Two weeks ago, an NBA cheating scandal rocked the basketball world as a player, a coach, and an assistant coach were accused of wrongdoing. While this was shocking to many in the sports world, this was small time compared to what I see on Wall Street and in the options trading world. Let me explain …
On October 23, Portland Trail Blazers coach Chauncey Billups and Miami Guard Terry Rozier, as well as former player and assistant coach Damon Jones, were arrested as part of a wide-ranging investigation into illegal sports betting and rigging poker games backed by the Mafia. Not good!
Later that night, I was at the gym and chatted up a guy whom I loosely know who played in the NBA for over 10 years. I asked this former NBA veteran his thoughts on this news, and here is essentially what he said:
First, he hoped that it was largely a misunderstanding and that his former “coworkers” would be alright (though I don’t think he was hopeful on that).
Second, he said something that resonated with me: For some people, no matter how much money a guy makes, he will always want more, no matter the risk.
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The second point he made really changed my perspective on this situation. Before I talked to him, the thought I had when I heard this story was, “How stupid can these guys be? They are making $5-$10 million a year, and they would throw it all away?!!!”
But then this former NBA veteran got me thinking, and I realized that part of what I do for a living is tracking down option activity tied to Wall Street professionals trading on insider information. The Wall Street cheaters were no better than the NBA cheaters!!
The basis of my trading system is tied to my time on the floor of the Chicago Board of Options Exchange (CBOE), where I was a market maker. And in that time on the trading floor, COUNTLESS times I would make a market on a call or put option, and in the days to come, a takeover, an upgrade, or some news item would hit that would send these options buys to massive profits. It was in these moments that I realized that I should be making similar trades to these Wall Street cheaters.
Now let me be clear, when I am tracking unusual call or put buying for Cabot Options Trader subscribers and then executing similar trades to these Wall Street cheaters, we are doing NOTHING illegal. I know nothing about the impending news and am simply tracking big-money call and put buying, and this is perfectly legal. This has been a very profitable strategy for me and Cabot Options Traders!
Stepping back, my NBA “friend” was spot on when he said some people will take unnecessary risks to make money even when they have more than enough, as Wall Street is full of stories of insider trading and cheating over the years. And my job at Cabot Options Trader is to find those cheaters and profit from their hubris.
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