My Age of Investment

  Chapter 1004 Stock Index Options and Derivatives

After explaining to Liu Hai, Xia Jingxing looked at Jiang Ping who was sitting quietly on the side, and asked with a gentle smile: "Big Brother Jiang Ping, where are you?"

   "I took the team to the Chicago Board of Trade these days and talked with the group's executives.

  The S&P 500 index fluctuates around 1400 points these days, and the price of one contract per lot is about 350,000 US dollars. "

  Jiang Ping said with a smile: “If you sell short 50,000 or 60,000 contracts, more than 20 billion US dollars will be smashed, and the market will be very volatile.

  I suggest that like Liu Hai short individual stocks, I also use stock index options tools, such as buying S&P 500 put options. "

  Xia Jingxing smiled slightly. The principles of index options and individual stock options are the same. Find an opponent to gamble together, but the underlying or called gambling tools are different. One bet on the index and the other on the stock price.

  In the second wave of shorting subprime loans, the tasks he assigned to Liu Hai and Jiang Ping remained the same as before, one in charge of individual stocks, one in charge of indexes and foreign exchange.

   "Okay, you can figure it out. When the final plan comes out, just show me a look."

  In Xia Jingxing’s memory, the three major U.S. stock indexes, S&P, Nasdaq, and Dow Jones indexes, seem to have not fallen as fiercely as some stocks.

Take the S&P 500 index for example. It is like the Shanghai and Shenzhen 300. It selects hundreds of listed companies and adds them together according to different weights to form a representative data called an index, which reflects the entire stock market. Change is also the market that people often talk about.

  However, Xia Jingxing believes that the constituent stocks of the S&P 500 index such as Lehman Brothers and AIG will definitely outperform the market...

  From this perspective, it seems that shorting individual stocks can make more money.

   However, the words come back again. Envision Capital now has too much capital, and all of them are shorting financial stocks, which is not easy to operate and very risky.

   "In addition to these two methods, we can also consider short or long ETF funds."

Jiang Ping said with a smile: "Take the S&P 500 index ETF fund, we can either choose to buy three times short ETF funds, or choose to short three times long ETF funds, both of which can achieve the purpose of short index. ."

  ETF index fund refers to an index fund that can be traded on a stock exchange like stocks. It actually represents the ownership of a basket of stocks. Its trading prices and fund share trends are basically the same as the index being tracked.

  For example, the S&P 500 ETF fund, the index rose 1%, and the fund also rose 1%.

  The triple-long ETF fund mentioned by Jiang Ping is slightly different from ordinary ETF funds. The index rose by 1% and the fund rose by 3%.

  The three times short ETF fund is the reverse, the index fell 1%, the fund rose 3%; the index rose 1%, the fund fell 3%.

  You don’t need to pay a deposit, and you don’t have to worry about liquidation, you can enjoy the joy and excitement of doubling your money...and doubling your money loss.

  "Through the TRS total return swap tool, Goldman Sachs and Morgan Stanley provided us with three times leverage, and then multiplied by three times the ETF shorting fund, the effect of up to nine times leverage can be achieved."

  Jiang Ping looked at Xia Jingxing with a smile, "The risks in this are great, but the benefits are also great.

  In addition, regarding the risk of liquidation, just look at the triple leverage of Goldman Sachs and Morgan Stanley.

  I think we can allocate a small amount of ETF funds to achieve the effect of diversifying investment and reducing impact.

  At the same time, we also need to pay attention to a problem-shock loss.

  In a market that is up or down in one direction, leveraged ETF funds can have the effect of amplifying returns.

  In the volatile market, the index returned to the original point after a few days of fluctuation. The net value of the unlevered ETF fund remained unchanged, but the net value of the leveraged ETF fund would decrease.

  In addition, the management fee rate of leveraged ETF funds is relatively high, more than 20 times that of ordinary ETF funds, and the annual fee rate is nearly 1%. "

  Xia Jingxing nodded slightly. If there are advantages, there will be disadvantages. It is impossible to be perfect. Otherwise, everyone will buy three times the S&P 500 index and do long ETF funds.

  From the perspective of past development experience, the major US stock indexes will always regain lost ground. If you can take it, you will definitely make money, but the return will not be too high.

  But adding a three-fold leverage is very impressive, not only do not have to worry about liquidation, but the income is also tripled.

  It seems that it is very suitable for long-term investment, but the friction of leverage can consume ordinary investors to death.

  Xia Jingxing nodded, "All right, ETF funds should also be allocated a bit, are there other short-selling tools?"

   Jiang Ping smiled and said: "VIX panic index!"

  Xia Jingxing froze for a moment, and then reacted, his expression became very surprised: "You mean the unpopular thing that measures the expected volatility of the Standard & Poor's 500 Index on the 30th?"

  Jiang smiled flatly, “Yes, that’s it. The higher the VIX index, the more it means that investors have smelled danger and are worried about the stock market;

  The lower the index, the more it means that the stock index will move more smoothly.

  VIX vividly reflects the degree of investor panic about the market outlook, so it is also called "panic index" or volatility index.

  Generally speaking, even in a bear market, the VIX index will not change much, showing a slow downward trend. "

Speaking of this, Jiang Ping watched Xia Jingxing, his voice suddenly raised, "But once there is the kind of economic crisis that Jingxing predicted is comparable to the kind of economic crisis of the Great Depression era in the 1930s, the unpopular VIX index may soar to the sky. !

  I recently investigated and found that many option traders are using derivatives to short the VIX index and making such easy money lying down.

  I think we might as well take some money to gamble with them, maybe the VIX index can create a record high, and the return is very impressive. "

  Xia Jingxing squeezed his chin. This is another kind of right bet. Betting on the U.S. stock market and gambling on the S&P 500 will take a roller coaster next time? Will the market panic?

He remembered that there was a retail courier in the United States in his previous life, who had been determined to short the VIX index for five years, betting that the United States would not break out of a financial crisis, and the country would be prosperous, and the bull market would continue, and he would accidentally change his 500,000 U.S. dollars. Became 15 million dollars.

  The operation is very simple and mechanical, but it is not necessarily how easy it is for people to make money. After all, it is difficult to combine knowledge and action, and it will not be bad to do Maotai for five consecutive years.

  However, it can be seen from this incident that the VIX index is indeed a tasteless one.

   "Okay, you can also gamble on the VIX index!"

  Xia Jingxing thought for a while, then added: "Gamble with leverage! Either make a lot of money, or just throw it in the water."

  Jiang Ping didn’t say anything. He decided to invest tens of billions of dollars. He was certain that the US stock market would fall apart. How could he care about this small amount of money and the gambling would be over.

The   VIX index was created in 1993. In 2004, the Chicago Board Options Exchange began to link futures and options with the index. The development time is not long, but the scale of transactions has risen rapidly.

  However, there is still a big gap with the mainstream S&P, Nasdaq, and Dow, and cannot carry too much capital.

  "Futures, options, ETF funds, and volatility of the three major indexes."

  Xia Jingxing counted with his fingers, and had to feel that finance was spent by the Yankees. It was just an index and produced such a large number of derivatives, and derivatives were built on top of them.

   "All the investment in these index derivatives will be handed over to you, Brother Jiang Ping. I only confirm the relevant contract plan. After the approval, the specific implementation and operation will be given to you."

  Looking at Xia Jingxing's solemn tone, Jiang Ping's heart also began to become heavy.

  This is 20 billion U.S. dollars, so I handed it all over to him, which made him both excited and feeling like a mountain of pressure.

   "I do my best!"

  Looking at Jiang Ping who was succinct and concise, Xia Jingxing nodded slightly. He knew that the other party was such a person. He didn't like long talks, and preferred to prove himself with actions.

  "Don’t be too pressured. The general direction has been determined and will not be changed midway.

  This win or lose has actually been set from now on. The execution of the transaction is just a matter of how much you lose and how much you lose. "

  Xia Jingxing patted Jiang Ping on the shoulder intimately, indicating that the other party should not be too stressed.

   Then he looked at Abel, who spoke a lot on weekdays, but who rarely spoke today.

   "Abel, the fundraising work for the $5 billion PE fund is about to end. What are your plans next?"

Hearing the boss calling himself, Abel has a small belly and replied loudly: "I plan to devote all my energy to the selection of the sub-fund managers of the Daxue No. 2 hedge fund of funds, and make it work as soon as possible. Get up, don't hold back the company."

  Abel not to mention, Xia Jingxing himself almost forgot that there is still such a chicken rib fund under Envision Capital.

  The reason why it is said to be poor is that it is difficult for outside fund managers to catch up with the rate of return of prospective capital. In comparison, if the gap is large, it is estimated that the LP who invested in this fund suspects that they are engaging in black-box operations.

  Xia Jingxing was too lazy to think about it, and asked, "How is it? How is the work going on recently? Have you found a suitable candidate?"

   Abel smiled, "I really found two, one is Greenlight Capital and the other is Global Investment."

  Xia Jingxing frowned slightly, the other name was too popular, and he had no impression.

  But he has heard the name of Greenlight Capital. The founder David Einhorn has also published a book called "All the way to the end", which is very Wall Street style.

   "Okay, all the 500 million dollars will be handed over to you, you can figure it out."

  The boss said this, and Abel suddenly felt a little lost in his heart.

  When he was about to apply for boss counseling, Xia Jingxing waved his hand, “Don’t ask me, this is your job, it’s up to you to do it well or not.”

  Abel knew that the boss was testing himself. If he performed well, he might have the opportunity to be on his own in the future.

  Thinking of this, Abel stopped hypocritical and worrisome, nodded and said: "Okay, Dai Lun, don't worry, Daxue No. 2 Fund will never damage the company's brand."

  Xia Jingxing nodded with a smile, not much to say.

  (End of this chapter)