Systemic risk, or market risk, is a risk that affects all assets and cannot be eliminated through a portfolio of assets. For example, wars, natural disasters, inflation, energy crises, etc. Because this type of risk, once it erupts, it affects the entire market, so it is also known as non-divergeable risk.

Most people know that you can't put all your eggs in the same basket, and the same applies to the investment market. For example, if you buy Boeing shares, you should also buy some Airbus shares at the right time, because in the aviation field, the two companies are very competitive with each other. If one loses a large order, it is most likely that the order will fall into the hands of another. This risk is unsystematic and can be hedged through a portfolio. The largest portfolio in the market is the basket of stocks that make up the index, which is the external reflection of the stock index, in which unsystematic risk is theoretically completely hedged.

One of the original intentions of stock index futures is to hedge systemic risk. For example, if a country suddenly goes to war, this situation is an unavoidable systemic risk for the capital market, in this case, investors can short the index to achieve the purpose of keeping the capital from shrinking.

Commodity futures also have a similar function, in fact, the commodity futures exchange was opened at the beginning, in order to hedge the risk from the spot market, but due to the high leverage of capital use and the increase in trading volume year by year, the futures market has gradually become a place for speculation.

As a trendsetter in the market, hedge funds are undoubtedly the most sensitive in this regard. When the price fluctuations of crude oil futures in November were too weird, they noticed this situation as soon as possible, and after careful analysis, they entered the market one after another to open positions, hoping to make a big profit in this market. Naturally, there are some people who are short and long, and the two sides have different judgments on the future direction of the market, but they all have one thing in common, that is, there will be a wave of crude oil market in the near future.

Counting the hedging producers and exporters, there are already commodity funds in these markets, as well as a large number of retail investors and institutions. At the end of 93, the crude oil futures market poured into a large amount of money. Both sides are fighting every day in this market, and both strive for the market to develop in their favor.

In this case, the open interest in NYMEX crude oil futures in December '93 reached a rare level of 400,000 contracts per day, which means that the average open interest in November increased by 30%. This means that at least hundreds of millions of dollars in margin are paid to exchanges. For every dollar moved, $400 million changed hands. The judgment of the two sides on the future direction of the crude oil market is very different, and the sentiment of gambling is extremely strong.

But sometimes the market is not created by these funds, and these two sides in the futures market are only a small part of the global market. Neither in terms of capital nor influence, they do not play a decisive role in the market. It's politics that really makes a difference.

During Thanksgiving, the Organization of the Petroleum Exporting Countries (OPEC) met in Austria to discuss proposals by some of its members to cut crude oil production. Analysts generally believe that the proposal to cut crude oil production is highly likely to be passed, because the current Shijie economic downturn, the demand for crude oil in major economies such as the United States and Europe has not increased much, and the current oil prices are too low, hurting the interests of most oil-exporting countries.

As the most important part of Shijie Energy, any decision of the Organization of the Petroleum Exporting Countries (OPEC) will affect the development of Shijie economy. The most typical is in 1991, Iraqi President Saddam Hussein advocated OPEC to raise oil prices to assist Iraq and other member countries in paying interest on their debts, which became the indirect cause of the outbreak of the Gulf War.

OPEC has 13 members, most of whom are Middle Eastern countries, with Africa also holding three seats, and the rest being Venezuela in South America and Indonesia in Southeast Asia, each of which has only one vote when proposing a vote. Since oil is the lifeblood of the shijie economy, this meeting on whether to cut production is particularly critical to the direction of the shijie economy in the next six months.

After three days of meetings, the proposal to cut production was not approved due to the opposition of the majority of member states, and the political wrangling behind this is unknown. However, some African member states have gone against the low-key norm in the past, and frequently called in the media to make a contribution to the shijie economy, as well as Ecuador, which just withdrew from OPEC last year, suddenly announced during the meeting that it would increase oil extraction in 94, and the United States aircraft carrier suddenly appeared in the Indian Ocean without notice.

You know, Africa has always been the traditional Shili range of Europe, and most of the other countries in South America, except for a few countries that claim to be hostile to the United States, rely on the United States to breathe, and recently Central and North America is also planning a North American Free Trade Area Jihua, which makes them more closely connected with the United States.

In any case, it is unlikely that the production of crude oil will fall, which is undoubtedly a fatal blow to the NYMEX bulls. On the news, NYMEX crude oil futures for January delivery plummeted from $16.95 at the close on Nov. 24 to $16.11 at the open on Nov. 29, a drop of as much as 5%.

It can be said that neither side expected to encounter this systemic risk when the main force of the short and long sides moved to the January 94 contract only two or three trading days, and it was only at this time that some people realized that half a month ago, HSBC's futures research department had published a similar research report, specifically mentioning that OPEC may not cut production at the second half of the meeting. When these latecomers re-read the report, most of them had only one idea in their minds, and that was to re-evaluate the research capabilities of HSBC's Futures Research Department.

Zhong Shi, who was still in Hong Kong, got the news of the sharp drop in crude oil futures for the first time, and only Andrew and Li Mingyang remained in North America at this time, and they called from the other side of the ocean as soon as the futures market opened on November 29.

"Crude oil futures have plummeted, and now our floating profit has exceeded $300 million, what is the strategy for the next operation, is it time to close the position and leave the market?" On the phone, Andrew was extremely excited and asked again and again.

He himself invested $5 million in the crude oil futures market, opened a total of 2,000 short positions, and so far made a profit of more than $6 million, which has fully doubled, and this yield is enough to make him very satisfied.

However, unlike Andrew's position, Zhongshi is a big short in the market, and his every move has attracted attention from all walks of life, not that it can be closed if the position is closed. As a simple example, when there is a large amount of short closing orders in the market, it is necessary to buy a large number of crude oil futures contracts, which will lead to the increase in the price of crude oil futures in a short period of time, and the final result is that a large part of the floating profit of the Zhongshi position will be lost.

Therefore, as soon as Andrew finished speaking, he immediately reacted: "Uh...... A small amount of out of the warehouse? That's not okay! The small amount of out of the position he said is to close a small part every day, and eventually close it all over a long period of time. The advantage of this approach is that it will not cause a drastic change in the price of the underlying asset, and the floating profit will be maintained to the greatest extent, but the disadvantage is that no one knows what will happen during the period of closing the position, in case the price of crude oil futures suddenly rises, then their floating profit will still lose a lot at present.

"Yes! Today will be an important day, just after the turn of the month, and encountering systemic risks, the trading volume will definitely increase. Fortunately, the January contract has just started, otherwise if the bulls launch a fierce force, we will spit out all the meat we just swallowed! Now the initiative is on our side, wait patiently, I don't believe that the bulls are still capable of maintaining their positions. Zhong Shi sighed, sometimes even if the bulls want to fight to the end, but under the current daily settlement mechanism, the funds of some of their institutions will soon be unable to keep up, and they can only be forced to close their positions in the end, or even liquidate.

"Close the 5,000 short positions today, and test the market's reaction!" Zhong Shi ordered. The bulls may be hedged funds, or there may be some large refiners, some of whom may even hold out until Zuihou! It's just that after today, they have to add funds in order to maintain their positions.

Not only the long and short sides of the market, but even the observing media are speculating about what the trend of this day will be, whether there will be a large-scale reduction in positions, or will there be a continued increase in positions, and the two sides will continue to bet on the January contract? At this time, it depends on the strength of the funds of both sides.

The crude oil futures market started with such a high level of attention!

"Zhong Sheng, 5,000 hands of closing orders have been released, I am gradually released in three periods, basically as soon as the transaction appears, the type of transaction is basically idling, it seems that the market bearish sentiment is still very serious, I think this time is a good opportunity for us to leave." It didn't take long for Andrew's call to come again.

"Don't be careless. You can release another 5,000 hand closing order to see if you can make a little bit. Zhong Shi thought about it and ordered Andrew to continue to test the market. There is an unwritten rule in the financial markets that once the news is announced, then the opening price of the relevant market the following day means that the expectations are in place, and the next time is the market correction effect. And at this time, there are still people entering the market, indicating that systemic risks are far from being fully digested. (To be continued......)

PS: Thank you very much for the dragon war ghost and the tip that made me think about it! I didn't see yesterday's tipping, but I would like to express my gratitude today!