Chapter 3
Chapter 3
Chapter 3
translator PennyWorth
A Black-Haired Investor Awakened as a Superman - Episode 003
==========
'What should I call this state of mine?'
It feels like I'm pushing every capability of my brain to its limit.
The term 'Awakening' might be appropriate, in the sense that latent potentials are being awakened.
With plenty of flight time remaining even after reviewing investment strategies, I continued to test these awakened intellectual abilities.
'Is this… really possible?'
The ability to recall anything I've experienced or even just heard about is astonishing.
A memory that seems to completely excavate and draw out every corner of my subconscious!
And my calculation and statistical analysis abilities are no less impressive.
Calming my surprised mind, I posed another problem.
This time, it's a portfolio optimization problem.
『 Problem: Construct an optimal portfolio based on the given conditions.
• Asset A: Return rate 10%, Volatility 12%
• Asset B: Return rate 15%, Volatility 18%
• Correlation: 0.3
Objective: Calculate the optimal ratio to minimize the portfolio's volatility while achieving an expected return rate of 12%. 』
The moment I set up the problem in my head.
Crackle― Crackle―
It's as if a light bulb is turning on.
My mind brightens, and a sensation spreads rapidly as if each part of my brain is shining simultaneously.
Countless numbers spin intensely in my head, creating a single coherent picture.
The final value that emerges!
…0.005184+0.005184+0.001944= 0.012312
'If I take the square root at the end, it's 0.111. This minimizes the portfolio volatility to 11.1%.'
'The optimal ratio to achieve an expected return rate of 12% is to allocate 60% to Asset A and 40% to Asset B.'
'That's the answer!'
I checked the calculation.
It matched perfectly.
The joy I felt repeatedly made my body tingle.
"Hiss!"
I checked beside me, worried that a groan might have escaped.
After pulling the blanket that had slipped down from under Mom's legs, I slowly calmed my breathing.
'Let's increase the difficulty.'
I added one more asset to the portfolio, which had been composed of only two assets.
The formula for calculating the portfolio's volatility becomes much more complex than before, as the number of correlations to be calculated increases each time an asset is added.
I can confidently say that solving this problem mentally would be quite challenging even for so-called math geniuses.
But, oh my god.
'Is this also possible?'
It only took about ten minutes.
'Could I possibly do ten?'
No way, that couldn't be possible.
That would be far beyond the realm of human ability.
* * *
Despite the surrounding noise and the shaking of the plane.
My mind was filled with numbers, formulas, and the arithmetic of volatility.
The process of running formulas in my head to solve the portfolio optimization problem with ten assets.
Calculating correlations.
Combining rates of return can only be described as a mental marathon.
Because it is a task that requires continuous concentration for a long time.
Suddenly, I felt a touch shaking me awake.
"We've arrived."
I heard Mom's voice.
When I opened my eyes, the disarrayed atmosphere inside the plane came into view at a glance.
Unfortunately, it couldn't be helped.
As expected, solving ten assets was indeed a difficult task for now. However, it wasn't because there was a problem with processing power, but simply because of time.
The time I need to solve this problem mentally is estimated to be about 25 hours.
But what I can be sure of is that if I have enough time, I can solve this problem mentally.
The processing power to compute complex formulas.
The concentration to perform calculations for 25 hours straight.
And the memory to hold all the processed calculations, I have all of that.
There are many more things I want to test, but now it was time to return to reality.
"You've changed a lot…"
Mom mumbled and slowly walked through the airport.
In Mom's tired face, there was a tangle of unknown emotions.
Her eyes kept looking around, and she occasionally took a long breath, as if she was ruminating on something.
It was clear that Korea, which Mom was returning to after 20 years, was also approaching her with an unfamiliar feeling.
"Wasn't it Gimpo back then?"
To my question, Mom looked at me silently and gave me a look that seemed to scold me, as if that wasn't important.
It was 10 PM Korean time.
But it was 8 AM New York time.
There wasn't much time left until the stock market opened.
"Do you think I can go down in about two hours?"
Mom seemed to hesitate for a moment at my question.
It didn't seem to be because she was in a hurry to see Grandfather, who had passed away.
Mom's gaze was directed at the carrier containing Grandfather's belongings, which had now become relics.
I could read Mom's worried heart in her eyes.
It wasn't about my resignation or Grandfather's death.
Mom still couldn't shake off her worries about bad things that could happen to me.
But if I was sick somewhere or saw a ghost, like when I was really young, then maybe.
But this change that had occurred was not something negative.
It was as if a huge light, shining too brilliantly, had poured in and awakened me into a being beyond human…
It was truly a great change.
But explaining this change in me could cause Mom other worries. I decided to maintain my existing policy.
I decided to keep it a secret from Mom for now.
A little later.
We each had a cup of coffee in front of us at a Starbucks in the airport.
There were many tasks that had to be completed in advance to calmly check market trends by turning on the laptop.
Mom moved to another table altogether, worried that she might be disturbing me.
The settings I used to use at the company were Bloomberg Terminal linked to a Prime Brokerage Account.
But now I am just an individual investor.
Fortunately, the general brokerage account I used at Wharton School was still active, so I was able to avoid the long process of opening a new account and getting it approved.
In fact, in a situation where I had to save every penny to take a position, Bloomberg Terminal, with an annual subscription fee of over twenty thousand dollars, was now a luxury.
So, as a general trading program, I chose Trader Workstation (TWS) provided by Interactive Brokers.
The strategy is already in place.
This is a program that is good enough for simple trading purposes.
'Here we go!'
A familiar interface unfolded before my eyes.
If it is really expected that Wuhan Pneumonia will explode into a global pandemic, several strategies are possible.
Betting on the decline through short selling in the stock market.
Selecting and investing in pharmaceutical companies expected to jump into vaccine development and treatment research.
Or you can invest in related ETFs.
Another method is to include safe assets such as gold in preparation for increased economic uncertainty.
But if it's not just an expectation but a conviction, the story is different.
You have to jump into the market that can generate the best returns.
So, there's no need to worry.
It's unconditionally the options market.
Even the cheerful sound of typing, the feeling of the mouse sliding, and the sensation of clicking, every step of the way to the market I had in mind stimulated my heart.
Thump, thump.
'Found it.'
[ TVIX MAR20 50C ]
It's a stock that will make me a star in the industry in one fell swoop.
* * *
[Transaction completed] TVIX MAR20 50C: The purchase of 125 contracts has been successfully completed.
TVIX is the name of the stock.
MAR20 means the expiration date is March 20th.
50C represents a Call Option with a strike price of $50.
In simple terms, it is a Leveraged ETN designed to generate large profits from the moment the option price exceeds $50.
Today, the option price of TVIX was $40.
That's how I brought in 125 contracts for twenty-five thousand dollars.
'I really bought this.'
[ Personal Account
• Option Name: TVIX MAR20 50C
• Investment Funds: $25,000
• Number of Contracts: 125
• Purchase Price: 2.00
• Current Price: 1.80
• Valuation Amount: $22,500
• Valuation Profit/Loss: -$2,500
• Return Rate: -10% ]
The negative return rate that was recorded as soon as I purchased it.
However, the initial loss when buying options is such a natural phenomenon that there was no need to worry about it.
What's important is the rate of return that will occur as it gets closer to the expiration date.
After completing the purchase, I approached Mom and told her that I had invested in TVIX Call Option. Mom waved her hand with a flustered expression.
"Don't talk about investments where there are people. You don't even know the basics."
"I told you because you were curious."
"When was I curious?"
I recalled Mom's appearance, who had occasionally made eye contact with me, and a slight smile came out.
"You'd better see it when you can? This is the last chance to see it. If I set up a fund, Mom can't access it legally or ethically."
"Huh?"
"Investors will flock to this one shot. Not to mention our assets."
It was after we came out of Starbucks.
Only then did Mom ask about my choice.
"Son. What is TVIX?"
Our Madam, who has great pride in her economic knowledge, was quite embarrassed to ask that.
"There's an index called VIX that measures the volatility of the market. It's an index that measures only the magnitude of the movement, regardless of whether it goes up or down. It's also called the fear index……."
I watched Mom's face and continued.
"As Mom knows, there are many products created based on these kinds of indicators."
Mom seemed to understand.
"TVIX is a VIX Leveraged ETN among them."
To be exact, it is a Leveraged ETN that tracks the volatility of VIX by a factor of two.
The option stock I invested in is a Call Option that moves based on this indicator. It was designed to make profits soar as the market moves greatly.
Mom's head nodded slowly.
"So, my son is betting that there will be a surge? You must be right. I hope so. It's what my son is doing."
What Mom understood was half right and half wrong.
I did bet that there would be tremendous volatility in the market. But that didn't necessarily mean a surge.
I bet that there would be a huge crash.
Because of Wuhan Pneumonia―
* * *
If you ask anyone on Wall Street right now, they would all accept it like Mom.
They only see what will go up, and no one predicts a decline.
That was the current market reaction.
The same goes for Wuhan Pneumonia.
The prevailing view is that it is just a happening, no more than SARS and MERS.
Everyone was intoxicated by the sweet temptation brought about by the resolution of the US-China trade war.
Only I saw a huge opportunity in Wuhan Pneumonia.
"Funny."
Mom smiled and regained a comfortable expression.
Anyway, I secured a position.
Now all I have to do is wait.
I'm already afraid of the wealth it will bring.