From Zero TradFi Experience to 10 Million Dollars in Profit: The Wall Street Arbitrage Chronicles of Two "Crypto Dummies"

Original Author: CBB（@Cbb0fe）
Compiled by｜Odaily Planet Daily Azuma

Summary

• Odaily Note: For more details on this part of the story, refer to "HyperEVM 'Top 1' Arbitrage Team's Public Strategy: How to Move Out $5 Million in Six Months."

Let's turn the clock back to October 2025.

For the past eight months, we have been running the top-ranked arbitrage bot on HyperEVM.

But this hard work is about to end. For the past few months, we have been competing with Wintermute, and now, new players have entered the scene, significantly compressing profits.

No problem. My buddies and I are used to this situation. We never try to compete long-term with institutions and their massive armies of workers. We can't do it; there are only two of us.

Our advantage has always been ------ to deploy a strategy as quickly as possible and then extract as much profit as we can before the big players come in.

They can't deploy a strategy within 48 hours. They have regulatory constraints, internal processes, approval procedures, and so on, while we don't have any of that; we just need to be as fast as possible.

So, it’s time to look for the next hard job.

We started thinking, where is the next opportunity?

On October 10, that thing just happened. The crypto market seemed completely hopeless, everyone had been thoroughly beaten, and there were no exciting new opportunities to explore.

So, we began searching for a new battlefield. On October 13, HIP-3 launched on Hyperliquid. Three days later, TradeXYZ officially launched the first stock perpetual contract market ------ XYZ100.

Considering that over 40% of the token supply on Hyperliquid has yet to be distributed to the community, we thought it might be a good idea to generate some trading volume on HIP-3.

In fact, this was exactly the same mindset we had eight months ago when we discovered the arbitrage opportunity on HyperEVM: back then, we just wanted to generate some spot trading volume on Hyperliquid.

We didn’t know if this would work, but we decided to give it a try ------ to develop and operate a stock perpetual contract bot that arbitrages between HIP-3 and traditional financial markets.

Step One: Entering the Traditional Financial World

One thing needs to be clarified in advance: we had never traded stocks in our lives before this.

We didn't even really understand what futures were. Basically, we knew nothing about traditional finance.

The only thing we knew was that for what we wanted to do, IBKR was a highly competitive platform, so we decided to study it first.

In the first few days, I was mostly just trying to figure out how to use the IBKR platform. I basically took screenshots of everything and sent them to Claude: "What is this?" "What does this mean?" "How do I operate here?" "How do we hedge XYZ100?"

Basically, this was how we started learning TradFi. Meanwhile, my buddy began researching IBKR's API, trying to figure out what could be done and what couldn't.

Coming from the cryptocurrency world, he was used to connecting to an exchange API and getting the program running very quickly.

But IBKR was a completely different world. Market data subscriptions, contract specifications, order types, permissions, API limits, TWS, IB Gateway…… We had a lot to figure out, and at first, we weren't even sure if this could be done.

However, after a week of wrestling with IBKR, we began to find some insights.

Building the Arbitrage Bot

The strategy is actually quite simple.

We treat IBKR's price data as the "real price" and continuously check for arbitrage opportunities on HIP-3.

If the trading price of a market on HIP-3 is discounted relative to IBKR, we go long on HIP-3 ------ only after our order on Hyperliquid is filled do we establish a corresponding short position on IBKR.

If the trading price on HIP-3 is at a premium relative to IBKR, we do the opposite ------ short on HIP-3, and after the order is filled, go long on IBKR.

In theory, it’s very simple, but in practice, we need to set a lot of parameters for each HIP-3 market.

Taking the NVDA arbitrage strategy on the IBKR side as an example:

["NVDA", 55, 400, { maxDelta: 800, slippage: 0.1 }]

• "55 shares" is our minimum hedge size. Since IBKR's commission is at least $1, we don't want to execute a lot of micro trades. Therefore, we let the Delta exposure accumulate until it reaches 55 shares of NVDA before hedging on IBKR.
• "400 shares" is the maximum hedge size for our single IBKR order to avoid excessive slippage.
• "maxDelta: 800" is our safety valve. If for some reason our trades on IBKR keep failing, causing the position difference between the two markets to reach 800 shares of NVDA, the bot will stop trading that market.
• "slippage: 0.1" is the maximum slippage we allow when hedging on IBKR.

Next is the HIP-3 side:

NVDA: pair("NVDA", "xyz:NVDA", {makerSize: 400, makerOffsetBuy: 0.12, makerOffsetSell: 0.12, cancelDelta: 0.02, takerRatioBuy: 0.05, takerRatioSell: 0.1, takerMin: 1, takerMax: 2000, limit: 110000, makerEnabled: true, preMarketOffset: 0.04 })

It looks complicated, but the logic is actually quite simple.

• "makerSize" defines our order size, while "makerOffsetBuy / makerOffsetSell" defines how much price difference we want to achieve relative to the fair price.
• "cancelDelta" tells the bot how much the price needs to change before it cancels the existing order and re-places it.
• For taker trades, "takerRatioBuy / takerRatioSell" defines how much price difference we need to actively take the order; "takerMin / takerMax" controls the trading size we are willing to execute.
• "limit" is the maximum total position size we allow in that market, while "makerEnabled" simply allows us to choose whether to enable or disable the maker orders.
• Finally, "preMarketOffset" adds some extra price difference during pre-market trading, as liquidity on the TradFi side is much worse during that time.

The First Trade

By the end of October, we were finally ready to start trying.

The first few days were a bit chaotic. We were constantly battling with the IBKR API, sometimes losing connection, and my buddy had to find ways to keep everything connected and running smoothly.

But we quickly realized that there were plenty of opportunities. Basically, it felt like picking up money.

Throughout November, we executed about $850 million in trading volume on HIP-3, with profits exceeding $500,000. That was pretty good.

December was a bit calmer. We completed about $550 million in trading volume, and profits were still decent, but we actually started thinking about whether we should focus on other things.

It was indeed profitable, but it didn’t seem like a gold mine.

However, we decided to continue. As always, as long as there are profits to be made, we usually find it hard to stop.

Precious Metals Frenzy

The real explosion happened in January this year.

Gold and silver began to surge wildly, and the demand on Hyperliquid was completely insane. Making money became almost too easy, and our preparations over the past two months were precisely for such a market.

One problem we faced was liquidity. Basically, everyone wanted to go long on commodities on Hyperliquid, which meant we needed to continuously inject more funds into the IBKR side for hedging.

We kept adding funds to IBKR, but transferring such large amounts of money also brought banking troubles. EtherFi was an MVP in this matter, allowing us to quickly complete large fund withdrawals.

Throughout January, we completed $1.7 billion in trading volume on Hyperliquid, with just the funding fee income exceeding $600,000.

But as I mentioned before, there were only two of us. We had no internal processes, and we acted very quickly. Basically, everything was tested directly in the production environment, and sometimes, this came at a cost.

On January 27, I had just arrived in Dubai, ready to grab coffee with my buddy and chat about the bot. Suddenly, I received a margin call alert from IBKR on my phone.

I had no idea what was going on. It was still early, and the market hadn’t experienced any significant fluctuations.

I logged into IBKR. It turned out we were net short $120 million in gold futures, while gold was in the midst of a fierce rally.

We immediately shut down the bot. At that moment, I was shaking all over. I was really scared of being liquidated because all the trades on IBKR were basically executed by the bot, and I wasn't that familiar with IBKR myself.

In the next 15 to 30 minutes, I manually closed out the $120 million short position in gold.

Later in the afternoon, when the market opened, we were finally able to calculate the loss ------ a loss of $1.1 million.

That was quite painful. But we had no time to cry about it; we had to figure out what had happened and fix it as soon as possible.

Eventually, we found out that the reason was actually ridiculously stupid: there was an issue with the data refresh from the IBKR API.

The bot thought there was a Delta difference between our positions on Hyperliquid and IBKR, so it kept shorting gold on IBKR, trying to correct a Delta exposure that actually didn’t exist.

Again and again; again and again; again and again……

Until it had shorted $120 million in gold, and we started receiving margin call alerts.

Clearly, we needed more control measures.

We needed to ensure that the data we were getting from IBKR was indeed up to date. Before allowing the bot to continue expanding positions, we needed to add additional checks. More importantly, the bot was not originally designed for such large trading volumes and such dense opportunities.

We spent an entire day fixing all the issues. The next day, the new version of the bot went back online, but our confidence had been shaken. Maybe we didn’t really know what we were doing. Maybe the risk-reward ratio of this thing wasn’t worth it at all.

We had just lost $1.1 million due to a ridiculously stupid issue, and now we started to feel that the bot could go wrong again at any time. This was the first time since the bot went live that we seriously considered ------ should we just stop?

But you should already know us by now…… We are just two greedy bastards. After losing seven figures, we wouldn’t give up. We would only work harder.

And I think this might actually be something we are good at. We have developed many bots together in the past, and almost every time we went through a phase of crazy losses, but for some reason, we always managed to bounce back.

We wouldn’t sit there crying for hours. We would try to figure out what went wrong, fix it, and then keep moving forward.

Before recovering the losses, this loss would basically become a taboo topic among us brothers.

The next day, silver experienced a crazy pullback after hitting an all-time high, and at one point, there was even about a 3% price difference between Hyperliquid and IBKR.

We made about $600,000 in profit from it.

We TMD are back!

Liquidity Management and Speed Upgrade

At this stage, we had already made quite a bit of money. And we knew how this game worked.

If there is so much money to be made here, then there will definitely be more people, along with their massive armies of workers, coming to fight for this cake. So, we must become stronger as soon as possible.

The first issue is funding. This is completely different from pure cryptocurrency arbitrage ------ in the crypto market, rebalancing funds between different trading venues can be done in less than five minutes; but here, we have to go through banks to transfer funds to and from IBKR.

Therefore, we designed a dynamic system that adjusts strategies based on the liquidity available on the IBKR side. When liquidity on IBKR is low, we are willing to incur some costs to close existing trades to free up funds.

At the same time, we would require a larger price difference to establish new positions. When liquidity on IBKR is high, we would do the opposite; we would be willing to accept a smaller price difference to open new positions and deploy funds more aggressively.

The second area that needed improvement was speed. Previously, we had been using IBKR's price data as the source of real prices. This certainly worked, but this data source was relatively slow.

As more and more participants entered this game, we knew that sooner or later, this would turn into a speed race. Continuing to rely on IBKR's data was no longer sufficient. So, we began looking for alternatives and found Databento.

With Databento and a Nasdaq data license, we could access a much faster direct market data source.

We applied for access in January and finally got approved at the end of the month.

From Precious Metals to Oil

By February, the metal market was still hot, and we completed about $1.5 billion in trading volume. As if that wasn't enough, at the end of February, Trump decided to bomb Iran, causing wild market fluctuations and pushing oil prices above $100.

At this point, we were making about $60,000 to $120,000 daily from arbitrage spreads and funding fees. Of course, excluding Saturdays and Sundays, because traditional financial markets would be closed, and we were bored to death.

If we "only" made $40,000 in the past 24 hours, we would even feel that something must have gone wrong.

So, we would check the bot, adjust parameters, try to figure out what was happening, and how we could further optimize.

Claude was a great help in this process. We could feed all the trading data from Hyperliquid and IBKR to it and let it analyze: where did we lose the most money? What exactly went wrong? What else could be improved?

This was actually our first time using AI to analyze trades, and it brought about quite a change. Even when everything was going smoothly, we maintained this almost obsessive state.

Basically, this was the only way we knew to stay ahead.

My buddy and I discussed the bot all day long. He pushed code updates almost every day, while I continuously adjusted parameters based on what was happening in the market.

Semiconductor Frenzy

By the end of April, as the Iran conflict began to cool down, we thought that this crazy profitability was finally coming to an end.

In the past few months, we had been making about $500,000 a week, and we really couldn't think of anything that could continue to create such large-scale arbitrage opportunities. Then, semiconductors and all "bottleneck trades" suddenly started to explode.

Stocks like SNDK and MU began to trade like pure meme coins. It was just too crazy.

We started building this bot in October when basically nothing was happening in the market. Since then, we have experienced precious metals rallies, oil rallies, and now, semiconductors are being hyped up like scam coins on BSC.

What on earth is happening in this world?

Clearly, there are many factors of luck involved. We just happened to be in the right place at the right time, and we happened to have a product that was already running and well-suited for this market environment.

But I believe that believing in HIP-3, stock perpetual contracts, and more specifically, believing in TradeXYZ early on was indeed a good judgment.

In May, June, and July, we maintained trading volumes of $1.5 billion to $2.5 billion each month, steadily earning about $400,000 to $500,000 a week.

Conclusion

Now it is early September. Since we started, many institutions have entered this market.

Ethena has also announced plans to enter the stock basis trading field in the coming weeks. For us, this opportunity may be coming to an end.

But it has definitely been a crazy journey. In ten months, during a period that basically felt like a "crypto winter," we achieved:

• A total trading volume of $32 billion on both HIP-3 and IBKR;
• 1.5% of TradeXYZ's total trading volume;
• $10 million in profits.

Of course, all of this was made possible by having a large amount of deployable liquidity, but in terms of actual deployed capital, the annualized return rate is still around 35% to 45%, depending on different stages.

More importantly, this was a fantastic opportunity that allowed us to truly enter the traditional financial world for the first time and understand how it operates.

Ten months ago, we had never traded stocks and barely knew what futures were. Now, we have traded $32 billion worth of stocks and related contracts.

The only thing left to do now is to pray for Hyperliquid Season 3 to arrive soon.

Thank you for reading to the end. We will return with the next story.