How I Helped to Make Fischer Black Wealthier (1996) [pdf]

In the 1970's, Fisher Black (of Black-Scholes fame) spotted an arbitrage opportunity between Value Line futures contracts (an early version of the equal weighted S&P index) and the underlying stocks.

The value Line futures contracts were supposed to track the performance of a basket of stocks represented by the Value Line Index. However, due to an error in the way the market calculated the price of the Value Line futures (which were a geometric index), there was an error in the market pricing.

Black, who at the time was at Goldman Sachs, was one of the first to notice this error, and helped the firm make a ton of money, and this trade helped him become a partner there. This article is from the POV of one of a group of finance professors who were on the other side of the trade, who didn't realize the error until it was too late.

Awesome story! The line about believing you are an informed trader when you are really just a noise trader brought back memories of my failed trading endeavors.