The Son of Finance of the Great Age

  Chapter 188 Close a position with far month exchange

   It needs to be explained that when the world economy is recovering strongly, almost all investors can predict that the price of raw materials for construction will rise accordingly. Under such circumstances, why do short sellers still enter the market? This involves their operating strategy.

As we all know, copper is widely used in all aspects of economic life, and the pricing power of this metal material is controlled by the LME. Both traders and producers use the price announced by the LME every day as a reference. Therefore, hedging on the LME is the key became inevitable.

Super-large companies like Sumitomo Corporation and Chilean Copper, which produce tens to hundreds of tons of electrolytic copper annually, have set up non-ferrous metal trading departments in the LME. These trading departments that nominally do hedging naturally hope that the price of copper per ton will rise. The higher the better. Inevitably, those importers with greater demand for copper are hoping for as low a price as possible.

  However, this situation is not absolute. For example, if an importer needs copper raw materials, if the income of their short position in the copper futures market exceeds the income of the corresponding production and sales, then they are very likely to give up delivery. Exporters may also choose not to conduct or reduce spot copper trade if their benefits from being long exceed the benefits of spot copper trade.

   Of course, these are only a few cases. For large copper industry groups, the operation of the futures market is only a supplement to their physical operations. The main force of bulls is still to hold huge long positions, while shorts are still short. This is why even when the price of copper futures continues to rise, the market still has a steady stream of empty orders.

The current situation is that some long designs that do not aim at spot copper delivery continue to immediately cash out their profits after raising the price of copper in the short term. On the other hand, it is worried that short sellers will squeeze positions, forcing bulls to finally deliver copper in cash. We must know that many of the bulls active in the market are speculative funds, and they are not involved in the trading of spot copper at all, let alone delivery.

   Therefore, the bulls create large fluctuations in the price of copper futures in the market, attracting follow-up orders to take over, and use this method to escape themselves, and also make the plan of the short sellers to attempt delivery in vain.

Their strategy is naturally seen by those who are interested. Some people on the short side have taken this point and lowered the price of copper futures step by step. While reducing the trading volume, it also narrowed the fluctuation range of copper futures prices, especially On October 31st, the price of copper futures hardly changed, and the intraday price once fell to 2637 US dollars, which is obviously unacceptable to the bulls.

   "I dare to bet you that the price of copper futures will definitely rise on the next trading day!" Zhong Shi said to Andrew after the day's trading ended.

Andrew looked disbelieving, but seeing Zhong Shi's confident face, he couldn't help but feel a little guilty. He took out a hundred-dollar bill from his pocket, slapped it in front of Zhong Shi, and said, "I bet you $100, the market won't go up tomorrow!"

   Seeing Andrew take out cash, other traders also booed one after another. The four of them took out a little cash from their pockets, including British pounds, US dollars, and even a 1,000-yuan Hong Kong dollar.

Zhong Shi looked at the colorful banknotes on the table, took out his wallet from his pocket, took out two 50-pound banknotes from it, put them gently on the table, and said with a smile: "We have set up a fund pool now." , the bet is the trend of the copper futures market tomorrow. I am personally optimistic about the rise, and the bet is 100 pounds, and you can bet freely!" Then he drew out two more pounds and put them aside, and said jokingly: "In addition, there are A handicap, that is, betting that the copper futures market will neither rise nor fall tomorrow, the odds are 1 to 100, how about it?"

Everyone laughed when they heard what he said. They have been in the copper futures market for so long, and they have never experienced a situation where the price of copper futures does not change. Just when they were about to place a bet, Ampite suddenly said: "Wait, We have to make sure of one thing, that is, we cannot enter the market tomorrow, otherwise Mr. Zhong will push the market to his advantage, and the others will lose out?"

  Others thought about it, that's exactly the reason. Andrew quickly withdrew his banknotes from the table, and said embarrassingly, "I'd better not gamble!"

Zhong Shi shook his head and said disapprovingly: "At present, our positions are almost the same. In addition to the 5,000 lots of long options in the options market, there are also 15,000 lots of November and December copper futures contracts. We will Just take a day off and focus on the operations of other people in the market, what's your opinion?"

  Hearing that they could take a day off, several traders were very excited, and even the gambling excitement that had just been extinguished just now rose again. Andrew said sternly: "Now that the externality is gone, we can continue to bet now. I personally bet that the copper futures market will fall tomorrow. The reference is today's closing price, which is $100 here."

   "I bet on the rise!"

   "I bet it's down!"

  …

Not long after, the betting on both sides ended. The bullish side had a total of 100 pounds, all of which belonged to Zhongshi alone, while the bearish side was all traders including Andrew. There were all kinds of banknotes. Zhongshi made a rough estimate. About 500 pounds, he couldn't help counting out another eight pounds, making up 500.

"Although this lottery is not much, but the winner can't keep it alone, he must use this money to treat guests, and then go to the PUB for entertainment, what do you think?" Andrew's eyes rolled around for a while, with a smile on his face. Said with a smirk.

  Zhong Shi shook his head helplessly, and then left the office.

  …

  November 1, Tuesday, as soon as the copper futures market opened, the price jumped up suddenly. Although the bears were prepared for this, the copper price rose still very fiercely. But what is very strange is that although the price of copper futures has risen fiercely, the transaction volume is not large. When the price of copper expires rises to 2,700 US dollars, the transaction volume increases significantly. After a lot of fighting between the long and short sides here, at the end of the market, the copper futures price barely stood above $2,700, and finally closed at $2,708.

  For this situation, Zhong Shi has long been mentally prepared. He has already expected that the bulls will play the trick of swapping their left hand for their right hand under the unfavorable situation of closing positions. However, he had already said something earlier and had to miss this small market move. As for the gamble, of course he won, but with a total of 1,000 pounds of gambling money, a few traders with particularly good appetites found a high-end restaurant to eat up, and even made Zhong Shi take out the after-dinner entertainment. A lot of cash.

  …

   "The trick of bulls is too simple." In the temporary office of Carl and Paul Asset Management Company, traders were gathering together and discussing the market just ended, Jerry said with disdain.

   "That's right! This kind of money-losing operation can only deceive small investors. If you want to deceive experts like us, it won't work." The traders laughed, and they didn't take the market's rise today seriously.

"It's not funny!" Carl uttered in time to stop the traders from laughing, "Today at the $2,700 level, the trading volume has increased significantly. This should not be the result of manipulation by the bulls. My personal The point of view is that the short sellers and the bulls will close part of their positions here, and the bulls will also dump some of their positions to follow suit. The long positions should have been reduced a lot. If the estimates are good, they will sell out one after another in the next few days. Clear the position."

"Clearing? How is this possible?" Not only Jerry, but also other traders were stunned. They never expected that although they had seen through the intention of the bulls to manipulate, they did not expect that there would be such a thing in the middle. Many twists and turns.

"It's very possible!" Carl glanced at the confused traders, and then seriously analyzed: "In order to raise today's price, the bulls must have opened a lot of long positions in November and December. The price of the contract is not low. The reason why the short sellers agreed to close their positions at a high level is to force the bulls to transfer their positions to Yuanyue and continue to fight with them. Moreover, the short sellers only sold part of their positions and entered the market to close their positions. After all, they followed suit They can’t eat much, and they want to tell the bulls in this way that if they want to leave the market, they must make concessions on the price, and continue to operate on the far-month contract.”

  After hearing Carl's explanation, the traders suddenly realized that this kind of complicated language may only be understood by the two sides fighting.

"But when this happens, if the longs switch to a more liquid monthly contract, wouldn't the shorts be unable to catch them?" After listening to Carl's analysis, most traders understood it, but Jerry was even more confused Yes, he immediately thought of a follow-up possibility.

"You're right!" Carl gave Jerry a thumbs up, and then explained: "The short sellers forced the longs to take positions, and then let them go, and they also took the opportunity to open short positions at high positions. After the bulls' trading is over, they will quickly suppress the copper price, and then their short positions will make huge profits."

Later, Carl turned his head and said to Jerry: "This coincides with your previous analysis, but the difference is that this time it is not due to the price fluctuations caused by the closing of long positions, but because the short positions have taken the initiative. To force the bulls to accept the high-priced contracts in the next month."

   "What will the bulls do? Just wait like this?" Not only Jerry, but also other traders have such doubts.

"Pull it up again, use the liquidity of the market to clear the position, and leave these long positions to those who are bullish, there are a lot of fools in the market!" Carl smiled slightly, "What they are doing now is to make money in the future What needs to be done in time is just a repetition. These short sellers are too shrewd, and they have not revealed their real intention until today, and they have taken over all the short options in the options market. What we can do now , is to strive to establish some high short positions in the market in the next few trading days. Let’s discuss it.”

Carl's tone was full of helplessness. He had always thought of himself as a shrewd fund manager, but judging from the intentions of the bulls and the shorts today, he and his fund were nothing more than an inconspicuous player in the market. Affecting the trend of the entire market, you don't even have the qualifications to play games with others!

   I feel that the enthusiasm has been high for a while and then began to fall... Favorites have increased and decreased... No more nonsense, continue to work hard, hope everyone will continue to support, thank you~

  (end of this chapter)