My Age of Investment

   Chapter 1054

  The next day, as soon as the U.S. stock market opened, Bear Stearns’ stock flew down three thousand feet as Liu Hai expected yesterday, and investors trampled and fled in a wailing.

  Bear Stearns’ stock price plummeted by more than 90% from yesterday’s closing price of US$34.38, hitting a historical low of US$2.84, setting a new record in 23 years of listing!

  This stock price is very close to the acquisition offer made by JP Morgan, and it is also an official portrayal of market pessimism.

  If it is multiplied by the total equity of 118 million, the total market value of Bear Stearns is only over 300 million U.S. dollars, and it has come to the darkest moment.

Recalling that before the subprime mortgage crisis broke out last year, Bear Stearns' peak share price was US$159, with a total market value of nearly US$20 billion. This financial giant is second only to Goldman Sachs, Morgan Stanley, Merrill Lynch, and Lehman on Wall Street. ；

  Even when CEO Schwartz was on TV five days ago, when the entire Bear Stearns was in turmoil, the stock price was still in the early 60s.

  In just a few days, the situation has taken a turn for the worse, and people have completely lost trust in Bear Stearns. Even JP Morgan is only willing to spend more than 200 million US dollars to acquire this toxic company. So how many risks are not exposed?

  With doubts and panic, people madly dumped Bear Stearns stock.

  Now choose to stop loss, and you can still sell above 2 dollars, and lose a little bit; when JP Morgan completes the acquisition, then you can only accept that the other party will take away their shares at a price of 2 dollars.

  Which is better, it is not difficult to choose.

  Investors with this mentality of cutting the meat out, gave Bear Stearns's already fragile stock price another crit.

   85 Wall Street, trading floor.

Under the leadership of a vice president, analyst Hou Xiaoqiang and several other colleagues are responsible for tracking Bear Stearns' stock price trends, and sending trading instructions to the brokerage departments of Goldman Sachs and Morgan Stanley at any time, and the two investment banks will be responsible for them. Specific execution of buying and selling.

   "Guys, work harder. There are instructions on it. These days, we must close the 4.28 million Bear Stearns short position.

  After completing this task, everyone can have a week of vacation and take their family to travel anywhere in the world. The company will reimburse all travel expenses as a benefit for everyone to work overtime for two consecutive months. "

The vice president finished his speech concisely, and then clapped his hands, "Well, now everyone sits back to their seats, and when the market opens, we will give our sweetheart a surprise. Remember to act lightly and don't scare our little ones. Sweetheart."

  Hou Xiaoqiang smiled, followed his colleagues back to their seats, and then stared at the six LCD screens on the workstation. This was his battlefield, and his promotion and salary increase were just around the corner.

   Then, as soon as the US stock market opened, Bear Stearns’ stock price really crashed.

  Taking this opportunity, Hou Xiaoqiang and other colleagues issued buy and close orders one after another.

  A large number of stock purchase orders have re-supported Bear Stearns’ stock price.

  The stock price first fell to 2.84 US dollars, and then ushered in a bottoming out.

  3 dollars!

  4 dollars!

5 USD!

  ……

  The stock price fluctuates constantly in the range of 3-10 US dollars!

  Hou Xiaoqiang felt that something was wrong. They had obviously closed their positions when they closed their positions, but the stock price was still fluctuating, which added a lot of liquidation costs.

  "Boss, I found that someone was entering the market just like us. With so many selling orders, the stock price was still above $5."

  The vice president gave Hou Xiaoqiang a glance, and said lightly: "You didn't make this discovery alone. Do you think our company is shorting Bear Stearns?

  Today, everyone is seizing the market panic to close their positions. After a few days, Bear Stearns stock investors’ mood has calmed down. If they want to close their positions, the cost is not so low! "

  While speaking, the vice president glanced at the screen in front of him, and immediately burst out "Fack". Just as they spoke, Bear Stearns’ stock price had broken through $10 and rushed towards $15.

  "Wait, wait for the most impatient group of guys to run away first."

  Following the instructions of the vice president, the team suspended the liquidation operation.

  Sure enough, Bear Stearns, who was sluggish, was only handsome for three seconds, and the stock price fell again, first falling below $10, and then being smashed back to $5 by a large sell order.

  Seeing this, the vice president finally smiled with satisfaction, "Guys, you can enter the venue now."

  Hou Xiaoqiang took a serious study attitude and watched the whole process very carefully.

  When Bear Stearns’ stock price broke through $10, the big shorts from all walks of life maintained a tacit understanding and stood still.

  When the stock price fell below $5, everyone started to do it again.

  The cycle has been operated several times, and the shorts from all walks of life reached a consensus in silence, putting the stock price in the range of 5-10 dollars to complete the liquidation, and everyone has the meat to eat.

   A similar scene also happened in another department of Envision Capital-the option trading department.

  Vision Capital not only holds 4.28 million shares (3.63% of the total share capital) of Bear Stearns’ short-selling stocks, but also holds 5 million put options.

  Compared with the stock price volatility caused by the liquidation of the underlying stock, the movement caused by the option sale transaction is much smaller.

  At present, Bear Stearns’s stock price has fallen below the agreed strike price of the option contract, from the initial out-of-value option to the real-value option, and the price of the option has soared all the way.

  American options are different from European options in that the latter must wait until the expiry date to be delivered, either one day earlier or one day later.

  There are two ways for American options to take profits. Take put options as an example:

  One is to wait for the expiry date to choose exercise, buy the agreed number of stocks from the market at a low price (the current stock price), and then sell the stock to the counterparty at the contract price (high price) to earn the stock price difference;

  The other is to take profit early, that is, sell options that have not expired but the price has skyrocketed, and let the next taker take the risk of profit and loss.

  If you choose the second method to sell the contract, because the option has not expired, it may fluctuate with the stock price. Selling the option in advance is equivalent to locking in the profit, and you are safe.

For the next taker, it is possible that just after buying someone else’s second-hand put option, the stock price has skyrocketed, causing it to be higher than the strike price. At this time, it is impossible to choose to exercise. The real value option becomes an out-of-pocket option and expires completely. Reduced to a piece of waste paper.

  However, Xia Jingxing was quite strong this time. He made a fairly accurate judgment on the time of the crisis in Bear Stearns. All put options held by Envision Capital will expire in the next week or so.

  Therefore, there are two options in front of Envision Capital. Xia Jingxing did not hesitate to choose the second option, and did not choose to exercise the right to expire.

  Because if you want to exercise the right, you have to buy the stock from the market and then complete the resale.

  The trading department responsible for shorting the underlying stocks is buying and closing positions at this time, and then adding buy orders, which will easily push up the stock price, which will affect the profits of both departments.

In addition, Xia Jingxing also knows that JP Morgan’s $2 acquisition bid is not the final plan. The two companies should be in further negotiations these days and will soon come up with a new acquisition plan. By then, Bear Stearns’ stock price is bound to change. Ushered in a major rebound.

  If the action is sluggish and reluctant to lose due to the friction caused by the quick liquidation, it will be buried directly in it.

  It is definitely a golden opportunity to clear all put options right now, and it happens to be able to sell at a high price.

Therefore, Xia Jingxing very decisively issued an order to "clear all positions". The various trading departments below are moving quickly. The short stocks were quickly liquidated, and put options were also sold at rallies. A large amount of cash and short profits began to flow back. Above the trading account.

  (End of this chapter)