How one trader made $2.4 million in 28 minutes (2024)

Update, 5/7/2015: On April 6, Reuters reported that, according to its data, a tweet about a potential deal between Intel and Altera appears not to have been the impetus for timely options trades that netted $2.4 million in 28 minutes. That tweet, sent by a Wall Street Journal reporter, came 19 seconds after the trades occurred. Intel and Altera have reportedly since called off any talks, and no deal appears to be in the works. Fortune’s story has been updated to reflect these facts.

A few years ago, a London hedge fund created something that quickly became known as the Twitter fund. A computer system it operated “read” 100 million tweets a week and determined whether they reflected a positive or negative outlook on the world.

If the sentiment was positive, the fund would buy stocks. If it was negative, it would place a bet that stocks would go down.

It was a horrible idea. The fund crashed and burned within two years.

But here’s perhaps what the fund should have done: On Friday an options trader made more than $2.4 million based on a single news wire in just 28 minutes. Nice work if you can get it, which you probably can’t.

The trade had to do with reports that Intel (INTC) is in talks to buy Altera (ALTR). News of the merger discussions between the two chipmakers surfaced on Dow Jones Newswires on Friday afternoon, but no deal has been officially announced. Nonetheless, one second after the news hit, a trader bought options for around 300,000 shares of Altera. The options had a strike price of $36, and the stock at the time traded for $34. So they were so-called out of the money options, because anyone exercising them would end up having to pay $36 for a $34 stock. And the options were set to expire in mid-April. They didn’t cost very much, around $0.35 each, or around $110,000 for whole trade.

Less than 20 seconds later, Altera’s stock was halted on the Intel merger news, according to data from Nasdaq. Two seconds after that, a Wall Street Journal reporter tweeted the news, according to Dow Jones. When the stock reopened at around 3:40, the shares had jumped 28%. The stock closed at nearly $44.50. That meant the options that had been bought for $0.35 were now worth nearly $8.50, or collectively just over $2.4 million more that they were 28 minutes before.

Intel is in talks to buy Altera. Deal would be largest in Intel's history. Scoop w/ @danacimilluca coming to http://t.co/Q7kOQBB8Zh $ALTR

— Dana Mattioli (@DanaMattioli) March 27, 2015

Options traders say they see shady trades all the time. And the Securities and Exchange Commission regularly investigates questionable trades, and does sometimes bring insider trading cases against the investors behind them.

Experts say a swift fingered options trader could have executed a trade in nearly a minute, but there was some skepticism in an options trader chat room as to whether that was possible. A much better explanation: The trade was done by a computer. A few years ago, high-frequency trading was relatively rare in options markets. But today, traders say it is increasingly common.

And perhaps it’s not all that surprising a computer would be able to pick up something like a news wire hit or a tweet tipping readers off about the potential deal.

The question, like with all debates about high-frequency trading, is whether it’s fair, or, rather, whether it’s any fairer than a trader using insider information. Generally, the theory behind making trading on insider information illegal is that it gives some people an unfair advantage over others. Other investors didn’t have access to the same insider information.

But it’s also true that most investors don’t have access to a high-frequency trading computer that could make a 300,000 share options trade in less than a minute. So isn’t it just as unfair to allow high frequency trading, in at least this instance, as well?

Jim Strugger, a derivatives strategist at MKM Partners, says that’s a silly argument. Insider trading is illegal and high-frequency trading is not. High-frequency trading could be an issue, Strugger says, when it is based on market data that only investment firms have access to, or access to first. Insider trading, too, is about access to private information. But when a trade is based on public information, or something said on Twitter, then it should be fair game. (Strugger’s firm, by the way, is not a high-frequency trader. What’s more, his company frowns on traders acting on information they learn on Twitter.)

Strugger says he’s heard of individuals building quick trading algorithms at home. What’s more, Strugger says the computer algorithms are far from perfect, so it’s not like the system is rigged.

“I get pitched all the time from people who want to sell us computers systems that can make quick trades on tweets or news about potential deals, but I turn them down,” says Strugger. “For every deal they get right, there are ten they get wrong.”

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How one trader made $2.4 million in 28 minutes (2024)

FAQs

How did one trader make $2.4 million in 28 minutes? ›

When the stock reopened at around 3:40, the shares had jumped 28%. The stock closed at nearly $44.50. That meant the options that had been bought for $0.35 were now worth nearly $8.50, or collectively just over $2.4 million more that they were 28 minutes before. Options traders say they see shady trades all the time.

What is the 3 5 7 rule in trading? ›

What is the 3 5 7 rule in trading? A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.

How much money do day traders with $10,000 accounts make per day on average? ›

With a $10,000 account, a good day might bring in a five percent gain, which is $500. However, day traders also need to consider fixed costs such as commissions charged by brokers. These commissions can eat into profits, and day traders need to earn enough to overcome these fees [2].

How fast can you become a profitable day trader? ›

Like any other endeavor you seek to master, you must be a good student and diligently practice daily. Not to be dismal, but only about 4% of people will make it as successful day traders. Further, it takes about six months to a year of hard work before seeing those consistent profits.

What is the highest trade ever recorded? ›

Probably the greatest single trade in history occurred in the early 1990s when George Soros shorted the British Pound, making over $1 billion on the trade. Most of the greatest trades in history are highly leveraged, currency exploitation trades.

How is the richest trader? ›

Profiles of the Top 5 Richest Traders in the World
  • George Soros: The Master of the Quantum Fund. ...
  • Ray Dalio: Pioneering Bridgewater Associates. ...
  • Warren Buffett: The Oracle of Omaha. ...
  • Carl Icahn: The Activist Investor. ...
  • Paul Tudor Jones: The Contrarian Trader.
Feb 11, 2024

What is 90% rule in trading? ›

The 90 rule in Forex is a commonly cited statistic that states that 90% of Forex traders lose 90% of their money in the first 90 days. This is a sobering statistic, but it is important to understand why it is true and how to avoid falling into the same trap.

What is the 80% rule in trading? ›

The Rule. If, after trading outside the Value Area, we then trade back into the Value Area (VA) and the market closes inside the VA in one of the 30 minute brackets then there is an 80% chance that the market will trade back to the other side of the VA.

What is No 1 rule of trading? ›

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade. A decent trading plan will assist you with avoiding making passionate decisions without giving it much thought.

Who is the most profitable day trader? ›

There are a lot of successful traders but Jesse Livermore is often regarded as the most successful day trader.

Can you make $200 a day day trading? ›

A common approach for new day traders is to start with a goal of $200 per day and work up to $800-$1000 over time. Small winners are better than home runs because it forces you to stay on your plan and use discipline. Sure, you'll hit a big winner every now and then, but consistency is the real key to day trading.

Can I make 1000 per day from trading? ›

Earning Rs. 1000 per day in the share market requires knowledge, discipline, and a well-defined strategy. Whether you choose day trading, swing trading, fundamental analysis, or any other approach, remember that success takes time and effort. The share market can be highly rewarding but carries inherent risks.

How do most day traders make money? ›

Day traders try to make money by exploiting minute price movements in individual assets (stocks, currencies, futures, and options). They usually leverage large amounts of capital to do so.

Which is the best trading strategy? ›

  • Day trading. Day trading is a popular trading strategy that involves buying and selling financial instruments within a single trading day. ...
  • Swing trading. ...
  • Scalping trading. ...
  • Arbitrage trading. ...
  • Gap trading. ...
  • Trend trading. ...
  • Pairs trading. ...
  • Momentum trading.

What is considered a successful day trader? ›

Day trading can be profitable, but it's far from guaranteed. Many day traders end up losing money before calling it quits. Success in day trading requires a deep understanding of market dynamics, the ability to analyze and act on market data quickly, and strict discipline in risk management.

How do some day traders make so much money? ›

Day traders try to make money by exploiting minute price movements in individual assets (stocks, currencies, futures, and options). They usually leverage large amounts of capital to do so.

Who has made the most money day trading? ›

Who is the most successful day trader? There are a lot of successful traders but Jesse Livermore is often regarded as the most successful day trader. His success came from trading on the capital earned by himself and by trading on setups made by himself.

Can you really become a millionaire from trading? ›

In conclusion, while it is possible to become a millionaire through scalping trading, it requires a significant amount of skill, experience, and risk management. As with any form of trading or investment, it is important to thoroughly research and understand the risks involved before investing your time and money.

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