Chapter 146 Systemic risk

  Systematic risk is market risk, which affects all assets and cannot be eliminated through asset portfolio. For example, wars, natural disasters, inflation, energy crises, etc. Because once this type of risk breaks out, it will affect the entire market, so it is also called non-diversifiable risk.

  Most people know the truth that you can't put all your eggs in one basket, and this truth also applies to the investment market. For example, if you buy shares in Boeing, you must also buy some shares in Airbus in a timely manner, because in the aviation field, these two companies are facing each other, and there is a strong competitive relationship between them. If one company loses a large order, then the order is most likely to fall into the hands of another company. This kind of risk is unsystematic risk, which can be hedged through investment portfolio. The largest investment portfolio in the market is a basket of stocks that constitute the index, and the external reflection is the stock index. In theory, unsystematic risks are completely hedged in this portfolio.

  One of the original intentions of stock index futures is to hedge systemic risks. For example, a war broke out suddenly in a certain country. This situation is an unavoidable systemic risk for the capital market. In this case, investors can short the index to keep the capital from shrinking.

Commodity futures also have similar functions. In fact, at the beginning of the establishment of the commodity futures exchange, it was to hedge the risks from the spot market. place for speculation.

As trendsetters in the market, hedge funds undoubtedly have the most sensitive sense of smell in this regard. When crude oil futures prices fluctuated too strangely in November, they noticed this situation at the first time. Opening positions in the market, looking forward to making a fortune in this market. Naturally, there are some people who are short-sellers and long-sellers, and the two sides have different judgments on the future direction of the market, but they all have one thing in common, that is, there will be a wave of crude oil prices in the near future.

Counting the hedging producers and exporters, the commodity funds that already existed in these markets, and a large number of retail investors and institutions, a large number of funds poured into the crude oil futures market at the end of 1993. Fighting every day in the world, they all strive for the market to develop in their own favor.

Under such circumstances, the open interest of NYMEX crude oil futures in December 1993 rarely reached an average daily level of 400,000 lots, which means that it has increased by 30% compared with the average open interest in November. At least hundreds of millions of dollars were handed over to the exchange, and 400 million dollars changed hands for a change in the price of one dollar.

  But sometimes the market is not created by these funds. These two parties who are mutually gambling in the futures market are only a small part of the global market. No matter in terms of funds or influence, they do not play a decisive role in the market. What really matters is politics.

  During Thanksgiving, the Organization of the Petroleum Exporting Countries held a meeting in Austria to discuss the proposals made by some of its member states to cut crude oil production. Analysts generally believe that the proposal to cut crude oil production is very likely to be passed, because the current world economic downturn, major economies such as the United States and Europe have little increase in demand for crude oil, and the current low oil price has damaged most of the world. interests of oil exporting countries.

  As the most important part of the world's energy, any resolution of the Organization of Petroleum Exporting Countries (OPEC) will affect the development of the world economy. The most typical example is that in 1991, Iraqi President Saddam Hussein advocated that OPEC raise oil prices to help Iraq and other member states pay interest on debts. It took the military just over a month to settle Iraq, which also forced OPEC to increase production to make up for the 3 million barrels of crude oil gap in the world market caused by the sanctions against Iraq.

  OPEC has a total of thirteen member countries, most of which are Middle Eastern countries. In addition, Africa also has three seats. The rest are Venezuela in South America and Indonesia in Southeast Asia. Each member has only one vote when proposing a vote. Since oil is the blood of the world economy, this meeting on whether to cut production is particularly critical to the direction of the world economy in the next six months.

   Three days of meetings were held in succession. In the end, under the opposition of most of the member states, the final production reduction proposal was not passed. The political wrestling behind this is unknown. However, some member states in Africa, contrary to their previous low-key status, frequently appealed in the media to make a contribution to the world economy, and Ecuador, which just quit OPEC last year, suddenly announced during the meeting that it would increase oil production in 1994 , and the U.S. aircraft carrier suddenly appeared in the Indian Ocean without notice. Judging from various signs, the U.S., Europe and other super political forces undoubtedly intervened in this meeting, and finally let OPEC make a decision that is beneficial to them. resolution.

You must know that Africa has always been the traditional sphere of influence of Europe, and except for a few countries in South America that advertise hostility to the United States, most other countries rely on the United States to breathe. Recently, Central and North America are still planning a North American free trade District plans, which brought them closer to the United States.

  In any case, it is impossible for crude oil production to decline, which is undoubtedly a fatal blow to the bulls of NYMEX. Affected by this news, the price of crude oil futures for January on NYMEX plummeted from $16.95 on November 24 to $16.11 on November 29, a drop of up to 5%.

The main forces of both short and long sides moved to the contract in January 1994. It was only two or three trading days before the contract encountered this kind of systemic risk. It can be said that neither side had thought of it. The futures research department of China Daily once published a similar research report, specifically mentioning that the OPEC meeting in the second half of the year may not cut production. When these belated people read this report again, most of them have only one consciousness in their minds, that is, to re-evaluate the research capabilities of HSBC Futures Research Department.

   Zhong Shi, who was still in Hong Kong, got the news of the sharp drop in crude oil futures immediately. At this time, only Andrew and Li Mingyang stayed in North America. They called from the other side of the ocean as soon as the futures market opened on November 29.

   "Crude oil futures have plummeted, and now our floating profit has exceeded 300 million US dollars. What is the strategy for the next operation? Should we close the position and leave the market?" On the phone, Andrew was extremely excited and asked repeatedly.

He also invested five million dollars in the crude oil futures market, and established a short position of 2,000 lots. So far, he has made more than six million dollars in profit, which has fully doubled. This rate of return is enough to make him very satisfied up.

  However, unlike Andrew’s small position, Zhong Shi is a big short in the market, and his every move has attracted the attention of all parties. To give a simple example, when there is a large amount of short liquidation orders in the market, it is necessary to buy a large number of crude oil futures contracts, which will lead to a rise in the price of crude oil futures in a short period of time, and the final result is the floating position of Zhongshi. Profit will lose a large part.

Therefore, as soon as Andrew finished speaking, he immediately reacted: "Uh... a small amount of liquidation? This is not okay!" The small amount of liquidation he mentioned means that a small amount is liquidated every day, and eventually all of them will be settled in a relatively long period of time. Flat out. The advantage of this approach is that it will not cause drastic changes in the price of the underlying object, and the floating profit will be kept to the greatest extent, but the disadvantage is that no one knows what will happen during the period of closing the position. In case the price of crude oil futures suddenly rises, then At present, their floating profit will still lose a lot.

"Yeah! Today will be an important day. The month has just turned and the systemic risk is encountered. The trading volume will definitely increase. Fortunately, the January contract has just started, otherwise if the bulls initiate a ruthless squeeze, we will just swallow it." I’m about to spit out all the meat! Now the initiative is on our side, wait patiently, I don’t believe that the bulls still have the ability to maintain their positions.” Zhong Shi sighed, sometimes even if the bulls want to fight to the end, However, under the current daily settlement mechanism, the funds of some of them will soon be unable to keep up, and in the end they can only be forcibly liquidated, or even liquidated.

   "Close 5,000 short positions today, and test the market's reaction!" Zhong Shi ordered. The long positions may be hedging funds, or there are some large oil refiners, some of them can even hold out until the final delivery! It's just that after today, in order to maintain their positions, they have to increase funds.

Not only the long and short sides in the market, but even the observing media are guessing, what will happen to the trend of this day, will there be a large-scale reduction in positions, or will there be a continued increase in positions, and the two sides continue to bet on the January contract ? At this time, it depends on the strength of the funds of both parties.

  The crude oil futures market started under such a highly concerned situation!

"Zhong Sheng, 5,000 lots of liquidation orders have been released. I released them gradually in three time periods. Basically, they are sold as soon as they appear. The type of transactions is basically idling. It seems that the bearish sentiment in the market is still very serious. I think this time is a good opportunity for us to leave." It didn't take long for Andrew to call again.

   "Don't be careless. You can release 5,000 lots of liquidation orders to see if you can get a little." Zhong Shi thought for a while and ordered Andrew to continue to test the market. There is an unwritten rule in the financial market, that is, once the news is announced, the opening price of the relevant market on the following day means that the expectation is in place, and then it is time for the market to correct the impact. At this time, there are still people entering the market, which shows that the systemic risk is far from fully digested.

   Thank you very much, Demon Dragon Warrior, for making me think about the reward! I didn’t see the rewards yesterday, so let’s express my thanks together today!

  

  

  (end of this chapter)