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Comment by JumpCrisscross | Hacker News Reader

> you'd be one of thousands of people holding HTZ calls or TSLA puts in your Robinhood account

Former options market maker. We regularly got incredibly detailed data requests from regulators following corporate actions. Everyone who made money got scrutiny. Anyone who made money who wasn't similarly profitable before is almost automatically punted to their broker's compliance department, who will put in several hours of investigative work by default.

One of the most consistent knowledge gaps between professional and amateur traders, I've found, is the underestimation of how advanced and pervasive insider trading / market manipulation surveillance is.

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I seriously doubt this is possible now that WSB is throwing around options like crazy.

Yeah there are a crazy number of people yoloing in crazy options plays right now. Their job must be much much harder these days if that’s the case.

I think you missed this part:

> Anyone who made money who wasn't similarly profitable before

WSB is one offs and gets investigate. Other market players have historical data showing they are not one hit wonders. Like someone who hits 5/17 is different than one who hits 1/21

Yeah I doubt they get investigated. They would have already talked about it by now.

Many WSBers have been investigated, myself included.

Thus it's easy to distinguish the guy that made a single perfect call from the crowd of imperfect one. The only solution for them would be to lose as much as much as everyone else from WSB... at least they wouldn't have to ever pay tax again right?!

> knowledge gaps

It's something you know intellectually, but MAN it's wild to see it in action.

It doesn’t take that many puts in Tesla to make a killing. If you bought 5 Tesla puts at 1700 and then sent out a tweet from Musk saying “I’ve contracted coronavirus and am expected to be hospitalized due to the severity of the symptoms. I am temporarily stepping down from my position as CEO until I am healthy enough to lead this company.”

The price of Tesla would plummet by 75% for at least 30 mins while the mess was sorted. If it dropped to 500, you could make 500k easily without very much risk of being detected. Then switch directions and buy calls. Easy money. Or get 5 friends to but 1 put each. Not that hard and pretty undetectable.

Bad idea to let friends in on it, as one of them may mess up.

No way it would drop 75%, the exchange would halt the trading for that particular stock.

> the underestimation of how advanced and pervasive insider trading / market manipulation surveillance is.

Can you please explain to us how all-knowing and how all-powerful the SEC / gov is?

Given the SEC only has a staff of 4600 employees?

How advanced and how pervasive are their technologies?

Any examples?

Banks and trading firms have substantial compliance departments that do a lot of the leg work.

Sorry, but are you unaware of modern technology and conventions that allow small groups of humans to efficiently process and analyze staggering quantities of data? Do you think such tools and methodology are only available to the tech sector?

And 4,600 is just the number of employees at the SEC — there are legions of employees at the relevant institutions who work on data compliance.

This might be true if you work at a professional brokerage or hedge fund, but there's no way the SEC can investigate everyone holding a few million worth of TSLA options.

Someone who buys a few million in puts just before hacking twitter is indistinguishable from some random robinhood user who decides it's time to go all in on puts because of a wsb post.

People in this thread are seriously underestimating the competence of the authorities in dealing with financial crimes. Virtually everything people are suggesting here is something law enforcement has seen a thousand times before.

Lots of people have had the idea that the SEC/FBI/etc. can never catch them. Right up until they go to prison.

> People in this thread are seriously underestimating the competence of the authorities in dealing with financial crimes.

Any stats/evidence to backup your claim?

So you're saying insider trading is a well understood and highly prosecuted crime? I'd love to believe that, but I'm wildly skeptical that financial crimes (including insider trading) aren't incredibly pervasive in our society. In fact, I'd bet good money the overwhelming majority of people get away with it - of course there's no way to prove that because nobody wants to fess up to a crime they got away with.

When they're motivated to turn the eye of Sauron toward you the Feds can be very hard to evade. This can happen in a lot of ways. Whether you got a tip from a family friend or you knew what trades to make in advance of some fake rumors on Twitter (because you planted them), if you turn $5,000 into $250,000 with some perfectly timed options trades around a news event in an individual stock you will show up on their radar.

Of course, insider trading among well connected hedge fund managers and our unaccountable financial elite is indeed pervasive and goes by without being prosecuted all the time, but it's fair to assume yesterday's hackers aren't in this protected class.

>Of course, insider trading among well connected hedge fund managers and our unaccountable financial elite is indeed pervasive and goes by without being prosecuted all the time

And a lot of those non-prosecutions involve either (a) civil fines, (b) the compliance department censuring or firing the relevant employee, or (c) the Feds backing down from a fight with a big white shoe defense firm. None of that applies to these Twitter hackers.

I'd bet it's just like drink driving. A significant minority do it despite the heavy penalities it brings. I don't know about women but I'd wager between 10-25% of men drink drive semi-regularly.

Wait do you mean they bought millions of dollars worth of put options or they bought put options they then sold for millions of dollars?

Because anyone could just buy a crap load of $0.10 options marked a week out, wait a few days, then tank the stock. It would look like you got stupidly lucky, I have no clue how anyone could connect that to the twitter event directly. Especially since it’s not like you’ll be the only one that “won the lottery”.

(Tesla isn’t a great stock for doing this though because their IV is so high that the premiums are crazy expensive)

> It would look like you got stupidly lucky

Precisely why you would be caught.

https://ns.reddit.com/r/wallstreetbets/comments/how6us/1m_in...

So you would investigate this poster for insider trading? There are thousands of posts like this each week.

Search Google for "fbi insider trading press release". Every one of those people thought nobody would find out. They were wrong.

Have you met r/wallstreetbets? While this certainly wouldn't be true for most people, many "day traders" make exactly these kinds of option plays that are in many cases literally just luck. There's many thriving communities around public market information before it's seen by the "mainstream".

For these people buying $10,000 out of the money contracts on a random ticker is completely normal and still legal. So tipping somebody like that off would certainly hard to correlate.

> It would look like you got stupidly lucky, I have no clue how anyone could connect that to the twitter event directly

The more standard deviations you go into profitability, especially over one trade, the more likely you'll be to get the stink-eye.

From that point, if someone raises a flag, it's just a matter of seeing whether they've been implicated in anything else. It's why departments that seemingly have no reason to have intel access are hooked into classified networks - precisely for this kind of data sharing.

Does your account have a history of making those sorts of trades? That's a time-consuming and costly thing to fake.

Is your position outsized relative to other punters in the OTM weeklies market? Most people don't bet the farm on one big lottery trade because the risk of ruin is too great.

Will there really be that many people who time things as well as you do and haul in a bonanza payout as though they had perfect foresight? A lot won't even be watching the market for the 5 or 10 minutes your rumor moves the stock, and of those who are, a lot of them will hang on for moar gainz.

Right, purchase something like 200-300k worth of OTM options with low enough IV, tank the stock, cash out for 2-3mil. A 10x increase isn't all that crazy and and this trade is indistinguishable from someone that just likes to gamble on short-term options. Pay your taxes and brag to your friends about how you should start a hedge fund.

Just doing that would be suspicious. Establishing a record of doing similar things for months to a year before the hack and THEN doing it, and continuing to do so for other stocks for a while after... well, then there'd be a LOT more plausible deniability.

r/wallstreetbets calls these (rather unfortunately) "fd" options.

Basically you can use not that much money to buy unlikely to be profitable options and make an actual crapload of money - and it would look identical to just being lucky.

The thing is 90% of people don't trade options themselves, and 99% of people don't do random fd plays. If you tipped off someone from WSB then they'd likely get away with it - that's what they do. Tip off a family member who has never traded options before, well....

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