What are the basics of trading and who are the key players involved?

Investment Vehicles

• Stocks — shares of public companies; profit by buying low, selling high
• ETFs — bundles of stocks, tradeable anytime during market hours
• Mutual funds — like ETFs but trade once a day, generally more stable

Firm Types

• Hedge funds — invest client money (LPs); fee structure is "2 and 20" (2% of assets + 20% of profits); no guaranteed returns
• Prop trading firms — trade their own capital, no client obligations; use leverage strategically
• Private equity — buys mature private companies via LBOs: use mostly borrowed money, pay it down with the company's cash flows, then sell
• Venture capital — invests in early-stage startups; much higher risk than PE, very different mechanics
• Quant firms — find mathematical patterns/algorithms to trade profitably; top firms: Jane Street, Optiver, Citadel Securities, DRW
• Market makers (Citadel Securities, Optiver) — always willing to buy or sell any asset instantly, profiting off the bid-ask spread millions of times a day; quant is what makes this possible at speed
• Investment banks — advise on M&A, IPOs, and capital raising; heavy modeling and deal work, not trading

Buy Side vs Sell Side

• Sell side (IB, market makers) — sells a service: advice, liquidity, execution
• Buy side (hedge funds, PE, VC, asset managers) — deploys capital to generate returns
• Most career paths go sell side → buy side

Quant Roles

• Quant researcher — finds signals and builds strategies
• Quant trader — executes trades and manages positions
• Quant developer/engineer — builds the infrastructure and systems
• Very different skill sets and compensation across the three