by Brian DeChesare Comments (2)

Sales and Trading Interview Questions: The Full Guide

Sales and Trading Interview Questions

Sales and trading interview questions are a bit of a paradox because they’re both easier and more difficult than investment banking interview questions.

They’re easier because there’s less to memorize, but they’re harder because you cannot prepare or practice in quite the same way.

Also, many questions do not necessarily have “correct answers”; interviewers ask them because they want to have an in-depth discussion about a certain topic.

Finally, it’s more difficult to generalize sales and trading interviews because they have a “choose your own adventure” element.

If you say you’re interested in exotic derivatives trading, you’ll get one set of questions.

But if you say you’re interested in corporate bond sales, you’ll get a completely different set of questions.

Before choosing an adventure, though, let’s start with the qualities that interviewers want to see in candidates:

Sales and Trading Interview Questions: What Do They Want to See?

The recruiting process typically starts with an online application, moves into a HireVue video interview or phone interview, and then concludes with an assessment center if you’re in EMEA or Hong Kong – or a Superday if you’re in North America.

“Interview questions” will come up in all parts of this process, from the HireVue or phone interview to the AC or Superday.

We’ve covered sales & trading assessment centers in the article on the rates trading desk, so please refer to that for tips.

Professionals want to see the following qualities in your responses to interview questions:

  • A hunger to trade or sell.
  • Quick thinking.
  • The ability to take risks and stay calm under pressure.
  • A willingness to go against the mainstream.
  • A solid rationale for why you’re interested in S&T rather than related fields like asset management or hedge funds.
  • Interest in a specific product, such as equity derivatives or sovereign bonds.

Being an athlete helps a lot because it demonstrates your drive and risk-taking ability.

Most candidates enter sales & trading out of undergraduate programs, but some are also hired from Master’s programs and MBA programs (though MBA hiring is far less prevalent).

There are also a few transfers from the middle office and other teams at the bank.

The main categories of sales and trading interview questions are:

  1. Fit / Behavioral – Including your story and “Why trading? / Why sales?”
  2. Market – Including your knowledge of recent events, key market indices and prices, and stock pitches or other trade ideas.
  3. Product / Client – Can you explain the Greeks? Do you know what metrics like duration and convexity mean? For sales, how would you handle problematic clients?
  4.  Brainteaser / Math – Quick, what’s 37 x 7? What about 261 + 839? How about the square root of 0.9?

The initial HireVue interview focuses on generic fit / behavioral questions, but a few simple market-based questions could also come up.

After the first round, interviewers will usually start by asking for your story, but they’ll quickly move into the other categories above.

Sales and Trading Interview Questions, Part 1: Fit/Behavioral Questions

There are 1.5 critical questions in this category – your story and the why S&T one, which is an extension of your story – and then a series of smaller ones.

“Walk Me Through Your Resume” or How to Tell Your Story

For this question, you can use the same outline recommended in our investment banking story template: The Beginning, Your Finance “Spark,” Growing Interest, and Why You’re Here Today and You’re Future.

The differences are:

  1. You should say you’re interested in a specific product or strategy, such as options, commodities, FX, or swaps, and make sure you know that one product very well.
  2. You should also say you want to work in a results-based environment and prefer a large bank because of the client/trading exposure and the network you’ll develop.

For sales, you can take a similar approach, but you should focus on developing client relationships rather than learning all the technical details of a product.

A reasonable example outline might look like this:

  • Beginning – Grew up in [Country / City], went to school at [University Name], majored in [Major Name], and also did [Fun / Interesting Activity, Ideally a Sport] while there.
  • Finance “Spark” – You won a trading competition in your first year by analyzing the software industry and longing a stock that rose 20% and shorting another one that fell 15%.
  • Growing Interest – You started out doing an internship in PWM and liked the markets-based work, but you wanted to work in an environment that was more results-oriented… which led you to a small hedge fund, where you focused on currency swaps to assist in their hedging strategies. You did well there but wanted broader exposure to the staff and clients at a large bank.
  • Why You’re Here Today + Your Future – You want to continue trading FX and learn other swap variants, and this bank has a particularly strong practice, so you’re confident it’s the right group for you.

Why Sales & Trading?

The expectation is that most students will enter sales & trading after completing previous finance internships – so, this question should not be difficult to answer.

Essentially, it’s the last two sections of your story above: explain how you started in Field X, moved to Field Y, which was closer to sales & trading, and how you now you want to move directly into S&T at a large bank.

You want to trade or sell [Product A], you want to be judged based on your results, and you want to [learn the technical product/trading details or build client relationships in that area].

Remember that the nature of the work doesn’t necessarily change much as you advance in sales & trading, so you can’t be too creative with your responses here.

Other Fit Questions

For other fit / behavioral questions, you can use the same approach recommended in the investment banking fit question article: prepare a “success” story, a “failure” story, and a leadership story, and use the STAR (Situation, Task, Action, Result) structure in your answers.

You can also think about your strengths and weaknesses, but they’re less important in S&T interviews because the skill set is more specialized.

The main difference is that you need to pick stories that demonstrate the traits that salespeople and traders want to see. For example:

  • You came up with a contrarian strategy in a stock investing competition and placed well as a result.
  • You were under pressure to turn around a student club before it ran out of funds in a matter of weeks, and you came up with a creative solution that saved everyone.
  • You evaluated the risk of a new business and hedged your risk by testing it in small increments while maintaining a part-time job on the side.
  • You analyzed a client’s portfolio and came up with new strategies that earned him above-market returns – even though he thought it was too risky at first.
  • You were losing a debate competition, but you thought on your feet and found a way to spin your opponent’s argument that allowed you to come back from behind and win.

The themes are thinking quickly, mitigating risk, performing well under pressure, and generating profits.

There isn’t a big difference between sales and trading in this first question category.

You can skew your stories a bit more toward leadership and communication skills for sales and more toward profit generation and risk mitigation for trading, but that’s about it.

Sales and Trading Interview Questions, Part 2: Market Questions

Market-based questions span a wide range:

Tell me about a recent news story related to the financial markets and your opinion of it.

Pitch me a stock (or FX, option, bond, or other trade ideas).

If you had $10 million to invest, what would you do with it?

What’s the S&P 500 / Dow Jones / FTSE 100 / DAX / other index at? How has it trended over the past year? What about oil and gold prices?

These questions are not “difficult,” but you’ll need to read sources like the Financial Times (FT) or Wall Street Journal (WSJ) regularly because the answers change each day.

Pay special attention to the front page and “Markets” sections of both.

We’ve covered hedge fund stock pitches extensively before, and you can follow the outlines and examples there.

But there are a few additional points to note in the context of sales and trading interview questions:

  1. Length – Aim for 60-90 seconds; they’ll lose interest if you go on much longer than that.
  2. More Than Just Long/Short Equities – For example, you could recommend purchasing call options or put options or using other derivatives to execute your idea. And you could pitch an idea related to FX, bonds, commodities, or almost anything else.
  3. Your Edge – What is the catalyst that will cause the security’s price to change, and why is it not already priced in? What do you know about this idea that the rest of the market does not?
  4. Stop Losses, Timeframe, and Risk Factors – These are all more important in S&T pitches, but you won’t have time to go into them in-depth in only 60-90 seconds, so briefly mention the basics and move on.

It’s best to develop one long idea and one short idea based on equities or credit (or potentially their derivatives) and another “macro” idea based on FX, sovereign bonds, commodities, or something else in that sphere.

For some example pitches, refer to the stock pitch or equity research recruiting articles.

Other Market Questions

For the one about where you’d invest $10 million, always start by asking for the person’s goals and risk tolerance and then giving high-level percentages by asset classes.

It’s pretty straightforward: younger people can afford to take more risk by weighting equities more heavily, while older people need to conserve capital because they can’t afford large drawdowns, so they’ll tend to put less in equities.

But you also need to factor in the macro environment.

For example, if interest rates are currently very low or negative, a traditional 60/40 stock/bond allocation may not make sense, especially if the person’s main concern is income generation in retirement.

It might make more sense to swap the bond allocation for precious metals, alternative assets, or real estate – anything that might generate cash flow or increase in price when interest rates are extremely low.

In terms of facts and figures, you should have a good idea of the following, both recently and over the past 6-12 months (check Bloomberg and markit.com):

  • Equities: US – DJIA, S&P 500, and VIX; Europe – Estoxx, FTSE 100, and VStoxx; Asia – Nikkei and Shanghai Composite
  • Credit: CDX NA IG, CDX NA HY, iTraxx Europe, iTraxx XO; SovX WE, SovX CEEMEA
  • FX: EUR / USD, USD / JPY, GBP / USD, RMB / USD
  • Commodities: Oil and gold
  • Interest Rates: LIBOR (or SOFR when it’s phased out), Fed Funds rate, and rates set by the BOE and ECB; also, 2-year and 10-year Treasury yields

Sales and Trading Interview Questions, Part 3: Product / Client Questions

These questions depend heavily on the roles that you say you’re interested in.

If you mention equity derivatives, expect questions about the Greeks and hedging the risk of each one.

If you mention sovereign or corporate bonds, expect questions about bond math.

And if you say you’re interested in sales, expect questions about how you work with clients and recommend products.

These questions also depend heavily on your degree and work experience; expect far more detailed questions if you’ve had direct experience with a certain product.

For this entire category, please refer to our equity trading and fixed income trading articles and the book recommendations there and at the end of this article.

Here are a few sample questions and answers in different categories:

Q: What is a derivative security, and how is it used?

A: A derivative is a security whose value is based on the price of another security (the underlying). The relationship can be linear, convex, concave, or a mix of both.

The simplest derivatives are call options and put options on stocks, which give you the right, but not the obligation, to buy or sell a stock at a strike price within a certain period.

Derivatives are often used to hedge portfolios, such as by buying put options on an index to protect against a market crash.

They can also improve the risk-reward on specific trades, such as with a call spread (long a call option at a lower strike price and short a call option at a higher strike price) if you’re confident of a stock reaching a specific price level.

Q: What does the “convexity” of options mean?

A: It means that the downside is limited, while the upside is unlimited.

For example, with a call option, the only risk is that you pay money for the option, and the company’s stock price does not reach the strike price before expiration, so you cannot buy the underlying stock.

At worst, you lose that small initial sum; at best, you might be able to earn a huge amount if the stock moves far beyond that strike price.

Q: Explain Black-Scholes intuitively.

A: The Black-Scholes formula values options based on the underlying security’s price, its dividend yield, the option’s time to expiration, the strike price, the risk-free rate, the implied volatility, and a cumulative density function.

For a call option, it estimates the probability of the underlying stock reaching various prices, including the strike price, according to a lognormal distribution.

It sums up the expected value (value * probability) at each possible price “under the curve” to determine the option’s value.

If the strike price and stock price are closer, the probability of reaching the strike price is higher, so the option is worth more; higher volatility boosts the option’s value for the same reason.

As the time to expiration decreases, the option is worth less because the probability of exceeding the strike price goes down as more time passes.

And as the dividend yield increases, the option also becomes worth less because you’re missing out on more of the underlying stock’s dividend.

Q: What is delta, and how does it change with the underlying’s price, volatility, and the passage of time?

A: Delta is the first derivative of the option’s value with respect to the underlying security’s price, i.e., it tells you how quickly the option’s value changes as the stock price changes.

It also represents the amount of the underlying stock you must own to be delta hedged, i.e., to offset gains and losses on the option with gains and losses on the stock.

Delta moves from 0 to 1 as the option goes from out-of-the-money (stock price is below the strike price) to in-the-money (the opposite), and it’s 0.5 when the option is at-the-money (stock price = strike price).

The intuition is that the option starts to behave more like the underlying as the underlying’s price rises; on the other end, the option is not sensitive to changes in the underlying’s price when it’s deeply out-of-the-money.

Higher volatility increases delta for out-of-the-money options and decreases it for in-the-money options, and increasing the time to maturity has the same effect.

Q: What about gamma?

A: Gamma is the second derivative of the option’s value with respect to the underlying security’s price, so it gives you delta’s rate of change.

Gamma is highest when the option is at-the-money (ATM) because delta is the most sensitive to changes in the underlying price there; it decreases as an option moves further out-of-the-money (OTM) or in-the-money (ITM).

Increased volatility increases gamma for ITM and OTM options but reduces gamma for ATM options, and increasing the time to maturity has the same effect.

Q: What is the yield to maturity (YTM) of a bond, and how do you use it?

A: We have a video tutorial on this exact topic: how to approximate the yield to maturity.

The YTM is the internal rate of return (IRR) on a bond if you purchase the bond at its current market value, collect all the interest payments, and then receive the bond’s face value back upon maturity.

The YTM is used to price bonds; if the YTM is below the coupon rate, the bond is trading at a premium to face value, and if the YTM is above the coupon rate, the bond is trading at a discount to face value.

Q: What are the duration and convexity of a bond, and how do you use them?

A: Duration is the first derivative of the bond’s price with respect to the YTM (or “prevailing yields on similar bonds”), and convexity is the second derivative of the bond’s price with respect to the YTM.

So, duration tells you how sensitive a bond’s price is to changes in interest rates or “prevailing yields on similar bonds.”

And convexity gives you the rate of change of the duration as the YTM changes.

Intuitively, duration tells you how long it will take for a bond to be repaid with its internal cash flows. You can think of it as the “weighted maturity of the cash flows.”

So, it’s 10 for a 10-year, zero-coupon bond and some number less than 10 for a 10-year bond with a positive coupon rate.

It also measures interest-rate risk because the longer the duration, the more the bond’s price will change as interest rates change.

Investors often use duration and convexity to manage their bond portfolios and ensure that they have the proper exposure to changes in interest rates.

Q: What factors influence foreign currency exchange rates?

A: Key factors include fiscal and monetary policy, the balance of trade levels, inflation levels, and economic growth.

For example, if one country is increasing its money supply (i.e., “printing money”) significantly more than another country, its currency will become less valuable – assuming that no other factors changes.

A country with higher interest rates will also tend to have a more valuable currency because higher interest rates create more investor demand for that currency.

Sales and Trading Interview Questions, Part 4: Brainteaser / Math Questions

First, note that if you say you’re interested in sales, you’re extremely unlikely to receive brainteaser or mental math questions.

So, worry about these questions only if you’re interviewing for trading roles.

With brainteasers, the best tip is to get a good book and go through as many practice examples as possible.

Always think out-loud and explain your assumptions, and if you get stuck, state what you’re thinking so far and what you need to continue.

Pure brainteasers are a bit less likely in sales & trading interviews at large banks and tend to be more common in prop trading and quant fund interviews.

Mental math questions, however, will come up in any of these roles. Again, you should get a good book that explains all the tricks, but here are a few examples:

Addition

The trick here is to break up “ugly” numbers into round ones:

  • 87 + 94 = (87 + 90) + 4 = 181
  • 334 + 567 = (300 + 567) + 34 = 867 + 30 + 4 = 897 + 4 = 901

Subtraction

Subtraction questions are similar, but you need to decide when to round up.

For example, if the second number’s second digit is bigger than the first number’s second digit, round up:

  • 62 – 27 = 62 – 30 + 3 = 32 + 3 = 35
  • 845 – 388 = 845 – 400 + 12 = 445 + 12 = 457

Multiplication

Multiplying a 2- or 3-digit number by a 1-digit number is straightforward because you just separate them into smaller groupings:

  • 47 x 5 = (40 x 5) + (7 x 5) = 200 + 35 = 235
  • 397 x 4 = (300 x 4) + (90 x 4) + (7 x 4) = 1200 + 360 + 28 = 1588

For 2×2 multiplication, put the number with the larger second digit first and then group them into smaller units once again:

  • 42 x 37 = 37 x 42 = (37 x 40) + (37 x 2) = (30 x 40) + (7 x 40) + (37 x 2) = 1200 + 280 + 74 = 1554

Squaring 2-Digit Numbers

This formula is the trick for squaring 2-digit numbers:

  • X^2 = (X + Y) * (X – Y) + Y^2

And then you set Y such that either (X + Y) or (X – Y) ends with “0.” Examples:

  • 49^2 = (49 + 1) * (49 – 1) + 1^2 = 50 * 48 + 1 = 2500 – (50 * 2) + 1 = 2401
  • 56^2 = (56 + 4) * (56 – 4) + 4^2 = 60 * 52 + 16 = 60 * 50 + 60 * 2 + 16 = 3000 + 120 + 16 = 3136

Square Roots

There are fewer “tricks” with square roots because no matter what you do, the answer will usually have decimal places.

But you can usually approximate the answer by thinking in terms of square numbers.

For example, let’s say they ask you the square root of 90:

  • You know that 9^2 = 81 and 10^2 = 100.
  • And 90 is slightly closer to 81 than 100.
  • So, you can say “slightly less than 9.5” (it’s ~9.49).

Case Studies? Programming Tests?

You’ve probably seen articles and stories about how “everything” in sales & trading is becoming more tech and programming-oriented – especially in areas like cash equities.

Based on that, you might wonder if you’ll get coding exercises or programming tests, as you would at a quant fund, prop trading firm, or tech company.

My experience is no, probably not – at least if you’re applying for traditional sales and trading roles rather than IT/engineering jobs.

It helps to know some Python and VBA, and you will increasingly use them on the job.

However, a senior trader is unlikely to ask you to solve a coding exercise on the spot in an interview because traders at banks aren’t necessarily programming experts.

For case study tips, see the rates trading desk article.

I wouldn’t recommend spending much time on case preparation if you’re in North America because most interviewers will still ask the standard questions.

Questions At the End and Thank You Notes

Yes, you should always ask the interviewer(s) questions at the end.

Focus on the person’s specific experiences rather than something generic:

  • “In the past, you have hired many interns. What separated the ones who succeeded from the ones who did not?”
  • “What do you now know that you wish you had known at the start of your career, and how would it have impacted your choices along the way?”
  • “Which other divisions or desks have you worked in, and why did you eventually switch to this one?”

After the interview, you should send a thank-you email within 24 hours.

Thank the interviewer for their time, bring up something that you discussed, and if you did not know the answer to an interview question, remind them of the question and include the answer.

These emails won’t always help you, but they definitely won’t hurt, and they only take a few minutes to send.

How to Practice for In-Person, Video, and HireVue Interviews

The recruiting process has become far more impersonal because of HireVue and other pre-recorded interview technology.

To prepare for these interviews, you should practice by recording yourself under similar conditions:

  • Queue up 4-5 randomized questions.
  • Give yourself 30 seconds to prepare an answer for each one.
  • And then give yourself 2-3 minutes to record an answer.

It will be uncomfortable to watch yourself, but you’ll need to do it if you want to improve.

Take a look at all the potential mistakes in our HireVue interview guide and watch for each one as you review the footage.

If you want to practice the market, math, and product questions, you should find older students who have won offers and ask them for a few mock interviews.

But I’ll be honest: your time is better spent developing your trade ideas, learning a specific product, and making sure you know the markets very well.

Since sales & trading interviews often turn into detailed discussions about products or trade ideas, mock interviews only help so much.

What If You Don’t Get an Offer?

If you don’t win an offer, you could say thanks, ask for feedback, and move on.

But if you feel you were not judged fairly or that the interview was conducted under poor conditions, you could go back and argue for another chance.

There are stories of candidates who failed to win an offer initially but who then argued for additional interviews and eventually received offers.

While this strategy can work, the risk is that most undergrad-level candidates are not great at determining whether the interview process was “fair.”

And there’s a thin line between being persistent and turning into a stalker.

So, if there was a glaring issue in your process, such as a poor connection or an interviewer who was not paying attention and had to leave midway through, sure, go ahead.

But if you could not answer certain questions or discuss your trade ideas effectively, this strategy is not a great idea.

Sales and Trading Interview Questions: Your Checklist and Recommended Books

Summing up everything above, here’s what you should have before going into any S&T interview:

  • Your story and why you want to do S&T over anything else – including related fields like asset management and equity research.
  • Three (3) “short stories” from your resume/CV that demonstrate the key qualities required in S&T (drive, risk-taking, profit generation, performing under pressure, and client communication for sales).
  • Knowledge of the market indicators listed above, plus a sense of how they’ve changed over the past 6-12 months.
  • Three (3) trade ideas or stock pitches, including a long idea, a short idea, and an FX/global macro/volatility/credit/non-stock idea.
    • For each trade idea, make sure you have a profit target, a stop loss, a time frame for the trade, and the top 2-3 risks.
  • One (1) recent article or news story related to the financial markets and your opinion.
  • Knowledge of a specific product that you’re going to say you’re interested in; enough to answer the types of sample questions above.
  • And at least a few hours of practice with mental math and brainteaser questions.

To learn more about the technical details of specific products, as well as math and brainteaser questions, check out:

You don’t need to learn “everything” in these references – pick a specific product and read the relevant book or sections within a book.

Do that, and you’ll be as prepared as you can be for sales and trading interview questions.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

Break Into Investment Banking

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

We respect your privacy. Please refer to our full privacy policy.

Comments

Read below or Add a comment

  1. Avatar
    Harsh Sudad

    Thanks for the thorough analysis. I have an interview coming up next week, so it was beneficial.

    I have a few questions regarding this article as well as more general questions.
    My interview is with an NYC-based trading firm for a junior trader position. My undergrad was in electrical engineering from M.I.T, and right now, I’m a Master’s student in Statistics. However, I DO NOT have any background in trading/finance. And I have not done any trading internships in the past. Do you have any suggestions for me to prepare for the market-based questions in less than a week?

    The firm has told me that there will be a final-round with the CEO. How should I better prepare for that round? Do you have any general suggestions for asking questions from him?

    Lastly, there will be an interview involving a deck of cards, but I do not know what game will be played. Do you have any suggestions to better prepare for that too?

    1. Your best bet for the markets-based questions is to read one of the recommended books here and learn as much as possible quickly. If you’re already at MIT, you should be used to cramming and learning a lot of new information very quickly. I don’t think you can prepare stock/investment pitches quickly, but maybe search online and try to emulate anything you can find.

      For the CEO interview, Google him and look up as much as possible about his background to ask better questions.

      For probability questions, take a look at one of the recommended guides to probability/statistics questions here.

Leave a Reply

Your email address will not be published. Required fields are marked *