Rebirth 79: I opened a bank in the United States

Chapter 258 Risk Hedging
"No, I traded futures! Do you have a cigarette? Give me one!"

Julian's back suddenly leaned against the back of the seat, and the expression that was originally struggling suddenly became much calmer.
"Why tell me this now?"

The news that Julian was sure that he had indeed bought the silver futures contract hit Carter's heart like a thunderbolt.

Carter didn't know what kind of mood he should be in now.

There is confusion about Julian's confession at this time, the pain of being betrayed and betrayed trust, and the regret of being naive at the time.
Carter couldn't find a suitable adjective to accurately describe the overly complicated mood swings.The only thing he could be sure of was that his hands were trembling when he handed the cigarette to the other party.
"Paper can't contain fire after all! The fact of objective existence will not disappear in this world because I avoid talking about it. Maybe you will never remember this matter, but, what if, what if One day you suddenly thought of it?!"

The burning fireworks are dazzling.After the scarlet flames shone for a while, they spit out a puff of thick smoke, and then quietly dimmed.
"This matter is like a thorn stuck in my chest. I originally planned to confess to you next year, when you graduate from high school, and after Tiger's first year's income comes out, but just now, you But it mentioned the two sides of human beings.”

"I feel that if I don't clarify the question, I will have no face to answer your question."

Also lighting a cigarette for himself, Carter looked out the window without opening his mouth.Continue to listen to Julian's explanation to himself.
"You should know me. I'm old and I'm bound by a family. I started as a stockbroker at Kidd and I was a cheapskate who only dared to focus on low-priced stocks. Search Ghost. You asked me to speculate in futures, I'm afraid!"

"If the futures make money, it is an exciting and good thing. But if it loses, what will happen to my family? What will my children do?! Not only can I not bear the risk of losing money at that time, you can't either."

"But you still speculated in futures, didn't you?"

Julian's words reminded Carter of the scene when the two met for the first time:
"My previous investment method was a bit um, stingy? I used to like to look for low-priced stocks. Although the profit cycle is a bit slower"

At that time, Julian had a slightly embarrassed expression on his face, and some awkward reactions, everything seemed so natural.Even at the beginning, his frankness was the point that he chose him.
However, this cannot be the reason for his black money!
"Yes, I did speculate in futures. But the futures contracts I bought, not many. I spent 34 US dollars to buy futures contracts, but I used more than [-] million US dollars for risk hedging!"

"Based on this money, and my house as collateral, and even mortgaged some of the stocks and securities of my clients, plus borrowing from relatives and friends, a total of about 650 million US dollars was borrowed, a total of more than 800 million US dollars. Then Use this money as a guarantee to borrow a large amount of silver spot to hedge against the risk of silver futures falling. Then, as you have seen, I have lost money on the spot!"

Risk hedging? !
For a while, Carter didn't quite understand what Julian meant, what hedging between spot and futures, his mind was in a mess.Fortunately, it seems to know that Carter does not understand these, Julian then explained:

"Selling the borrowed silver spot is short-selling, taking profits from falling; buying futures is doing long, taking profits from rising, and performing reverse operations on related targets at the same time, so as to avoid unilateral risks."

“当初我在买入34万美金的白银期货时，同时卖出800万美金的白银现货。等于是，我在用34万美金买入了170万盎司的白银期货的同时，我卖出了72万7千多盎司的白银。”

"Later, when the price of silver rose to $23 an ounce, I could make a profit of about 2000 million on the futures. But correspondingly, I lost money on the spot. I had to use 23, 24, or even a maximum of 29 dollars an ounce I bought more than 74 ounces of silver to close my short position. In order to close this short position, I spent more than [-] million. The final actual profit was only [-] billion How much."

"Wait, you bought 34 silver futures, and in order to balance the risk, you shorted [-] million silver?! Is this a bit of a big deal?"

The logic in Julian's words is not difficult to understand. After such an explanation, Carter understood: To put it bluntly, he is betting on both ends!
I bet on your rise and bet on your fall!It's like when I roll the dice, I bet on the odd and even numbers at the same time, no matter what result you roll out, I will always make money on one side and lose on the other side.

As long as you ensure that the interest rate difference between the two is positive, then you will make money!

The logic of this thinking is not difficult to understand, but when sitting in the car and unable to take out a pen and paper to check the calculation, Carter instinctively felt that there was a big gap between the two numbers when he just listened to the numbers.

It's like betting on odd and even numbers.The logic of normal people, shouldn't it be, almost?Then, on the side that I think is more likely, I will slightly tilt the proportion to avoid the embarrassing situation of breaking even every time.

So at first glance, 34 against 800 million, this is...
"Hehe, for me back then, this was a huge gamble! If it wasn't limited by my qualifications, I'm afraid I would have borrowed even more."

Julian chuckled, feeling that Carter's words had increased, knowing that Carter had already listened to his explanation.As for whether I can accept it, or whether I feel relieved in my heart, it is hard to say, but at least, the communication channel is much smoother than before.
"Carter, you have to know that for short sellers, what they have to face is limited profit margins and unlimited risk of loss! For example, the silver spot sold at $11 per ounce at the beginning, even if the silver price falls to infinitely close to 0, and my profit is only about $11 per ounce. Taking the profit of $11 per ounce as calculation, the final profit is only more than seven million.”

"As for futures, based on the silver futures margin of 1000 yuan at that time, 34 US dollars was enough for me to buy 340 contracts. One contract was 5000 ounces, and the total amount was as high as 170 million ounces. Assuming the same level of silver price fell , My loss will reach more than [-] million, and even if there are short-selling profits to make up for it, the difference will still be [-] million US dollars!"

"So for me at that time, it was already risky to use 800 million U.S. dollars as short silver spot to hedge against 34 U.S. dollars in silver futures. Of course, my operation was also flawed. The timing of closing positions was not well balanced, otherwise The profit should be more than one million."

"In short, the situation is like this. To be honest, at that time, I didn't think it was necessary to tell you these things. After all, you were just one of many clients under my name at that time, even if you belonged to The more high-quality customers are essentially the same.”

Carter was a little silent when he heard the words. Indeed, the relationship between himself and Julian at that time was not as close as it is now.Even if he intentionally cheated himself, it is not surprising.

As for the indignation or anger in my subjective feelings, it is all my own.What does it have to do with him?What does it have to do with the overall environment on Wall Street?
In Wall Street, eating talent is the norm.
"and after?"

(End of this chapter)