Trading Scenarios interview questions

A basic arithmetic and risk-framing question in event-driven interviews.

A target trades at $96 after receiving a $100 all-cash offer expected to close in four months. Calculate the gross spread and simple annualised return. What does that number omit?

Sales and trading interviews use a client order to test quote direction, execution and risk awareness.

A dealer quotes USD/JPY at 149.80 / 149.84. A client wants to buy $20m against yen immediately. At what rate do you trade, and what risk does the dealer have after filling the order?

A first-round market-microstructure check for candidates new to electronic trading.

A stock is quoted at $49.98 bid and $50.02 offer. You want to buy 1,000 shares now. Explain the difference between sending a market order and a limit order at $50.00.

A practical execution calculation for an equities-sales-and-trading first round.

A client asks you to sell 30,000 shares versus VWAP. You execute 10,000 at $24.80, 12,000 at $24.70 and 8,000 at $24.60. The market VWAP is $24.68. What is your execution VWAP and did you outperform for a seller?

A first-round electronic-trading screen checks that a candidate can read a two-sided market precisely.

An ETF is quoted at $101.20 bid and $101.28 offer. What are the mid-price and bid-ask spread? If you buy 500 shares at the offer and immediately value them at the mid-price, what is your mark-to-market loss before fees?

A first-round special-situations calculation testing whether you understand why a tender premium is not earned on every share tendered.

A company offers to repurchase shares at $25 while the stock trades at $23. You buy and tender 100 shares. The offer is oversubscribed and proration is 50%; assume untendered shares remain worth $23. What is your dollar…

Event-driven funds use stub trades to test relative-value construction and corporate-action mechanics.

A holding company owns a listed subsidiary worth $900m, has $200m of net debt and no other material assets, but its own equity trades at $500m. Is this automatically a stub trade?

A relative-value case used to test whether a candidate can separate a stock view from unintended market exposure.

You are bullish on Retailer A and bearish on Retailer B. A has a beta of 1.2 and B has a beta of 0.8. If you buy $12m of A, how much of B should you short to make the trade approximately beta-neutral? What risks remain?

A client-structuring case tests whether you match derivative certainty to uncertain operating volumes instead of simply maximising the hedge ratio.

An airline expects to consume 10m gallons of jet fuel next quarter, but bookings are volatile and management believes actual consumption could range from 7m to 10m gallons. Fuel costs are a major earnings risk. Recommend…

This tests practical market judgement: preserving information and execution quality matter as much as the directional view.

A portfolio manager needs to sell $40 million face value of a corporate bond that normally trades only $5 million clips. How would you execute without unnecessarily moving the market?

Common in execution services, and in any conversation about market structure.

A client needs to sell 2 million shares of a stock that trades 500,000 shares a day. Walk me through how you'd approach the execution and the trade-offs involved.

A desk-style risk question testing whether a candidate sizes a hedge by rate sensitivity instead of by headline notional.

A client buys a Treasury portfolio with a DV01 of +$175,100: it gains $175,100 if yields fall 1bp and loses the same amount if they rise 1bp. A Treasury futures contract has a DV01 of +$85 when you are long. How many…

Central to any market-making interview at a prop firm or bank.

You're making a market in a stock. What determines the width of your bid-ask spread? A large institutional client asks for a two-way price in size. How does that change your quote?

A fallen-angel scenario that tests technicals and fundamentals together.

An investment-grade issuer is downgraded to high yield. How do you analyse the trade?

A systematic-trading interview tests whether a candidate follows a risk process when a live position conflicts with a backtest.

Your mean-reversion strategy is long a stock after a three-standard-deviation selloff. The position is down another 4% intraday, while the model still says buy. What do you check before deciding whether to hold, reduce…

You will be asked this in every trading interview. Have three ready.

Pitch me a trade. Include your thesis, the specific expression, sizing, catalysts, risks, and what would make you exit.

A desk case that tests how a candidate turns client flow into inventory, liquidity and hedging decisions.

A client wants to sell 2 million shares of a liquid $50 stock. Average daily volume is 10 million shares, and the stock is currently $49.95 / $50.05. What would you assess before quoting a block price, and how would you…

A commodities sales interview tests whether you can reconcile a client's physical cost with a liquid but imperfect futures hedge.

An airline expects to buy 1m gallons of jet fuel in three months. Jet fuel is $2.20 per gallon, so it buys 20 heating-oil futures contracts, each covering 42,000 gallons, at $2.10 per gallon. At purchase, jet fuel is…

Credit funds ask this to test bearish expression without equity-short language.

You think a company's credit is deteriorating but default is not imminent. How could you express the short and what can go wrong?

A trade-expression question around growth, inflation and central-bank expectations.

The market is debating a soft landing. What does that mean, and how would you express a view that it is underpriced?

A realistic junior-trader scenario testing whether a candidate can convert a macro print into a risk-defined rates view.

Headline and core CPI both print 0.2 percentage points above consensus. Two-year Treasury yields jump 12bp in seconds, while ten-year yields rise only 4bp. You think the market has overreacted. What would you check, how…

Credit-desk interviews test whether an analyst can distinguish useful flow intelligence from a reason to chase a price move.

At 10:00am, three real-money accounts ask for offers in the same issuer's 2029 unsecured bond. The bond has widened 12bp while the issuer's CDS and peer bonds are unchanged. The trader asks whether to mark the bond wider…

Oil-product interviews use a crack-spread question to see whether you can translate a relative price into an industrial margin.

Crude oil is $75 per barrel, gasoline is $2.50 per gallon and heating oil is $2.70 per gallon. Explain the 3-2-1 crack spread and what a widening spread says about a refiner.

Macro and FX interviews use carry unwinds to test whether you can describe risk, not just a yield differential.

You are long a high-yielding emerging-market currency funded in Japanese yen. The central bank unexpectedly signals tighter Japanese policy and global equities fall sharply. What happens to the trade, and how would you…

A standard equities-sales-and-trading follow-up after a candidate says a company beat consensus.

A company reports quarterly EPS of $1.05 versus published consensus of $1.00, yet its stock falls 8% after the release. Give a structured explanation and say what you would check before trading it.

A common FX macro question because carry trades often look stable until they break.

Why can an FX carry trade earn steady returns for months and then lose a year of gains in days?

A harder EM macro question that links flows, reserves and policy.

How does a balance of payments crisis develop, and what market signals would you watch?

Event-driven and multi-strategy fund interviews.

Company A agrees to acquire Company B for $50/share in cash. B trades at $47. The deal is expected to close in 6 months. Construct the trade, calculate the return, and explain what determines whether you'd put it on.

An equities-trading case that separates a fundamental short thesis from the securities-finance and execution constraints needed to express it.

A portfolio manager wants to short $20m of a $40 stock ahead of earnings. The stock trades 3m shares per day, reported short interest is 25% of float, and securities finance quotes a 12% annual borrow fee with only…

A senior prop-trading case tests how you turn fill data into a controlled quoting decision.

Your ETF market-making strategy earns the spread on most fills, but over the past week your fills lose 4 basis points on average after one second. Volatility and displayed spreads are unchanged. What would you…

The construction question that follows the cash-deal merger arb question.

Acquirer A is buying Target B in an all-stock deal at a 0.5x exchange ratio. A trades at $80, B at $38. Construct the trade, calculate the spread, and explain what you're exposed to.

The practical hedging problem on any desk that cannot trade the exact instrument.

You're long $10m of an illiquid corporate bond and want to hedge the rates risk. The only liquid instrument is a Treasury future. What ratio do you use, and what risk remains?

A harder levfin question on where underwriting losses actually come from.

A bank commits to a $2bn leveraged financing. Markets sell off and investors only want the debt at 90. What happens?

Electronic market making interviews test whether you understand the microstructure you'd trade in.

Why does latency matter to a market maker, and what is queue position worth?

A market-structure case for an equities trader responsible for risk when displayed liquidity vanishes during a fast market.

You are long 300,000 shares of a $30 stock after a client block. Mid-session, news hits and the stock falls 9% in seconds, triggering a volatility halt. Before the reopening auction, the indicative price is $26.40 with a…

A live-desk judgement case for candidates expected to reason about closing liquidity, client constraints and adverse selection.

At 3:55pm, a client must sell 500,000 shares at the close. The stock normally trades 2 million shares per day, but the auction imbalance is already 900,000 shares to sell and the indicative match price is 1.8% below the…

A merger-arbitrage follow-up designed to test whether a candidate understands when an exchange-ratio hedge stops being static.

Target B will be acquired for a fixed $60 of Acquirer A stock, subject to a collar. If A trades between $80 and $100 during the pricing period, B receives 0.667 A shares. Below $80, B receives 0.75 shares; above $100, B…

The core mechanic of market making, tested with a live scenario.

You're making a market at 99 / 101 in a contract. You get hit on the bid three times in a row and are now long 300 lots. What do you do with your quote?

A credit-trading desk replay after an issuer misses earnings and the market reprices its bonds.

You cover credit trading for a consumer-products issuer reporting before the open. Make a decision at each stage, then leave a concise trading note for the desk head.

A commodities trading interview on translating inventory evidence into a risk-managed futures-spread view.

Crude inventories at Cushing are falling, prompt physical differentials are strengthening, and the front-month WTI contract moves into backwardation. A colleague says to buy the front-versus-sixth-month calendar spread…

A rates-desk market replay testing reaction function, positioning and risk expression.

You are on a US rates desk into CPI. Commit to a trade as the release and market colour arrive. You will see the reaction only after making each decision.

One of the most reliable technical dislocations in credit.

An investment grade issuer is about to be downgraded to high yield. What happens to its bonds, and how would you position?

An offer-ready market-structure case for desks that execute index flow and closing-auction risk.

A stock is being added to a major market-cap-weighted index at the close. Passive funds tracking the index must buy an estimated 8% of average daily volume. How would you expect the stock and its liquidity to behave, and…

A special-situations case that tests whether an analyst can value a binary post-close claim rather than quote its headline payout.

A target will be acquired for $40 cash plus one non-tradeable CVR. The CVR pays $10 if the FDA approves its lead drug by December 31 next year and pays zero otherwise. The target trades at $43.20; the stand-alone break…

A rates relative-value interview case testing whether a candidate can see financing and delivery optionality, not just a screen spread.

A desk sees a deliverable Treasury trading rich to its futures-implied price and proposes buying the future's cash-and-carry: buy the bond, finance it in repo, and short the futures. The apparent annualised spread is…

An FX-options desk asks this when assessing whether a candidate can turn volatility-market information into a disciplined client recommendation.

USD/BRL spot is stable, but three-month USD/BRL implied volatility rises from 12% to 18% and USD calls trade at a much higher implied volatility than equivalent USD puts. A US importer must pay BRL 100m in three months.…

A systematic-trading review after a research backtest appears to generate alpha around splits, special dividends and index changes.

A daily equity signal shows a sharp return improvement after a new corporate-action vendor feed is added. The gain is concentrated around special dividends, rights issues and spin-offs. How would you determine whether…

A physical-metals scenario tests whether you understand the distinction between exchange inventory and deliverable supply.

LME aluminium inventories are high, yet nearby physical premiums and the cash-to-three-month spread both rise. How can those facts coexist, and what would you investigate before trading it?

A credit-trading desk simulation testing trade expression, liquidity discipline and client communication after a fast market move.

You are a credit-trading analyst supporting a desk that holds a large cash-bond inventory after a disappointing earnings release. Use the market updates to prepare a risk note for the desk head and sales force.

A live scenario question. Funds want to see how you behave under loss, not in theory.

You're short a stock that has risen 40% in three weeks on no fundamental news. Your thesis is unchanged. What do you do?