Jason Karp Color Coded Information To Teach His Analysts “what was safe and what might be illegal”

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Jason Karp Color Coded Information To Teach His Analysts “what was safe and what might be illegal”

Every trader needs an edge, but not all edges are created equal. One of the most powerful edges is information. At SAC Capital Jason Karp color coded information to teach his analysts “what was safe and what might be illegal.” The white edge was “readily available information”-–completely safe but not worth much. The gray edge might be (and probably was) material, nonpublic information. At SAC the only way to be sure it wouldn’t get the firm into trouble was to talk to its legal counsel, something few traders were eager to do. So gray slid into white. Black edge information was obviously illegal. Karp warned his analysts: “If you do one thing wrong, you’re in jail and your life is ruined. There is no trade that’s ever worth it.”

And yet. As one trader, asked if he knew of any fund that didn’t traffic in inside information, answered: “No, they would never survive.” The author adds: “In this way, black edge is like doping in elite-level cycling or steroids in professional baseball. Once the top cyclists and home-run hitters started doing it, you either went along with them or you lost.”

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