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Sodium Citrate Capital is not a predator, but it has been in the limelight lately, and often uses out-of-the-box remarks to attract attention, but it has to be admitted that their short-selling strategies are usually logical and have good returns.

There are also many people who suspect that Ammonium Citrate Capital is actually a sounding balloon or white glove of a giant investment bank, which Sodium Citrate Capital itself has never admitted, and certainly has not denied.

Maintaining a sense of mystery is what roars!

The story of long-short battles happens every day on Wall Street, and it is normal for someone to go long when they open a short.

And this time, Sodium Citrate Capital also called several helpers, Giant Capital and Attack Capital.

The scale of sodium citrate capital is very small, and the scale of its capital is hundreds of millions of dollars.

It seems like a lot, but this is Wall Street, and hundreds of millions of dollars is the volume of shrimp.

Cap Capital and Attack Capital can barely get second-rate standards, and the combined scale can reach billions.

It initially has the ability to make waves.

In this way, sodium citrate capital opened the cannon, and two small sharks followed and burst in, and the market began to change color.

The decline in theater stocks across the United States has accelerated sharply!

But this time Edward and Carl Wright are eyeing because these short-selling capitals are a little carried away.

According to Carl Wright's observations and statistics, he found that the entire market has reached as many as 1.5 times more than the market value of the stock itself.

This is clearly unreasonable.

After all, the financial market is real gold and silver, but it is not Buddhism, and the four major are empty when you close your eyes......

This kind of excess emptying is purely a disregard for the Basic Law.

The reason is simple, either many institutions did not negotiate well when they were shorting, and made multiple short positions through complex financial derivatives, and when it came to delivery, they competed with each other to see who could run faster;

Either their core purpose is to force the stock to be delisted, and the stock does not exist, then no matter how much excess there is, it will be a source of water, and it will be a hundred.

In this regard, Edward thought that it was possible to do both, or that he did not think of forcing the delisting at first, but after discovering the excess short position, in order to maximize the profit, the vultures began to kill themselves and force a decent stock to be delisted.

It is not too much to say that this is forcing good people to become prostitutes.

It is immoral and unethical, but it is not illegal.

The term "devil's dealing" is not for nothing, it is not a slander, but it is a true description of the inherent ugliness of short-selling business, especially the fact that this model can only be carried out by specific institutions, and ordinary retail investors are isolated through laws and regulations.

Short trading could have been a good hedging tool to control risk and curb the brainless rally of junk stocks.

But in practice, short sellers basically don't have a good reputation.

The main instruments for shorting right now are securities lending and options. (There are also CDS, CDO, SWAP and other things, but the invention time is relatively late, 69 years should not be, secondly, uncles let me go, I'm already depressed, professionally, everyone just watch a happy harmony, please.) ）

Let's talk about securities lending first, financing is like borrowing. As the name suggests, borrowing stocks.

For example, let's say Edward has a one-pound gold brick in his hand, which is worth $10,000 in the current market.

Edward himself bought it to pass it on to future generations, without considering trading at all, and he was optimistic about the future generations of the exchange money.

But Carl Wright doesn't think so, and he thinks the price of gold will fall to $9,000 a pound in three months.

He wanted to take this opportunity to make a small fortune.

But what if you don't have gold in your hands?

It just so happened that he knew Edward, so the two exchanged fools about the future price of gold...... Crossed out, they thought of a way to get the best of both worlds.

Edward lent the brick to Carl Wright, agreeing that one day three months later, Carl Wright would return the same brick, plus a $500 handling fee.

Carl Wright got the gold and went straight to the market to sell it at the current price, and got $10,000.

Three months later, if the price of gold falls to $9,000, then Carl Wright goes to the market to buy a piece, one in and one out, and the gold brick does not change, but he has an extra $1,000 in his hand, and he can still earn 500 after deducting the $500 he wants to give to Edward.

But conversely, if the price of gold rises to $11,000 a pound, then Carl Wright will have to admit it, buy it back for 11,000, and return it to Edward, and pay a 500 fee by the way.

Of course, he can also give Edward $11,500 without delivering the physical goods.

Or if he chooses to repay his debts, then he will wait to suffer the iron fist of capitalism, because in fact, in the relatively perfect financial speculation market of capitalist countries, there is no possibility of defaulting on debts.

Here's why......

Because there is a brokerage broker between Edward and Carl Wright, let's think it's better to be Chris.

So the original process became, because of Chris's good reputation, Edward bought the gold and kept it for him, and Carl Wright went to ask Chris to borrow it.

Chris said, since I am a middleman, then we have to play some advanced, the core purpose is to reduce the losses of both sides of the transaction.

Because in the previous trading model, Kyle Wright would have suffered a direct loss of $1,500, which is not reasonable and does not fit the original purpose of the financial market - the purpose of the financial market is to accelerate the flow of money, drive optimal allocation, and use the law of market value to automatically reduce risk - well, this is a fact, although this thing has not been properly adhered to since then, but it was thought that way at first.

So Chris said, I lend the gold to Carl Wright, but he has to pay a certain deposit with me, and if the deposit is consumed due to excessive market volatility, then the transaction is terminated and Carl Wright must return the gold immediately.

Specifically, if Carl Wright wanted to borrow gold, he would have to give Chris a $500 deposit, which is called a security deposit in the jargon.

The purpose of margin is to reduce risk, assuming that after Chris borrows, the price of gold begins to rise, when it rises to $10,500, Carl Wright's $500 margin cannot cover the increase, at this moment he only has two choices, either add margin, or directly admit it, $500 is not needed, and the gold will be returned - the jargon is called forced liquidation, forced liquidation.

It seems that he is losing, but how to compare with the previous way, it is still a loss of 500 US dollars, of course, if the price of gold rises to 10500 and falls to 8000 again, then Carl Wright has nothing to do with him because he was liquidated before, and how much he falls later.

If gold is replaced by stocks, it is a typical securities lending operation.

In fact, simple securities lending is not particularly scary.

In order to prevent liquidation, that is, the failure of speculation, resulting in the speculator owing money to the brokerage, in practice, if he wants to borrow and lend securities, Carl Wright must have sufficient assets as collateral.

For example, if he wants to borrow $10,000 worth of national cinema stocks, then his position usually has at least $12,000 worth of assets (usually stocks or securities) as collateral.

In this way, if there is an extreme situation, such as a sudden violent rise in borrowed stocks, then as long as the market value of these national theatrical stocks does not exceed $22,000, then the broker and the lender of the stock will not lose money.

Securities lending is also a kind of leveraged trading, but the leverage is very low, usually above 100%, that is, if you want to borrow at least one dollar worth of stocks as collateral, such as the leverage ratio of 120%, that is, you need $1.2 to borrow a stock with a current price of $1.

This practice of extremely low leverage does not actually pose much risk, but without risk, where is the excess return, how can the vultures of Wall Street be satisfied?

So options came into being and shone brightly.

The English name of option is option, which literally translates as option, and option is actually the abbreviation of trading option in the future period.

This is the best weapon in the "Devil's Deal", and it is also the bloodiest murder weapon, and it is not only the blood of the enemy that flows from the blade, but also the blood of the knife bearer.

An option is a right to choose whether to trade or not.

When the buyer of a contract pays a premium, if he has the right to buy or sell a certain amount of the underlying object to the seller of the contract within a specific period of time (or at a specific time) according to specific conditions or performance price, this right is called an option.

If this power is to buy the underlying asset, it is called a call option (call option, call option), referred to as a call option.

If this power is to sell the underlying asset, it is called a sell option (short option, put option), referred to as a put option.

There are two kinds of options, buy and sell, plus this is a two-way transaction, so it can be divided into four types: buy buy right, buy put right, sell call right, and sell put right.

The history of options is actually very long, dating back to the Netherlands in the 17th century, during the period of tulip mania, and aside, it is likely that the ancestors of the Lansing family were Dutchmen who participated in tulip speculation and went bankrupt, and ran to the New World in order to escape debts.

At that time, the tulip bulb was no longer a plant, but a speculative commodity, the price was inflated to the point that it was completely detached from its actual value, and the turnover of the goods was extremely high.

This is where highly leveraged options come in.

In terms of buying options, the buyer of the tulip has the right to ask the seller to sell the tulip bulb at an agreed price within the agreed time by paying a small premium.

For example, next year, the bulb will be 1 yuan a piece, but I estimate that it may reach 2 yuan a piece in March next year, so I made an agreement with the flower planter, and I now lock in a contract at the price of one cent per bulb (royalty), and the contract requires that he sell it to me at the price of one dollar per bulb in March next year.

If everything is normal, I will buy it for one dollar in March next year, sell it for two yuan, earn 1 yuan, deduct the royalty of one dime, and make a net profit of nine cents.

It is equivalent to the cost of 1 cent, and I earned 9 cents, and the leverage ratio is 9%.

But on the other hand, if the price is still 1 yuan in March next year, then I can choose to buy still or give up the right to buy, so that I will lose a dime no matter what.

If it falls to 9 cents, it goes without saying that the right to buy will definitely be abandoned, and the corresponding loss will also increase to 2 cents per piece.

Back to stocks.

The stock of the National Cinema Chain is now trading at $2 per share, but Carl Wright thought it could fall to $1 per share in three months, so he bought a three-month Omni long option, each corresponding to a purchase right of 100 shares.

Let's assume that the current price is $10 per option contract.

Well, we can calculate it this way.

Assuming that Carl Wright's entire capital is $10w, if he does it through securities lending, assuming that the leverage ratio of securities borrowing and lending is 100%, that is, he can only raise 2,500 shares worth $5w, sell them at $2 per share, and buy and repay the bonds at $1 after 3 months, making a net profit of $25,000.

But if you are involved in the options market, then the situation becomes quite interesting.

Carl Wright can choose to sell call, that is, he signs a contract with his opponent as a buyer, agreeing that after three months, no matter what the market value of the stock market in the United States theaters is, he can sell 100,000 shares to the other party at a price of $2.5 (it is normal for someone to be bearish and someone to be bullish, this kind of transaction is essentially a one-to-one match). )。

But this kid knows that it will definitely fall to $1 per share by then, so he can earn (2.5-1) * 100,000 = $150,000 through this transaction!!

That's not all, because it is an option transaction, as the party with the performance obligation, he can receive the royalty, which is the amount of each bulb/1 cent in the tulip transaction, and the premium per share is assumed to be 10 cents, then 100,000 shares is $10,000.

The total revenue is 150,000 + 10,000 = 160,000 USD.

Compare it with securities lending, 25,000 vs. 161,000, six times!

Do you think that's the end of it?

That's obviously a pattern!

Since the contract is agreed to be completed in three months, Carl Wright has the 100,000 US dollars in hand, and he can not participate in this transaction, as long as he can get together 10w after three months, the usual way is to borrow a loan shark, anyway, it only needs to be used for a day or even a few minutes, and the money is transferred to the account after a while, even if the transaction is completed.

Of course, it is not completely unconditional to operate this way, Carl Wright's account must have collateral to prevent liquidation - the brokerage is a casino, he will isolate his own risk from trading, but this is also simple, the dead money of a house, a car or a securities or something can be used as collateral.

In other words, this trading model of selling and calling options is simply an empty glove white wolf.

It's faster than going to Las Vegas to get money.

It's not casual that Wall Street has always been known as the world's largest casino, and in this year-round windy street (mainly surrounded by high-rise buildings on both sides), millions or multi-millionaires are born every day and every moment, and they will boast that there are many secrets to success, but in fact, it is good luck to do the right trade once in a lifetime.

But where in the world is it so convenient to make money?

The benefits are huge, but so are the risks, and selling the call is the only one of the four trading modes of options that will generate exposure risk.

That is to say, although this model makes a lot of money, but the loss is also huge, and the most terrible thing is not a huge loss, but in the later stage, it will lead to a situation that will not be able to get out.

In case, the stock price rises, and the situation changes.

If the stock price really reaches $2.5 per share, then Carl Wright's loss will be (2.5-2)*100,000-10,000 (premium) = 39,000.

Net loss of $39,000!

What's even more terrifying is that as the stock price climbs, there is no upper limit to this loss.

The increase from $2 to $2.5 is only a 25% increase, and Carl Wright will lose 40,000 less.

And what about going up to $5?

（5-2）*100000-10000=290000！！

Net loss of $290,000!

If it rises to $10

（10-2）*100000-10000=790000！！

Net loss of $790,000!