Theodore A. Andros and Joan B. Andros - Page 31

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          sales on each day.  A few of these transactions were butterfly              
          spreads.23                                                                  
               At times, Tandrill established positions that appeared to be           
          regular, nonbutterfly spreads but which, on closer examination, had         
          little risk involved.  For instance, in early November 1979,                
          Tandrill purchased February 1981 gold contracts and sold April 1981         
          gold contracts, a “forward spread” which apparently anticipated             
          that interest rates would decline.  However, at the same time               
          Tandrill purchased January 1981 silver contracts, it sold December          
          1980 silver contracts, resulting in a “back spread” which sought to         
          profit from an increase in interest rates.                                  
               In 1979, Tandrill bought and sold 160 contracts of copper              
          futures straddles, 330 contracts of gold futures straddles, and             
          1,110 contracts of silver futures straddles through Bache.24  Of            
          these transactions, 164 contracts of gold futures, 721 contracts of         
          silver futures, and 100 contracts of copper futures were all                






               23   The butterfly effect offsets forward spreads (which are           
          profitable if interest rates decline) with back spreads (which              
          are profitable if interest rates increase). Mr. Maduff believes             
          that this sort of strategy is "economically schizophrenic".                 
               24   Mr. Maduff believed that because Tandrill engaged in              
          more transactions than necessary to achieve a given economic                
          purpose, its transactional costs were greater. Moreover, because            
          Tandrill held positions for short periods of time, it was less              
          likely the positions would move.                                            




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