dest's arbitrage history

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Overnight said:
I bet that's an interesting story all on it's own. Do tell!
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I would rather talk about the incident.

So it was the mid-late 90s and I was trading for a relation of a major privately-owned construction company. It was an LPOA arrangement and I was paid quarterly, 20% on high water. I'd been trading for the guy about a year or so and the quarterly performance fee comes due and no contact. I tried his cell and the office number goes to VM. He had an admin but her number also goes to VM.

So I liquidate positions over a couple days at limits to make sure the guy doesn't accuse me of dumping. I clear the account and leave the account dormant for weeks. I login a month later and nothing has been done. No wire out, no activity of any kind. I figure the guy is traveling and unreachable.

So fast forward a few months and I am trading my own funds and a few POAs and it's a Friday after the close and I take my Newf for a walk. I lived in Barrington Hills (west of Chicago) at the time. I am walking the dog around the block and as I approach the house I see a brown Ford Taurus parked about 50Y from the house and the driver is on a walkie. As I get closer I hear "individual is walking his dog." lol

So what do I do? I cannot live without knowing WTF is going on and figure if I really did something illegal they would have done a no knock. No way a single cop is sitting there in his car to arrest me. Further, I could not for the life of me understand what I possibly could have done (napalm)!

So I simply walk up to the driver-side door and ask the guy if he's looking for me. He's startled and says, "yeah, can I talk to you for a minute?" Wearing a black polo with ""POLICE" in yellow and his badge is on a chain around his neck and says something about "Illinois State's Attorney" officially.

So we chat at the car while the officer is petting the dog and he asks me if I have any contact with "Dick X" the POA account owner?! I told him what I knew... no contact -> closed positions -> logged in and no activity. No calls, mail, etc.

So the officer tells me he's missing and he gives me a card for the State's Atty office. Any contact and I call that number day or night.

Months go by and I keep hearing this noise on my landline. The dial tone is laggy and occasionally the phone won't disconnect when I hang up the line. I pick up the line and it's got a fast busy tone. I call the carrier and they say the line is fine but send a guy out. They charge me $80 and the line is still buggy.

So I am taking the train into town and it occurs to me that they (State LE) probably have a Pen Register or a full analog wiretap on my line. I start to think that there is no way that a Pen Register would actually cause any line trouble so now I am certain that I have a recorded line. I'm pissed and suspect that they continued to record my calls even after the discussion with the cop in the Ford Taurus. Plans are set in motion.

I am super ticked off that they are obviously running an active wire even though I was willing to interview and had told them all that I know. I barely used the landline as a single guy and I was rarely home. My sis would take my dog when I traveled, etc.

So I hatch a plan to figure out, once and for all, whether I have a tap on my line. I take the train into the city as usual. I call my voicemail from the empty train car on my cell and leave a message TO MYSELF, ON MY LANDLINE VOICEMAIL regarding a suspicious device in an "official building" planted on the nth floor. Now understand that I never called in a threat; I was talking to myself. I discussed it with an attorney (Winston and Strawn) about this after the fact, and it was 25Y ago so F off.

So, an uneventful day at the JBO and I am riding the train back to the Barrington station and my sister calls me and tells me to go to the bar-car and watch the news... ABC 7 is on and they are evacuating the building in question due to a "small fire" on one of the upper floors. My sis asks if I had anything to do with it and I hang up. I cannot imagine why she would suspect it although we'd discussed the wiretap in person. I never discussed it with her. She was telepathic.
 
destriero said:
I would rather talk about the incident.

So it was the mid-late 90s and I was trading for a relation of a major privately-owned construction company. It was an LPOA arrangement and I was paid quarterly, 20% on high water. I'd been trading for the guy about a year or so and the quarterly performance fee comes due and no contact. I tried his cell and the office number goes to VM. He had an admin but her number also goes to VM.

So I liquidate positions over a couple days at limits to make sure the guy doesn't accuse me of dumping. I clear the account and leave the account dormant for weeks. I login a month later and nothing has been done. No wire out, no activity of any kind. I figure the guy is traveling and unreachable.

So fast forward a few months and I am trading my own funds and a few POAs and it's a Friday after the close and I take my Newf for a walk. I lived in Barrington Hills (west of Chicago) at the time. I am walking the dog around the block and as I approach the house I see a brown Ford Taurus parked about 50Y from the house and the driver is on a walkie. As I get closer I hear "individual is walking his dog." lol

So what do I do? I cannot live without knowing WTF is going on and figure if I really did something illegal they would have done a no knock. No way a single cop is sitting there in his car to arrest me. Further, I could not for the life of me understand what I possibly could have done (napalm)!

So I simply walk up to the driver-side door and ask the guy if he's looking for me. He's startled and says, "yeah, can I talk to you for a minute?" Wearing a black polo with ""POLICE" in yellow and his badge is on a chain around his neck and says something about "Illinois State's Attorney" officially.

So we chat at the car while the officer is petting the dog and he asks me if I have any contact with "Dick X" the POA account owner?! I told him what I knew... no contact -> closed positions -> logged in and no activity. No calls, mail, etc.

So the officer tells me he's missing and he gives me a card for the State's Atty office. Any contact and I call that number day or night.

Months go by and I keep hearing this noise on my landline. The dial tone is laggy and occasionally the phone won't disconnect when I hang up the line. I pick up the line and it's got a fast busy tone. I call the carrier and they say the line is fine but send a guy out. They charge me $80 and the line is still buggy.

So I am taking the train into town and it occurs to me that they (State LE) probably have a Pen Register or a full analog wiretap on my line. I start to think that there is no way that a Pen Register would actually cause any line trouble so now I am certain that I have a recorded line. I'm pissed and suspect that they continued to record my calls even after the discussion with the cop in the Ford Taurus. Plans are set in motion.

I am super ticked off that they are obviously running an active wire even though I was willing to interview and had told them all that I know. I barely used the landline as a single guy and I was rarely home. My sis would take my dog when I traveled, etc.

So I hatch a plan to figure out, once and for all, whether I have a tap on my line. I take the train into the city as usual. I call my voicemail from the empty train car on my cell and leave a message TO MYSELF, ON MY LANDLINE VOICEMAIL regarding a suspicious device in an "official building" planted on the nth floor. Now understand that I never called in a threat; I was talking to myself. I discussed it with an attorney (Winston and Strawn) about this after the fact, and it was 25Y ago so F off.

So, an uneventful day at the JBO and I am riding the train back to the Barrington station and my sister calls me and tells me to go to the bar-car and watch the news... ABC 7 is on and they are evacuating the building in question due to a "small fire" on one of the upper floors. My sis asks if I had anything to do with it and I hang up. I cannot imagine why she would suspect it although we'd discussed the wiretap in person. I never discussed it with her. She was telepathic.
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Fascinating story, and that vm to self was inspired. Whatever became of Dick X? Did he emerge? Did you get paid?
 
destriero said:
Not that I am aware. Nope, never paid. No death notice/obit, nothing. Just googled it.
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But after a time, could you not have made a claim against the account and beneficial owner since you were essentially a creditor with a legitimate claim? The LPOA and the account records would surely have served as sufficient proof, no? Was it just not worth the trouble?
 
Frederick Foresight said:
But after a time, could you not have made a claim against the account and beneficial owner since you were essentially a creditor with a legitimate claim? The LPOA and the account records would surely have served as sufficient proof, no? Was it just not worth the trouble?
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I never saw any notice in the Tribune, etc. It was under $12K.
 
I cleared RJO during the wiretap fiasco. I was trading the T-complex during the mid-late 90s and went from futures-switches (front two and flies) and into the vol. During the summer of '96 I'd amassed a ton of the Sep vol-flies and condors (overlapping flies) in the 30Y which was the most active vol-contract at the time. I'd short the ATM combo into numbers, equity vol moves, FTQ, etc. I have a range of synthetic condors across three strikes.

Expiration week was crazy. I was up 600 or so and every day was another figure as I was basically pinned to the high gamma strike. I recall that on Tuesday of exp week I was sitting on a stupid gain and day-drinking at my condo when I called my sis at Chapman and Cutler to ask if I should hold through LTD. She said to hold it to the bell (nvm) which I did. She knew nothing about the product but I wired her 10% the following week. I wanted affirmation outside of someone with a bias, motive, etc.

I lost $450K in '97 and had a huge tax bill that I was confident I could recover. I was not a tax attorney and fairly young and seemingly invincible. I ended '98 with my starting '96 money after recovering from the '97 loss and taxes from the '96 fly-trade.

1997 was the Telecom dereg Bill passing and the birth of the dotcom rally.
 
RAES (option) Bandit

I met a Dem-donor and HFer at a Gore rally in '99 and ran a sub-account for the donor until 2001. There was a prominent tail-hedger who also ran an account there who lost 12% over the same period. The founder of the fund was keen on posting all sub-account results in a monthly email.

I left and funded my IBKR account with my perf-fee, taxable account and liquidated my self-directed IRA. I wanted to be free to short the dotcom/telecom bubble. I met my wife during this transition and she made me aware of the telecom dereg act and she personally held 120K shares of ALGX and she was restricted at the time so we wrote collars on the shares.

I had size-wins in short telecom that did well against named like LVLT and other tickers in the CLEC-space; partially as a L/S hedge against my GF's ALGX position. I bought back my shorts early when I discovered the COMS/PALM arbitrage trade and the crossed quotes in the former.

The dual-listings in SN equity vol were not linked by the OCC. You would often see the same listing with calls bidding at 3.25 on PHLX and offered at 3.00 on say, PSE. You could lift the offer at PSE at 3 for 20 and hit the bid at PHLX for 3.25 x 20. I say 20 because under RAES retail was prioritized up to 20 lots. The above was the actual market in the front contract in COMS ATM options.

The "RAES arb" was amazing. My first trade was the above 20-lot. I had been picking off stale quotes and exploiting RAES for months and this just happened to fall into my lap. I was filling these manually; always buying to open at the limit and STC at the mkt, routed to the crossed market exchange. I scratched less than 3% of all transactions.

This went on for months, mostly in COMS but in other tickers as well. Any high volume large cap saw various levels of crossed market arb.

You had to keep it to 20-lots or less to receive the instant, marketable fill. I made 1.4 in the first month on 20-lot orders. I developed carpal tunnel and was on Naprosyn for the pain. I hired a local programmer to automate through their API and literally the day we were to go live the arb was dead.

That morning I had a 15 cent arb in some ticker and the buy filled but the STC hanged. Attempted to cancel but it hanged as well. Price on the target exchange dropped in line with the other listings. No longer exhibiting the hang but I was no longer marketable.

Any crossed mkt would hang. I would find that OCC finally became aware of the x-market arb and was freezing any crossed quote seen on SN-vol across all exchanges. The arb was dead.

I move on in SN vol preparing for the CLEC crash (as I saw it) and a month later my doorman called me to the lobby to let me know that two attorneys had been at the front desk asking to ring my unit. He told them I was on vacation but gave me their card. I had planned on calling them on Monday, but received a C&D letter from the OCC on Saturday.

Found out that the attorney's represented IBKR and wanted to discuss the OCC letter. OCC was also asking for disgorgement of gains involved in the RAES arb.

I never heard from the OCC again... no summons, nothing. I am loyal to IBKR and how they handled the situation although I no longer can stomach their front-end and margin rules under PM.

https://www.interactivebrokers.com/en/accounts/legalDocuments/raes.php
 
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