This humorous article ends with a cautionary note. Inside trading is more common than we think.
There’s inside traders and then there’s bad inside traders. This guy, Dimitry Braverman, was bad at inside trading.
“This is the worst way to insider trade:
- Work in the information technology department of a big law firm that advises on lots of mergers.
- Find out about a pending deal from your work computer systems.
- Buy stock in one of the parties to the deal in your law firm 401(k) account.
- Realize that that’s dumb, your law firm might notice that sort of thing.
- Sell the stock out of your 401(k) account at a tiny ($90) profit.
- Then buy short-dated out-of-the-money call options on the same company in your personal account.
- Panic when, completely coincidentally, a lawyer at your firm is arrested for insider trading a week later.
- Immediately sell all of your call options, at a loss.
- Talk to your brother constantly on the phone during all of this, and make sure that he trades after each phone call.”
The article ends on a serious note: this pathetically bad inside trader worked at the same M&A law firm as Mr. Mathew Kluger, who has been in the news – he got the longest jail term in the history of insider trading. Coincidence? Probably. The coincidence is that they both got caught while inside traders at other firms go undetected.