The Son of Finance of the Great Age

  Chapter 101 OTC Options

   "What do you mean?" Lu Feiqi said.

   "Over-the-counter option, have you heard of it?" Zhong Shi was a little surprised. Didn't the agent know such a thing?

  Over-the-counter (otc) options, in a broad sense, refer to options trading outside the exchange. Compared with on-market options, the underlying amount is larger, the number of transactions is larger, and it is not subject to the supervision of regulatory authorities, so the trading is very active.

  But there is a problem with OTC options, which is the credit problem. Because of the lack of mandatory delivery, both parties to the transaction are likely to default when the delivery period approaches. However, this problem is not difficult to solve, which is to add a third party with a good credit rating as a guarantee between the two parties to the transaction.

  This type of third party is often acted by a large commercial bank, and in return for the guarantee, the commercial bank often needs a guarantee fee or a percentage of the profits of both parties to the transaction.

   "I know, I know!" Lu Fei quickly agreed. "I don't know which aspect and direction Mr. Zhong wants to make options, so we can find a counterparty as soon as possible."

   "Swiss franc's opponent, short selling, the transaction amount is about 3 billion US dollars, and the time limit is about two months. Is there any problem?" Zhong Shi thought for a while, and then reported such a figure. His current net worth is about 2.3 billion US dollars. If he adds a little leverage, he will have no problem raising 3 billion US dollars.

   "No problem, I will help you deal with it as soon as possible." Lu Fei agreed.

Zhong Shi knows that the currency crisis in Europe is far from over. Next, international hot money will continue to attack other currencies in the European exchange rate system. In the history of later generations, international hedge funds will always attack the French franc, even until 1993 year.

  Basically, except for the German mark, which accounts for 30% of the European exchange rate system, several other currencies have been attacked to varying degrees.

The reason why the currency crisis caused by the European exchange rate system in later generations is simply regarded as the crisis of the British pound is because the United Kingdom is an old capitalist country, and the British pound is also an important part of the European exchange rate system. Only the defeated central bank will be "famous".

  Before this, the central bank of a country has never been defeated by international hot money.

  There is another more important reason, that is, through this attack, hedge funds finally made a name for themselves in the international financial market, which also made the market realize the power of these institutions again.

When the British pound was attacked, the Swiss franc was also attacked, but the Swiss government urgently raised short-term interest rates, which temporarily stopped the fluctuations in the foreign exchange market. This is certainly due to the Swiss government, but it is more due to the capital The main battlefield is on the British pound, lira and other currencies. When they free up their hands, the Swiss franc will suffer a catastrophe.

  After hanging up Zhong Shi's phone call, Lu Fei immediately picked up the phone again regardless of the jet lag, and invited a group of professionals to discuss the Swiss franc and US dollar option options.

   "Short CHF? This client seems to have a problem with his vision!"

  After the exit of the British pound from the European exchange rate system, other currencies have strengthened to some extent, and it seems that the currency crisis in Europe seems to be over in the short term.

   "Is there a problem with vision? He placed a bet of three billion U.S. dollars. A rise or fall of one percentage point is a fluctuation of 30 million U.S. dollars, an astronomical figure!"

   "Exactly! So why would he think the Swiss franc will fall when it expires?"

  "This client must have another trick. Maybe he is one of those who attacked the pound. Could it be that their next target is to attack the Swiss franc?"

   "Extremely possible! With the decline of the British pound during this period, if he had operated with a full position, it is estimated that he would have earned 100 million pounds by now."

   "Then what kind of option agreement should we provide him?"

   "Our main agreement is to buy and sell yen/dollar. There are not many Swiss francs. I guess we should ask the British side. Is it difficult to find a counterparty for such a large amount of options?"

"Not necessarily, you didn't see that in the past few trading days, the Swiss franc has risen sharply against the US dollar, and the intervention of the Swiss government has initially shown results. I think it will continue to rise in the past few days. Under this situation, I want to find The corresponding counterparty should not be difficult."

   "Wait a minute, now is the trading time in Europe, I'll call first to ask."

  …

   After a few minutes, the voice sounded again.

"It just so happens that there are two Swiss franc option contracts in Europe looking for a counterparty. One is a call option with an agreed one-month strike price of 0.8000, with a target of $1 billion, and the other is a two-month strike price of 0.8200. The call option, the target is 2 billion U.S. dollars, which seems to be a value-hedging transaction conducted by the importer.”

   "Why are there so many bullish options? Is it possible that the Swiss government is preparing to intervene in the foreign exchange market recently?"

   "It's hard to say, the central bank in Europe is now like a frightened bird, and immediately intervenes frequently at the slightest sign of trouble. What happened to the Bank of England scared them!"

"Then let's design the contract, show it to the client first, and then find a counterparty in the market. After all, there are a lot of banks in Switzerland, and they don't have to worry about counterparties. They all want to get some benefits at this time. What do you think? Sample?"

   "Alright. There are more bulls now, and if you want to bet against the bears, it shouldn't be difficult to find a counterparty. By the way, what are the specific requirements of your customers?"

   "I didn't say anything specific. I'll show him after I design it. We can design the price of francs a little lower, so it's easier to find a counterparty."

"That `s a deal!"

  …

  The private bank acted very quickly, and quickly designed a contract with a selling price of 0.7000, with a target amount of 3 billion U.S. dollars and a period of two months. The specific content of this contract is that after two months, Zhongshi will sell three billion US dollars worth of Swiss francs to the counterparty at the price of one Swiss franc to US$0.7000.

However, the plan did not change quickly. During the process of formulating the contract, the Swiss franc rose sharply for two trading days, and the exchange rate of the Swiss franc to the US dollar in the market has risen to 0.8000 US dollars per Swiss franc, which made Lu Fei and her team re-formulate again. Contract, the execution price is set at 0.7900.

  This means that on the settlement day, as long as the Swiss franc is above 0.7900, the stalactite will generate losses. Below 0.7900, Zhongshi will be profitable.

After Zhong Shi nodded, HSBC used its global network to start looking for a counterparty in the market, and soon the contract was concluded. The counterparty was a local Swiss commercial bank. Looking for corresponding contracts in the market to preserve the value of its Swiss franc assets.

When the contract and the contract of the offshore company were transmitted to Zhong Shi far away in Europe, it was already two days later. After slightly modifying the contract, Zhong Shi signed the contract in the name of Skyline Holding Company. contracts.

The specific content of the original contract is: Zhongshi, after paying an option fee of 30 million U.S. dollars, has the right to sell 3.75 billion Swiss francs at the exchange rate of 1 Swiss franc to 0.7900 U.S. dollars on November 20, 1992. option. HSBC Bank will provide guarantee for the entire transaction, and the commission and guarantee fee will be 20% of the profit part.

What Zhong Shi modified was commission guarantee fees. He did a rough calculation and found that taking 20% ​​of the profit was too high. Finally, he negotiated with the private bank to guarantee the commission at a price of 50 million U.S. dollars, thereby withdrawing This content accounts for 20% of the profit.

In the end, Zhong Shi swiped his pen and signed the OTC option betting contract for shorting the Swiss franc, because his funds are in HSBC, and after transferring 30 million US dollars to the corresponding account, the agreement will automatically take effect .

In addition to shorting the Swiss franc, Zhongshi quickly made the same contract on the Swedish krona, which was about the same price as the previous contract. Used half of it.

   After completing these agreements, Zhong Shi and Andrew started the next round of investment.

This time they put all their funds into the British national debt market and stock market. According to Zhongshi’s analysis, the British domestic economic policy will face major adjustments. The British government does not need to maintain such a high interest rate level to allow the British pound and European currencies Therefore, the adjustment of interest rates will be imperative, and the bond market and stock market will benefit from this.

   After finishing all this work, Zhong Shi and Andrew finally returned to Hong Kong. (Thank you very much for your support, the author is going to start designing new content, the update is a little slower, I hope everyone can understand...)

  (end of this chapter)