Chapter 13
Chapter 13
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Translator: MadScientist
Chapter: 13
Chapter Title: Earning Pocket Money (2)
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One key characteristic of derivatives is that they are a zero-sum game.
Whenever someone makes a profit, someone else takes a loss.
That's the nature of such contracts.
Who would take on that kind of risk without any potential return? That's why derivatives fit the "high risk, high return" label better than anything else.
"Our goal for now is ten billion won."
I said it matter-of-factly, sipping the leftover milk from my glass. Lee Si-hyeon's eyes went wide.
"...Ten billion? Ten billion won? H-how?"
"Why not? If my prediction is right, turning it into a hundredfold return is a piece of cake."
Turning 100 million won into 10 billion.
In the options market, that happens pretty often. Sure, the opposite happens just as frequently.
For reference, during the 9/11 attacks in 2001 or the options shock in 2010, returns hit 50,000%—that's 500 times over. Those who won big made a fortune, while those who lost...
Well, they were ruined. Even thinking about it now makes my hands and feet tremble. Those damn Deutsche Bank bastards.
"What if you lose?"
Lee Si-hyeon, who couldn't see the future, naturally asked that. I shrugged nonchalantly.
"Then I lose 100 million won, that's all. I can just sell some stocks."
"..."
This was an investment strategy only possible for a chaebol third-generation heir. What might be a life-or-death gamble for someone else became a casual bet for me.
In reality, if I'd been born into an ordinary family, I probably couldn't have done it... There's always the chance that even the tiniest unknown detail could trigger a butterfly effect.
"Besides, since we're only buying options net long, the worst case is breaking even. Nothing more than that."
The person selling me the options might end up a bit pitiful. They'd have to cover my entire 10 billion won profit. But since it's an option they've already sold, from their perspective, it should play out similarly to the original history.
"...But you could lose more than breaking even?"
Lee Si-hyeon shook her head in dismay at this extreme side of capitalism.
"Exactly. I told you—the risks are insane. My position is one of the safer ones."
"Losing just your principal is 'one of the safer ones'..."
"Alright, that's enough for today. Any more and your head will hurt. Time to get ready. Call that securities guy we met last time."
Lee Si-hyeon nodded slowly and pulled out her notepad.
"Yes, understood. You mean Executive Director Ha of Daeha Securities, right?"
"Yeah. He's worked at the Tokyo Stock Exchange before, so he'll get the gist. Not the straight executive line, so he'll listen well too..."
As work time approached, energy surged through my body.
My relaxed posture straightened up, and the perpetually curved, smiling eyes sharpened to a keen edge.
I glanced in the mirror. The Yoo Ha-yeon reflected there still wore an innocent smile fitting her age, but the aura was completely different now.
Time to make some money.
◇◇◇◆◇◇◇ No smartphones yet, and computers are outdated, so most securities trading happens in person or over the phone.
Sometimes old Wall Street scenes pop up in Hollywood movies: offices ringing nonstop with phones, brokers persuading people to buy stocks—that's the vibe back then.
Luckily, I didn't have to deal with that chaos. As a minor, I couldn't anyway, and these things are typically handled by brokers.
"Well, if it isn't the young lady. You've come."
He had a friendly, rotund face.
But his eyes were sharp, and there was a chilling undertone somewhere—like a comic book good guy who reveals his true colors around chapter two.
His name was Ha Joo-seong, Executive Director at Daeha Securities.
Ha Joo-seong, the affable Executive Director of Daeha Securities, bowed his head with a broad grin. He'd been skeptical of me at first, but once I proved my knowledge and skill, his attitude flipped 180 degrees.
In this field, mere mortals can never beat geniuses.
—People who can smell money and those who can't are worlds apart. Just look at the Chairman...
It sounded like flattery, but since I had the ability to make it real, it was fine.
"Uncle, I want to trade options."
"Ah, I heard. Foreign exchange options, right? Whew. If you weren't the young lady, I'd talk you out of it right now. Honestly, I've only done stock options myself. Tried it once, and the thrill was unreal—"
He wiped his brow theatrically, not exactly inspiring confidence, but Executive Director Ha was one of the few hands-on operators among Daeha Securities' board, a firm only two years old.
'Until last year, investing overseas wasn't even an option.'
If Daeha Securities hadn't been established two years ago, I might have hesitated, but with the Daeha Group running a full-fledged securities firm, it made no sense not to use it.
Well, once the succession battle heated up, even these guys might not be trustworthy...
Fortunately, Daeha Securities was set up right when I began my awakening.
Chairman Yoo Seong-pil was still reeling from Yoo Jin-cheol's death, which let me plant my own person there.
That person was Ha Joo-seong. He'd been on the brink of ruin from a bad line, but I scooped him up cheap.
"You know the risks of options trading as well as anyone, young lady... Let me confirm first. Foreign exchange options, yen/dollar call option?"
When the yen appreciates, the value of a call option to buy yen cheap skyrockets. Meanwhile, the put option to sell devalued dollars high would also surge.
"Yes. If there's money left, I'll buy others too, like dollar/yen puts."
Executive Director Ha looked puzzled at my words.
"Why bother...? You said you're investing just 100 million won, right? Exchange rates are hot right now, so trading volume's high."
The 1980s options market might seem small by U.S. standards.
The Chicago Board Options Exchange—CBOE—the world's first and largest, was already computerizing trading, with massive volume.
Even for FX options instead of stocks. 100 million won is big for an individual, but pocket change for institutions.
"I don't want plain vanilla options. The G5 Finance Ministers' Meeting is September 22nd—everyone knows that. No big wins there. I'm going for rarer ones, with low volume and hard to trade in large amounts at once, so I have to split it up."
"...Is that why it's FX options and not stocks?"
I nodded in affirmation.
"Yeah. Stock options expire on the 20th. FX options let you set custom expirations, more flexibility."
Lee Si-hyeon, listening quietly beside me, didn't catch on, but the seasoned trader Ha Joo-seong got it immediately.
Even without obscure FX options, there are plenty tied to exchange rates, like options on Japanese company stocks.
But there was one problem.
U.S. standard options expire on the third Friday of the month. September's was the 20th.
Unfortunately, the G5 meeting and Plaza Accord happened on the 22nd. Two days off.
Next month's options? Too much time left.
People aren't idiots. Once the Plaza Accord is announced, anyone—not just me—can predict future rates, shrinking my share of ordinary options.
So... stock options are out.
"Um... could you explain, miss?"
My bewildered secretary asked me directly, even with someone else there. Bold move—I liked it.
'Perfect reaction.'
With Lee Si-hyeon responding so well, I kindly elaborated.
"Option prices drop as expiration approaches."
Options and futures have expiration dates. Contracts need an end date for fulfillment.
Like shelf life. Same product, but value decreases over time.
"So if I buy options on the 21st for the ministers' meeting, I'd pay top dollar. Previous expiration was yesterday, new contract has a full month left."
The G5 meeting wasn't some secret. The shock was the Plaza Accord outcome, but CBOE traders were betting on what the Plaza Hotel folks would decide.
"So, to make big money, you need to predict something no one else sees coming."
Predicting that finance ministers would tweak the pesky yen-dollar rate? Too obvious.
No profit there.
"Right. Lower probability means higher payout. And I'm betting on the extreme end. Way more extreme than standard FX options."
Ha Joo-seong's mouth fell open slightly as he turned to me. He'd caught on to my plan.
"N-no way, young lady..."
"Yep. Those even more exotic ones? Not traded on exchange, only OTC—over-the-counter."
"Most FX options are already OTC, but that's not what you mean. Then... surely not...?"
"Yep. Exactly what you're thinking."
Options that turn standard once the condition hits, but become worthless paper otherwise.
I'm buying a Barrier Option.
"Specifically, a Knock-in Barrier Option."
Ha Joo-seong took a deep breath and asked.
"Barrier price... what level?"
"215 yen to the dollar."
"...!"
Current rate was over 240 yen to the dollar.
"Wh-what's the expiration? For the barrier."
I smiled brightly, innocently like a child.
"23rd. New York cut should work."
The day after the Plaza Accord, the rate—235 yen until then—plummets to 215 in one day. By year's end, it halves.
"...Are you insane?"
Ha Joo-seong's eyes trembled. Even in his trading days, no one pulled stunts this crazy.
"Why? I'm being perfectly rational. Simple, clear outcome."
Win: 10 billion won.
Lose: Zero.