Chapter 177 Option Short Entry

Due to the underestimation of the copper futures market, Quantum Fund spent a lot of money after establishing a bottom position, and the difficulty of the subsequent promotion process was underestimated. Later, Druckenmiller had to call in another This sum of funds made Quantum Fund only establish a total of less than 50,000 positions.

As for Sumitomo Corporation, the overlord of copper futures, this time the pull-up is mainly aimed at the option shorts this month, so it did not invest too much money in the early stage. It made them willing to sit back and watch the results, but even so, plus their consistent positions, their total positions reached about 40,000 to 50,000 lots.

  Combining the 30,000 positions that Zhong Shi took in during this period, the total long positions of the three parties reached 120,000 to 30,000 lots, accounting for 50 to 60% of the total long positions, which is already a terrifying proportion.

  Wednesday, May 18th, the option execution day, is the day for them to enter the market for the option parties who announce the execution on the first Wednesday of this month on this day. Before that, the price of copper futures has risen to 2,200 US dollars per ton, which I am afraid they did not expect before announcing the implementation.

In just two weeks and ten trading days, the price of copper rose from US$2,000 to US$2,200, an increase of up to 10%. This range is not large, but for many option holders who announced the execution of short positions, the current price may unacceptable to them.

Based on the price fluctuations in April and other months, the price of short-term options at that time was generally chosen around US$2,100, which meant that they had to accept a loss of US$100 per ton as soon as they entered the market, that is, a loss of US$2,500 per contract. This means greater losses for those shorts with larger positions.

  But for those who choose to execute the bullish option, this means that part of the floating profit will fall out of thin air. Now they only need to enter the market to level off according to the market price, and they will firmly pocket the profit.

  It’s just unfortunate that, for the various option parties that announced their execution this month, the bearish side still occupies the majority, while the bullish side is a very small part.

  Now there are only two paths for new short sellers to enter the market. One is to admit losses and leave the market, and the other is to carry it to the end. At present, the market does not know the proportion of shorts who are ready to leave the market, but everyone knows that even those shorts who admit their losses and leave the market can fight hard before closing their positions, making the option price on this day higher and higher. The lower the better.

   Therefore, this day is the best day to test the financial strength of bulls.

  Opened at $2223, slightly lower than the final price of the previous trading day, which is also a normal expected reaction. But everyone knows that there will be a fierce battle on this day.

   Sure enough, not long after the opening of the market, the price of copper futures plummeted, falling to $2,210 almost instantly, and selling continued to appear.

   "What's going on?" In the United States, inside the Quantum Fund, traders were a little overwhelmed. Although they didn't care much about the drop, the sudden changes in the market still touched their sensitive nerves.

"This should be a normal reaction after option shorts enter the market." Druckenmiller's voice sounded, and seeing the eyes of the traders focused on him, he nodded slightly and explained indifferently: "They It is the option executer in May, who wants to take advantage of this opportunity to suppress the price so that they can leave the market at the lowest price."

   “So where is the price they compromised on?” a trader lost no time in asking.

"A compromise price?" Druckenmiller was stunned for a moment, then reacted, and said with some amusement: "They don't have a compromise price! For them, the lower the price, the better. In this case, $0 copper price per ton is their compromise price! Guys, their compromise price is in your hands, understand?"

  Hearing what he said, these savvy traders didn't understand that it was time to beat the dogs in the water. They immediately entered the fighting mode and began to attack these new shorts.

  …

The same scene also happened in the London department of Sumitomo Corporation. Even Hamanaka Yasuo, who always works in his office, came to the trading floor and issued orders one after another to the many traders under him: "Hold me!" , We must let the short sellers know how powerful we are!" "We must not let the price of copper futures fall below the bottom line of 2,200 US dollars, which is the lowest price we can accept."

  The traders of Sumitomo Trading Co., Ltd. were busy on the phone, instructing the brokers to buy newly opened short orders and long exchange orders in the market, and strive to stabilize the price above 2,200 US dollars.

  …

   "Sure enough!" Zhong Shi, who was also in the United States, saw this scene on the board, and he didn't understand what was going on, but at this time he was caught in a dilemma.

  In his previous imagination, this was the first premeditated promotion by the bulls. It has to be said that his ideas coincided with those of the Quantum Fund. But now it seems that these pull-ups may seem like a trap set for the option short side. As long as the option side admits defeat and leaves the market on this day, it is likely that the pull-up has reached its limit.

   It's just that he couldn't tell whether it was a trap or a long-term promotion.

  So at this time, for him, there are two strategies to choose from. The first is to help the bulls pull up. When the price reaches a certain height, the option shorts will naturally admit defeat and leave the market. But there is a problem with this strategy, that is, for a period of time in the future, his position will have a great price risk.

  Another strategy is to take advantage of the situation where the bulls are desperately protecting the bottom line, to close positions on a large scale, and suppress the price together with the shorts. But in this way, his floating profit will suffer huge losses, which is not worth the loss.

  He has completely forgotten that he is also a part of the main bulls, and his influence during this period is not weaker than that of the other main bulls.

"How should I choose?" Zhong Shi fell into deep thought for a moment, and he didn't even hear Andrew's urging on the phone. Before he knew it, the price of the disk had reached 2,207 US dollars per ton, and the two sides expanded their scale at this price It was a huge fight, but after a full five minutes, the price of copper futures did not break through this limit.

   "Andrew, what did you say?" Zhong Shi reacted from his contemplation, and said to the phone belatedly. In his meditation, he faintly felt that someone was calling him, but he was too lazy to answer, and he didn't realize until now that it was Andrew's shout.

Andrew, who was waiting by the phone, finally heard the echo, he couldn't help but heaved a sigh of relief, and hurriedly said: "Just now, the long and short sides engaged in a large-scale fight. According to the feedback from the trading software, the trading volume below 2210 US dollars has reached more than 10,000 hands, the two sides are fighting crazily at almost every price point..."

   "What?" Zhong Shi reacted, and quickly asked: "You mean that the two sides compete for every price below $2,210, and the trading volume reached more than 10,000 lots?"

  The trading volume is 10,000 lots, which is already 10% of the normal day's trading volume, but this is only the trading volume less than an hour after the opening of the market today.

   "Yes..." Andrew nodded quickly and replied.

  Suddenly a bold idea appeared in Zhong Shi's mind. Since he didn't know the specific plan of the bulls, why not let the bulls reveal their ultimate goal through a large-scale change of hands? You don't have to choose to do it on this day, but you must make it impossible for the short sellers to leave the market too early, otherwise no one will play.

"Andrew, you open a new position immediately. The price should not be too high. To absorb long orders, you must absorb them quietly and on a small scale. Don't let other people in the market find out. It is best to do it in a few lots or dozens of lots." After reacting, Zhong Shi hurriedly ordered.

   "..." Although Andrew wanted to ask why, he also knew that this was not the time to ask, so he hurriedly ordered the traders to do it.

   "Bryan, buy long order for me, 500 lots, entrusted at market price." In addition to Andrew, Bryan also arranged trading orders.

   Soon, when the long and short sides were fighting fiercely, the market price order of 500 lots was sold almost without any effort. Soon, another 500 lots were traded again, and then the third and fourth 500 lots were traded. After a full 2,000 lots of long orders were traded, both the long and the short sides realized that at this time, there was a big deal in the market. Small bulls.

Even though there were more than 2,000 lots traded, the price of copper fell below $2,200 during this period. After breaking through $2,200, the short sellers pushed the copper futures to $2,175 in an instant, because most of the long defense orders for copper futures were set at It is around $2,200, so after the defense of $2,200 is broken down, the bears will recklessly suppress the price of copper.

However, there are only a few shorts who can close their positions at $2,175, and they are extremely lucky investors. The bulls who reacted quickly set up their defense again at the position of $2,180, and first took all the short positions below $2,180 , and then regain lost ground step by step.

   "It should be the main force of the bears just now!" Seeing a long red line drawn from the software, Zhong Shi couldn't help but sigh with emotion. So far, the bulls are fighting with the shorts who enter the market in the form of option execution, while the main shorts who have been active in the market are secretly fueling the flames while waiting for their release, and finally give them a chance to suppress the price to 2175 Dollar.

   And the bulls are also great. Before they can react to the trend, they build up the defense again, which reduces a large part of the financial pressure.

   "Open 10,000 more lots!" Zhong Shi watched the price stabilize at $2180, and suddenly yelled into the phone, very excitedly shouting to Brian who was waiting on the other end of the phone.

   "What?" Brian was stunned for a moment, and then he realized: "10,000 lots? Market order?" He had already stuttered. The number of lots shocked him, and the margin alone would cost hundreds of millions of dollars.

   "What are you waiting for?" Zhong Shi was very dissatisfied with Bryan's sluggishness, he was looking at an opportunity with great difficulty, how could he let it miss so easily?

   "Yes!" Brian shuddered all over, and immediately realized that he quickly picked up the phone and started matching.

10,000 lots of buy orders entered the market, which quickly pushed the price of copper futures to a new high. At this time, the long and short bulls were also a little exhausted. At that time, the result was that the price of copper futures rose all the way, and soon broke through the price levels of 2190, 2200, 2210, and 2220 US dollars, which caused the market to reverse, and the follow-up market desperately kept up. go up.

When it reached $2,230, 7,850 of Zhongshi’s 10,000 orders had been sold. At this time, he asked Brian to stop, and slowly closed the long position he had established before. , They didn't realize that this was a liquidation order to pull up the long position, and quickly took down this part of the long exchange position. When Zhong Shi reduced the position to 3000 lots, the price of copper futures was also followed. That pushed up to $2,255.

  The next thing has nothing to do with Zhong Shi. He opened 5,000 new long orders on this day, with an average price of around 2,140 US dollars.

Not long after, when this wave of gains slowed down, the main short sellers and option short sellers seemed to be irritated and exerted their strength at the $2,255 position. At this time, the "main force" of the bulls had become a follower, and these people were naturally vulnerable , after a little resistance, it immediately began to abandon its position, which eventually caused the price to fall back to around $2,200.

Following the trend, the position is generally opened at around 2220 US dollars, and some are even at a higher position, but who would have thought that the main force of the bulls who pulled up is simply changing positions here, and there is no way to continue to pull up, and lose money. They can only yell at the bulls, but who cares?

   Thank you very much for the monthly ticket support from book friend I Youqing Drinking Water! At the same time, I would like to thank the magic dragon and war ghost for making me think about the reward!

  

  

  (end of this chapter)