’s nothing quite like it.

In terms of management:

This is much less interesting to most because it is really just anything that falls under my team’s purview that isn’t just straight-up trading. This typically looks like conference calls, meetings, relationship management with counterparties/clients, onboarding for technology and new trading groups, proposals for new trade types, training new hires, presentations internally and externally, speaking with intern classes/universities, putting out fires/explaining mistakes and losses, reporting on my group’s performance, etc.

It is quite literally anything that we have to do, that isn’t directly trading.”

How does it feel to trade sums in the order of the tens of millions of dollars?

“Once the notional values start going into the tens of millions of dollars, you almost get a bit of vertigo, one mistake and you will probably lose all of your bonuses, your team’s bonus will get hit, and you might just lose your job too. Trading with such large sums makes you a little numb to the actual value of money though. For example, when the PnL of a position you executed swings the value of a high-end house within the day, sometimes in the span of an hour or two, it becomes easy to rationalize eating out or getting Starbucks every day because the dollar value seems so inconsequential by comparison. Of course, this is not a good mindset in the slightest because trade profitability does not equal the compensation of the trader, but it certainly changes your perspective to see such large dollar figures just ticking around.

Haha so I recently went from my largest deal being $30M, to doing a few that have exceeded $100M. The interesting thing is that the vertigo feeling caps out roughly around $30M, at least for me. For example, there is a stark difference in how it feels to trade with $1M vs $30M, but trading with $30M vs $100M doesn’t feel all that different. I suppose your body can only comprehend such high values up to a certain point, it’s almost like it reaches an asymptote.”

In 2021 you predicted that inflation would remain high, and with it interest rates, in a spiral similar to what happened about 50 years ago. How has your view of financial markets changed over the past two years, considering the uncertainty associated with rising rates, energy prices, and inflation?

“Not financial advice, just my opinion:

That prediction is playing out quite well, and I still stand by it today. In the 70s the money supply was increased by about 40% and interest rates increased with it for about 5 years. This time they increased the money supply by about 300%, and we are only 3 years into it with rates moving up at a rate that in my opinion is not proportional to the money supply. I would estimate that rates will plateau in about 2 years and then they will start coming down. However, I don’t believe they will come down to the 2-3% levels we once saw, I think they will find a foothold around the 4% mark.”

Two years ago, you said the crypto world would shrink and only the most useful digital currencies would remain. What do you think now that Bitcoin’s dominance is at an all-time high and prices are rising again?

“Not financial advice, just my opinion:

This prediction was correct as well, as bitcoin dominance does not equate to the crypto world as a whole. While it is true that bitcoin dominance is at an all-time high, the crypto world itself did shrink according to market capitalization since I made that prediction in July of 2021, see chart below. I still stand by that statement, only the most useful/incumbent digital currencies will continue to survive, namely Bitcoin and Ethereum. There are a number of others that are useful as well, but as we saw with the Terra/Luna situation, even the most mainstream currencies can collapse for a litany of unforeseen reasons overnight.“

What is your perspective on commodities, particularly oil and natural gas, considering your experience in trading these derivatives?

“Not financial advice, just my opinion:

Crude: I could see crude oil becoming stronger in the second half of the year by a few dollars, perhaps all the way up to $90/bbl, unless the Russia/Ukraine conflict or another conflict erupts, then we could see prices flying well past that.

Chinese demand and jet fuel demand at a 1 year high should be the main drivers for now. I would also keep an eye on statements from Saudi Arabia and OPEC about production cuts.

NG: Nat Gas has been a bit slow since the start of the year. I could see it easily breaching $3 again, especially in November and December, but I would be surprised to see significant movement past those levels. At the same time, I don’t see it falling through $2 anytime soon. When NG comes roughly around the $2 mark it becomes appealing to buy NG for use in power generation relative to coal or oil, thereby giving it a fundamental level of support there. Natural gas is also a cleaner-burning fuel, which has the added benefit of helping power plants meet emissions standards, thereby further reinforcing the level of support here.”

Energy transition: will it play a central role in the markets or are most of the initiatives in this regard greenwashing?

“I wouldn’t say the energy transition will play a central role, but it will certainly be more significant to the markets in the coming years. A few years ago, low-carbon investments by oil and gas majors were less than 1% of capital expenditures. Then just last year they are nearing 10% of capital expenditures. This shows that the trend from oil and gas majors is going towards greener energy to some extent, however, the main issues are still the efficiency, cost, and infrastructure of green energy. Then from the regulatory perspective, there are numerous initiatives from the EU and the US that promote the energy transition as well. There certainly is an element of greenwashing in many instances, but the overall trend is still moving towards a genuine energy transition, greenwashing is not stinting the trend very much, it is just making it harder to see.”

What is your opinion on the direction of interest rates in the United States and how do you think they will affect the economy and financial markets? When will the declines begin?

“Not financial advice, just my opinion:

As I said, in the 70s the money supply was increased by about 40% and interest rates increased with it for about 5 years. This time they increased the money supply by about 300%, and we are only 3 years into it. I would estimate that rates will plateau in about 2 years and then they will start coming down. 

In terms of how it will impact the economy and financial markets, one of the main concerns is the housing market. With interest rates where they are, many people cannot afford to buy a house, and as a result, we are starting to see some fractures in the asking prices of properties. Sellers are forced to lower their prices, because there are fewer buyers, and the prospective buyers that exist need a lower transaction price in order to have a monthly payment they can afford since the higher interest rates constitute a larger share of the monthly payments now. Of course, these conditions create a great market for the few buyers who exist who are able to buy all cash.”

How have you personally managed your financial investments during the past two years? Have you made any changes to your investment strategies?

“I am under a fair amount of restrictions on managing my own investments because of my role, so I do not actively manage my personal investments. They are all index funds that I do not plan to touch very much. To be honest I would stick to index funds even if I wasn’t under any restrictions, it is simpler, and I sleep better at night haha… There is quite a bit of research out there that explains why index fund investing can be the best course of action for many. From a high level, actively managing your own portfolio rarely seems to outperform diversified index fund investing, unless, of course, you are a John Arnold type haha…”

Regional banking crisis. Who do you regard as the main people responsible for what happened? Do you think it can still have ripple effects in the financial markets?

“I won’t be able to comment on the parties responsible out of professional courtesy, but I can comment on a few ripple effects:

You may see deposits at regional banks be stinted a bit in the long term relative to their bulge bracket counterparts, because this crisis will be fresh on the minds of the public, and they will want to make sure their business is done at a place they don’t have to worry about going under.

It will also contribute to higher interest rates since banks will try to attract deposits with higher interest rates while subsequently making interest rates on loans rise. This will lead to an exacerbation of other effects such as those we have seen in consumer spending, loan default rates, and unemployment.”

What was the most unusual situation you handled with the rise in energy prices after the invasion of Ukraine? Did you expect European spot gas prices to go negative?

“I remember I was returning from Houston after spending a long weekend there and had landed in Oklahoma pretty late at night. The conflict was just taking off, and I had some clients call me on my personal cell phone while the plane was still taxiing to the gate. Basically, they wanted me to cancel all of their NG orders they had working GTC (good ‘till canceled) because there was so much uncertainty and volatility with the conflict underway. This resulted in me running off the airplane, getting in my car, and driving at felony speeds to get to the office, all while my clients were (understandably) checking up on me every 5 minutes. I got to the office around midnight to take care of the situation.

I did not expect European prices to move the way they did, partly because I do not watch them. Seeing that happen though was quite surreal and reminiscent of crude prices in April of 2020.”

What has been your biggest challenge as a trader so far and how have you dealt with it?

“The biggest challenge is that you always have to be “on”.

What I mean is that this is not a career path where you can coast on days you wake up and still feel tired, you have to be sharp and get the job done even when you aren’t feeling 100%. You might get lucky and not have a lot of trading activity on a day you feel slow, but on the flipside, an RPG might hit a refinery and you are suddenly thrown into one of the busiest days of your career, you just never know what you are in for when you wake up in the morning. This is highly motivating for a lot of us though, it’s certainly part of the reason I don’t hit the snooze button on my alarm in this role. On top of this, you quite literally have to be available at any hour of the day, including weekends, even when you are on vacation, and especially when you are working on management-related items. Part of this has to do with the fact that commodity markets basically trade 24/7, at least bilaterally.

To explain this with an example:

A lot of people I work with, including clients, have my personal cell phone, and there have been times when I get woken up by a call at 3AM on a Tuesday from my broker because an obscure market I’m involved in has hit a price target I need. This is certainly not a time where I am at my peak performance, regardless I get out of bed, execute the trade with him, triple-check all my work and wrap up at about 4AM, and go back to bed for two hours before getting ready for a full workday at 6AM.

In short, I am expected to have the same level of performance in my role when I am barely conscious at 3AM on a random Tuesday, as I do when I am in the office at normal hours.

In terms of dealing with it, there’s no other option but to change your expectations of what a job is. There are those people who treat a job strictly as a 9-5, and there is nothing wrong with that, but if that is where your head is at then the lifestyle that is common in this industry will be hard to manage. Then there are those who are really passionate about what they do, when they are bored they might think about ways to better the business, and their shower thoughts give them ideas they can take to work the next day. This group sounds a bit insane, but they are the ones who end up making a career out of this industry because they are the only ones who can deal with the challenges that come with being a trader.”

Finally, what would you recommend to someone who wants to pursue a career as a trader? What are the key skills and knowledge to acquire?

“I will start out with the skills and knowledge first:

You want to get very good at using Excel, take some online courses, and make sure you can navigate Excel comfortably with your mouse unplugged. If you are prone to typos, work on fixing them immediately. The first typo you make as a trader could very well be the last. If you want to go to the proprietary side of trading, learning a coding language is basically a must these days.

However, before you work on the hard skills and knowledge, the first thing you should do is to make sure trading is really what you want to do, as in you want to do it because you like it. Trading is a bit glorified in this day and age by pop culture, and the result is that a lot of people chase a trader seat because they view it as something that it’s not. The reality is that it’s filled with a combination of pressure, intensity, and scrutiny that are hard to describe to those who have never experienced it.

I know a lot of people who try to go into trading because of the title, or because of the compensation, and those people never make it very far before becoming jaded and burning out, then they are left with an extremely niche skillset that quite frankly makes them unemployable unless they want to take a notable pay cut by starting from square one in another industry. On the topic of compensation, if you are really concerned about pay, I always recommend working in an industry you are passionate about (within reason, make sure it is still a valid career path where being mediocre still allows you to live comfortably). The passion you have for what you do is the trait that will make you work slightly harder than the next person in your industry every single day. That edge will compound over time until the gap between you and your counterparts is impossible to ignore. You won’t be working for the money, or for a fancy VP title, but strictly to see what you are capable of achieving. And at that point, the compensation will find its way to you instead.”

How do you feel about being the youngest Vice President at JP Morgan, the world’s largest bank? What will your daily tasks be?

“It is an honor, and I am very grateful to be trusted with such a position, especially at a company as large as JP Morgan.

There were in excess of 20 other people being considered for the role, and being granted the title created numerous hurdles during the offer process because of my total years of experience, and JP Morgan’s baseline experience requirements for the VP title itself. But exceptions were made by management at JPM, and I was actually extended the offer and title while I was still 24.

From a high level, I will be starting a team for their North American Gas and Power Trading businesses. My day-to-day will be more on the management/ quantitative/ risk side of things, and not outright trading like my last role. It will consist of acting as a liaison between trading and various other groups within the company to manage various risks that arise within the trading businesses, especially with complex/illiquid positions that can’t be valued easily. I have a rather rare mixture of a derivatives trading background, coupled with managerial capabilities and experience, which is the ideal fit for a role like this. I can’t give too many insights beyond that for now, as I have not started the position haha… Perhaps we can do another interview later on once I have been in the role for a bit.”

As a VP, will you focus more on trading or on managing the people in the team, or both?

“It is not a trading role, I will be starting and then managing a team that supports the North American Gas and Power Trading businesses. In the beginning, I will be focused on learning all there is to learn about the business itself while developing my own methodologies for the various responsibilities and items I am tasked with. Then once I am competent enough to run the day-to-day tasks and processes on my own, I will begin building out my team and training others in what I have learned, and the processes that I’ve developed, so the business can then be scaled up to the needed degree.”

Do you think getting an MBA played an important role in getting you this position?

“Definitely. The role is significantly more managerial, I will be building a team. Nearly by definition, an MBA provides you with the knowledge you would need to do this. A lot of the interviews themselves were focused on managerial aspects once it was apparent that I knew the trading side of things very well. For instance, a common question that came up during the various interviews was something to the extent of “How would you manage someone who has decades more experience than you?” They were essentially asking how I would handle being 24, but managing people who can potentially be 30-40, which is a perfectly valid concern haha… My answer to that question was based on various relationship management concepts that I learned during my MBA. Because I was given the role, I presume they liked my hypothetical approach to that haha…”

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Nota bene: lo scopo dell’articolo è esclusivamente didattico ed esso non deve intendersi come la promozione di un particolare investimento. Tutti i marchi citati sono dei relativi proprietari.