Chapter 674 The most short squeeze in history (1)

With the swarming of vulture (hedge) funds and the fanning the flames by market makers, the short selling of Volkswagen Group shares expanded by an order of magnitude in a few days, more than doubling from the previous 4.5% to reach An astonishing 10%, which means that more than 8 billion euros of funds have participated in short-selling Volkswagen Group investments. And because of the weight of the Volkswagen Group in the German index, plus short-selling funds on short-selling indexes, options, OTC CDS, and other highly correlated stocks, it is conservatively estimated that this figure has reached an astonishing 10 billion euros.

  Although these stocks did not hit the market at the same time, such a large-scale sale did not affect the performance of Volkswagen Group's stock price too much. After a slight decline, Volkswagen Group's stock performance immediately stabilized at around 180 euros. This phenomenon surprised the hedge funds. They mistakenly believed that the "vests" of the Porsche Group were secretly accumulating funds. Naturally, they no longer spared any effort at the moment and tried their best to sell the shares of the Volkswagen Group in the market.

   "Volkswagen Group's stock price has fluctuated abnormally. In the past few days, there have been frequent sell orders at the level of millions of euros or even tens of millions of euros. It seems that they are indeed short-selling with all their strength!"

  On Friday, October 21st, in the temporarily rented office in Frankfurt, Jiang Shan reported to Zhongshihui with joy.

"The whole of Europe is shorting the shares of Volkswagen Group. I think there must be a lot of hedge funds coming this time." Zhong Shi put his hand on his chin, looked at the board carefully, and estimated the value of the transaction, "From 240 euros to 180 euros , The drop reached 25%, which should be enough for many hedge funds to make a lot of money. It's a pity, a pity..."

   "What a pity?"

  The smile on Jiang Shan's face froze immediately, and he immediately realized, "Zhong Sheng, you say they are too greedy?"

"Yes, it is indeed too greedy!" Zhong Shi pointed to the K-line chart on the computer screen, and patiently analyzed, "When the 240 euros fell to 200 euros, due to the psychological barrier, some funds began to buy , although it is not clear whether it is to close the position or to be bullish, but the rebound is inevitable. If a hedge fund is in short-term trading, from the range of 200 euros to 210 euros, they will close part of their positions through operations and steadily make profits Keep it in your pocket, and then continue to sell at a high level, and operate again when the big shorts suppress the stock price again. In this way, on the one hand, you can avoid the risk of volatility, and on the other hand, you can keep a certain amount of liquidity between repeated operations, so that you can be at peace when unexpected situations occur. Of course, for large hedge funds, this method is not suitable, their expected price is too low, and this benefit should not be seen in the eyes.”

   "After all, they didn't think too much about the possibility of a short squeeze!" Jiang Shan echoed with a smile.

  The so-called long-short squeeze refers to a strategy in which traders force short-sellers to default or deliver at high prices through capital advantages, controlling the long positions in futures or monopolizing the quantity of deliverables.

  Because the scale of the futures market is much larger than that of the spot market, there are strategies such as long-squeeze or short-squeeze in the two markets. For example, a certain cotton producer hoards a large amount of spot cotton, makes a large amount of long positions in a certain month's contract, and forms a trading order with short positions that far exceeds the spot size. When the delivery day is approaching, as long as the cotton merchant makes a word of it, the delivery will not be made in cash. At that time, the short sellers will have to go to the market to collect cotton, or they will be forced to raise the cotton futures price and leave the market. At this time, the losses of short sellers will be extremely heavy, because they have no choice but to be blown up in minutes.

   In the same way, if the above-mentioned character becomes a cotton trader, he can choose to make profits by squeezing long from short. Because there is a large amount of cotton stock on hand, they short-sell it recklessly. Anyway, they will have enough spot delivery when the final delivery is made. For the bulls as opponents, this situation is undoubtedly disastrous, because they are either forced to take over the spot, or leave the market at a very low price.

  Although these are extreme situations, they happen from time to time no matter in the futures market or in the stock market. And every time there is a short squeeze or a short squeeze, it is an extremely rare big scene, and the entire market will participate in it. This is equivalent to a gamble. As long as you can bet on the right direction, the benefits you will earn will be far greater than usual.

   Now that Jiang Shan and Zhong Shi are saying this, it is natural to point out the plan planned by the two of them and the Porsche family, which is to squeeze more air! Now the Porsche family holds 42.6% of the shares in public circulation, plus the option transferred by Zhongshi, there are not many bargaining chips left in the market, because the Lower Saxony state government still holds 20.1% of the shares. So when the Porsche family announced that they held this part of the options, it was the time when the short position was destroyed.

   "Zhong Sheng, when do you think the Porsche family will start?"

   Regarding the secret actions of the Porsche family, Jiang Shan has a clear understanding, because he is almost doing all of this. Although everything has been handed over to the Porsche family, he is still observing the follow-up of the matter.

"If it was you, when would you activate it?" Zhong Shi suddenly had a strange look on his face, and after giving Jiang Shan a meaningful look, he asked instead, "This is really an interesting question. It can reflect the style of operation, if you were to squeeze short, when do you think is the most appropriate time?"

   "Of course it is the day before the delivery date, or the same day!"

Jiang Shan replied without hesitation, with a decisive expression on his face, "On the day before the delivery date, there is still a one-day processing time for short sellers. At this time, the two parties can discuss whether it is cash delivery or final physical delivery. And If it is the same day, basically the shorts have no choice, and the speculative shorts can only buy long orders at high prices to close their positions. The result of this is a crazy rise in prices, which may be even more terrifying than the previous one. Although each has its own advantages Inferior, but can also achieve the effect of maximizing benefits.”

"Sure enough radical!" Zhong Shi showed a knowing expression on his face, "As a hedge fund practitioner, an aggressive investment style is inevitable, because we must consider α (alpha value). But you Another condition is ignored, that is, in the futures and options market, when the delivery date is approaching, the trading volume will not be as large as usual. Because both the long and short sides know that the market may be forced, except for the single cash delivery This is not the case in other markets outside the futures market. At this time, they have already transferred part of their positions to next month or other distant months. So in this case, the maximization of interests you mentioned may not be achieved.”

"It turns out that this is the case. I really did not think properly!" Jiang Shan suddenly realized, and then frowned and asked, "Then when is the most appropriate time to activate it? Timing is very important, but if the time is long enough, leave it to the other party to prepare." It’s too much time, and that doesn’t seem like a good idea.”

"That's true!" Zhong Shi nodded slightly, agreeing with Jiang Shan's ability to draw inferences from one instance, "Let's talk about the timing the Porsche family chose to launch. I personally think that Thursday this week, that is, yesterday should be the best time. In this way It can not only leave a certain amount of time for short positions to close positions, but also cause great pressure on the Volkswagen Group. Of course, this is just my idea. In fact, they did not launch it yesterday, which shows that their determination to acquire the Volkswagen Group is extremely firm, and For the short sellers, it is undoubtedly forced into a dead end. The Porsche family does not seem to intend to follow the principle of keeping a line in order to meet each other in the future. This transaction is worth looking at.”

  Next Wednesday, that is, October 23, is the futures and options delivery day in the Frankfurt market. Institutions or individuals who hold certain futures or options before that need to announce whether to exercise or not before the end of trading on Monday. However, before that, there will be institutions or individuals announcing the exercise of rights, because institutions or individuals who really want to do hedging will definitely give the other party a certain amount of preparation time.

  In other words, the purpose of the institution or individual who announced the exercise of power on that day is absolutely not pure.

  After listening to Zhong Shi's words, Jiang Shan fell into a long silence.

  …

   "Something is wrong with me!"

In Central Park, New York, after watching the market late at night, Soros was very depressed. He lay on the sofa and said weakly to Rodney Jones, "I have been feeling ominous these days. .This feeling has been away from me for a long time!"

   "How does it feel?"

   Rodney Jones was also exhausted. He barely sat up straight. After listening to Soros' words, he frowned involuntarily, "George, are you overworked recently, do you need me to call the doctor?"

"No, no, I'm not overworked!" Soros said, waving his hands. It's dangerous, and it's very dangerous."

"Danger? What danger? It should be a danger in investment!" Rodney Jones reacted quickly, and after thinking about it for a while, he understood what Soros wanted to express, "But the market hasn't fluctuated too much recently. , after the rescue policy succeeded, the Dow Jones index barely stopped the decline. If there is anything else, I'm afraid it is our short sale in the Frankfurt market, but what I can't understand is that this transaction does not appear to have any What danger."

"No, no, my feeling is very accurate!" Soros shook his head straight. "This feeling has appeared in major times such as the stock market crash in 1987 and the Japanese yen in 1998. You also know that we were in those few times There was a lot of damage in the incident. I still don't feel right, and I'll have to see how VW Group's stock performs."

   As he said that, he turned over, opened the Bloomberg terminal, and carefully checked the shares of Volkswagen Group. This time, he didn't even let go of the options of Volkswagen Group.

   "Hey, why do they announce such a small number of options?"

Pointing to the 17.5% total buying position data, Soros asked, "According to reason, the stock price of Volkswagen Group has risen so wildly, and their option trading volume and position level can never be so low. Why is it only 17.5%?" This seems unreasonable, don’t the Germans play options?”

"I know this!" Rodney Jones said casually, "There are regulations in the Frankfurt market. If they buy options with all their funds instead of leverage, their positions can not be disclosed. It satisfies the needs of brokers and traders. According to the capital requirements of the exchange, these positions do not need to be disclosed. Long positions and short positions are the same. I have to say that this regulation of the Germans is not the same as ours.”

   "So that's the case," Soros nodded, not paying much attention, and then went to the next derivative. But at this moment, a thought appeared in his mind like lightning. Immediately afterwards, he looked at Rodney Jones, and found that the other party was equally horrified.

   “They bought calls, lots of calls!”

  The two said in unison.

"Yes, yes, that's it!" Soros understood at once, "The 10 billion euros are used for the exercise of options. As long as they wait for the right time, they will announce it to the public. The liquidity will be reduced a lot at once, and the stock price of Volkswagen Group will also skyrocket!"

   "The nearest delivery day is next Wednesday!" Rodney Jones' face had lost all color.

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  (end of this chapter)