the trader was the head of the trading desk at the same time that was a subdivision of the bank (brokerage), it was in the nineties. The bank had bought the brokerage cause they had no real experience in trading. So the trader also overlooked everything. The trader had allready cashed in when the broker was taken over as the management used to be partly owner too, guess he saw the whole thing as an extra option for him personally. I know it sounds like a joke, but it happened ...
I know an even worse story of a desk where an option trader (the guy has died of cancer in the meantime) that hid his position from a bank where he valued his index options at vol 18 where in reality the index was trading over 30. Only two other options traders knew this, risk management knew nothing. I found this out by accident as I happened to visit that trading desk and had seen something was totally wrong with the greeks of the position. One of the other options trader I knew signed me to shut up. He later told me on his private phone how it really was. As vol later in the year took a dive he managed to get away with it. This was at another bank.
