Chapter 20
Translator: Dreamscribe
Options.
It is truly an interesting financial game.
Even in ancient Greece, the concept of an options existed, and during the tulip bubble in 17th century Netherlands, there were contracts for predicting and trading future price fluctuations. (TL Note: https://en.wikipedia.org/wiki/Tulip_mania)
However, the modern options market began with the establishment of the Chicago Board Options Exchange in the United States in 1973.
A financial product that allows trading the right to buy or sell an asset at a specific price in the future.
That is what an option is.
So people in securities firms call it a lottery ticket.
In Korea Exchange (KRX), options are standardized as products and listed, with institutions selling them and investors paying a premium to purchase the rights in this system.
This lottery ticket can be sold to others before the expiration date.
Its price varies widely depending on the market.
As with all lottery tickets.
Most options become worthless on the expiration date.
But sometimes, very rarely.
The Day of Judgment arrives.
“Manager Kim. How, uh, how much has it risen now?”
“Right now it’s 9… no. Now it’s 10 times.”
“Crazy. Then isn't a margin call coming soon?”
“Yes. Korea Exchange (KRX) also contacted us saying we might need to prepare additional margin.”
People who buy options don't care what happens to stock prices.
They can just resell it, or simply give up the right on the expiration date.
So then who is the problem?
It’s the original seller.
The initial option seller must deposit margin with Korea Exchange (KRX) to be able to sell the option.
The rule is to deposit margin between 5 to 15 times the option value.
The problem arises when the sold option’s price exceeds the margin, triggering a margin call.
And the moment the seller fails to meet the margin call, forced liquidation occurs.
"Forced liquidation absolutely cannot happen!"
Whether the initial seller is a fund, an institution, or a securities firm.
The moment they are forcibly liquidated, trading is temporarily suspended, and the position is liquidated at the currently soaring market price, resulting in massive losses.
“First, retrieve the stuff we’ve spread out! And roll over the ones with other expiration dates.”
“Will we be able to cover the cost for the margin call, Department Head?”
“I already informed the higher-ups. I asked them to let us put out this urgent fire. Right now, responding to the margin call takes priority. Even up there, they’re in a panic telling us to sweep everything up quickly before the price rises any further.”
When Chinese securities first plummeted, it was only the overseas market that was in chaos, while the domestic stock market remained relatively calm.
But then the tsunami hit in an instant, flooding everything.
They had to scoop the water out of the house quickly, but there was one problem.
“How is it that there are so many buy orders, but no one’s selling! How much more do they want to gain!”
It’s already 10 times.
And yet, the person who swept up all the quantity wasn’t releasing it.
The more that happened, the higher the price kept climbing.
At this rate, not just 10 times, but 20 times seemed possible.
“Relentless bastard. Who the hell is bleeding us dry like this?”
***
Everyone knows.
A bubble will burst someday.
That's why there's such a saying.
Catching the optimal selling timing is divine luck.
In other words, the ones who get out before the bubble bursts are the winners.
“It was like this last month, and this month’s performance looks bleak too. There’s never a quiet day, seriously.”
“Still, we defended well. The impact from China’s market arrived in Korea later than expected. Our detailed risk management helped too.”
“What’s the point of risk management? It’s all in the red anyway, right? Do you know how many reports I’ve gotten today alone?”
“That’s true… But considering other securities firms are wailing, we’re lucky.”
Where there’s a bull market, there is always a bear market.
The problem is when it hits too hard.
“Thank god it didn’t grow to Lehman Brothers level.”
“Phew. Compared to the subprime crisis, this is heaven.”
When thinking back to the subprime mortgage crisis that broke out in 2008, CEO Hwang Dae-woon still felt a chill down his spine.
“Back then, options went up a hundredfold, and quite a few firms shut down. We also got hit by margin calls and even borrowed money using bonds as collateral.”
So since that time, Kwangwoon Securities had built a system for the options sector to be as low-risk as possible.
Even if the profits were smaller, the aim was to minimize the damage should a similar situation occur again.
“But this time too, it must be fatal for the ones who handed out those lottery tickets.”
“Right. Especially some funds and securities firms are in total chaos.”
“Why? Because the price went up?”
“The price did skyrocket, of course, but the real problem is that the ones who swept up all that volume aren’t selling. Occasionally, some amounts are released, but they’re truly small, and the ones holding large quantities aren’t showing themselves. Everyone in Yeouido is going crazy trying to find out who’s holding it.”
“Huh. At this level, doesn’t it seem like there was insider information? That guy swept it all up beforehand and isn’t selling? That’s ruthless.”
“Yes. The selling side is probably having a meltdown. The price just keeps soaring with no end in sight.”
But there was something that had been bothering him for a while.
Senior Managing Director Tak Jae-ho, who was reporting just now, was grinning the entire time.
Even though the company was taking a hit because of the Chinese stock market!
“Why are you smiling like that?”
“CEO-nim. You haven’t asked who’s holding those options.”
“How could we possibly know that? Do you know how dangerous it is to have positions exposed."
Which position I’m holding.
That must never be revealed to the other party.
If you slip up, there's a high chance of being manipulated.
That’s why everyone kept their positions a strict secret.
"Do you know how that new Team Leader is doing? You haven't received a report yet, right?"
The new team leader could only be Jung Jin-ho.
“I was already worried about how Jin-ho was holding up. How’s he doing? Is it bad over there too?”
Since something like this happened right after he became a team leader, the damage must have been severe.
It was just that kind of market.
Perhaps once things settled down, he should offer some comfort separately.
Since it was an unavoidable natural disaster, he’d tell him not to get too discouraged.
“Wait a minute.”
But something felt off.
“Why are you suddenly bringing up Jin-ho?”
Tak Jae-ho’s lips curled up in a grin.
“That volume, it’s all in Team Leader Jung Jin-ho’s hands now.”
“That volume… don’t tell me…!”
“Yes. That volume everyone in Yeouido is looking for right now.”
“!?”
***
Is today not the day either?
I was staring at all nine monitors, moving the mouse back and forth between buttons.
From the options we bought to ETFs.
Everything was showing a profit.
Among them, the one showing the most profit was definitely these options.
To be honest, I wanted to just sell everything and lock in the profit right now.
But the feeling hadn’t come yet.
That’s why ever since the bubble burst, I had just been sitting blankly in the office, flicking my mouse around.
Knock knock-
“Ah, yes.”
At that moment, Deputy Manager Lee Hye-rin came in.
…With a plate of cookies in one hand.
“Team Leader. Please have a snack while you’re working.”
Did she see me flinch?
Deputy Manager Lee Hye-rin placed the plate in front of me and put her hands on her hips.
“I didn’t make these, okay? Could you not be so surprised?”
“Haha. Wh-when was I? I like your cookies, Deputy Manager.”
"Our Team Leader. Really can't lie. It's all written on your face!"
“.......”
"Just wait and see. I'll practice a lot and make the most delicious cookies in the world!"
"I'm rooting for you!"
Then Deputy Manager Lee Hye-rin subtly asked me,
“By the way, Team Leader. We’re still holding, right?”
The team members must have been getting bored.
Normally, a prop trader must make hundreds of short trades in a single day, fighting within the thrill and suffocating tension of the market.
Aren’t the other teams already working hard to make up their losses with frantic short trades?
But we were just passing time doing nothing at all.
“I said this last time too, but trading is up to you. If you think now is the right time to sell, you can go ahead and sell. You’ll make a good profit either way.”
“But I also think holding is better for now. The Chinese government hasn’t come up with any groundbreaking measures. Thanks to that, we’re still making money.”
That was probably why my instincts weren’t flaring up.
Because nothing had come out yet that could stabilize this market.
“If I think the timing to sell has come, I’ll let you know.”
“Wow. Then we’ll just wait for your signal, Team Leader!”
Deputy Manager Lee Hye-rin gave a polite bow and left the office.
After confirming that she had gone out, I put one of the cookies on the plate into my mouth.
Ah. Delicious.
Sorry to her, but this felt like the first good cookie I’d had in a long time.
While I was chasing away my creeping drowsiness with cookies and coffee and moving the mouse toward the sell button.
“......!”
A signal rising from my fingertips struck my brain like a bolt.
***
“What did the Team Leader say?”
“Huh? Ah. It looks like the Team Leader is still holding too.”
“Well, it would be a shame to sell now.”
It might seem really boring to do nothing, but the members of Team 7 weren’t bored at all.
Even though the office was warm, their hands were trembling.
Right now, Team 7 was recording the highest profits since becoming prop traders. The problem was, to realize profit, you had to sell what you were holding.
So they were barely holding themselves back from dumping everything right now.
“When do you think the Team Leader sees the sell timing coming?”
“Who knows. How can a sparrow understand the thoughts of a phoenix? We just follow orders.”
Manager Seo said that as he slurped his coffee.
“.......”
The team members looked at him with amazement.
When Manager Seo had first joined the team, he had seemed full of complaints.
But now, he practically revered the Team Leader.
“Picking a sell timing is harder than a buy timing. The Team Leader’s just being cautious.”
“If nothing drastic happens right now, it seems okay to just keep holding. Looking at the current indicators, it’s clearly smarter to sell later.”
However, just because the indicators looked good didn’t mean that was the answer.
This bubble incident proved that.
Everyone was drawing hope with all kinds of indicators saying it would go up 300%, and then suddenly a regulation hit and the bubble burst.
“So let’s wait. Even from our perspective, now doesn’t seem like the right time to sell.”
“Everything’s fine, but I’ve got nothing to do. A workday where all I do is look at my phone and read books...”
“That’ll only be for a bit. If the Team Leader gives the order, then we’ll all-”
Bang-!
Just as the team members were quietly chatting among themselves.
The door to the Team Leader’s Office, which had been shut, suddenly burst open.
Everyone turned their heads in surprise.
There stood Team Leader Jung Jin-ho, his eyes different from before.
“Team Leader……?”
“Everyone. The time is now.”
“Huh?”
“Sell all the volume you’re holding. Right now.”
“!?”
Finally, the order they had been waiting for- no, the divine command, was given.
But as always, there are a few foolish people who question such things.
“Team Leader, n-now? But the price is still rising.”
“Yeah. If we just hold a little longer, it’ll go even higher than-”
“Silence, all of you!”
But that doubtful one was immediately scolded by Manager Seo.
“How dare you have a will of your own. Just move exactly as the Team Leader commands. Got it!?”
At that, the others came to their senses.
Isn’t one word from Team Leader Jung Jin-ho more trustworthy than a hundred pieces of data?
“Ah……!”
“W-we’ll sell immediately, Team Leader!”
The once calm office suddenly erupted into a frenzy.
*****
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