From legendary short seller to god of American capital

Chapter 372 Two-Front Operation: Buying the Dip in Futures Trading vs. Short Selling by Betting Firms

Less than 15 minutes after Larry left, the price of wheat plummeted to $1.10 like a kite with a broken string.

Unlike the earlier commotion, when the price actually hit that level, a deathly silence, as if suffocating, filled the trading hall.

The hoarse shouts of the quote clerk and the sporadic, urgent orders to close positions collided in the air.

Matthew swallowed nervously, his mouth dry with anxiety. This was his first time making a trading order on his own, and he felt as if a thousand pounds were weighing on his shoulders.

The price was hovering slightly around $1.10, as if making a final struggle. Then, with a few scattered sell orders, this round number was quickly broken.

Matthew didn't remember when Larry had told him this, but he must have said that once prices started to fall, then the whole number level would inevitably be lost.

$1.095, $1.09, $1.085 —

Each drop in price was accompanied by a suppressed curse or sigh coming from somewhere. It turns out that when people are truly desperate, they become speechless, unwilling to utter even the slightest sound.

The trading hall is getting weirder and weirder.

Matthew stared at the quote wrench, his heart pounding with sweat. Larry's earlier instructions still echoed in his ears, but the rapid evaporation of his money sent chills down his spine, especially in the deathly silence around him.

Matthew had already filled out a transaction order, but the price and quantity were left blank. He held the order in his hand, his knuckles turning white from gripping it so tightly.

Suddenly, the price stopped at $1.08.

For a full three minutes, the number remained fixed at the top of the quote board, as if welded to it. Everyone calmed down, waiting for the next collapse. Matthew could almost hear countless forced liquidation orders swirling in the throats of the traders on the floor.

However, despite several offers, the price remained at $1.08.

Gradually, a buzzing sound filled the hall, and some people began to whisper to their companions.

Matthew grew even more nervous. He rested one hand on the Stone Company's counter, his lips slightly parted, preparing to say something to the trader behind the counter.

A guy standing to the side, having lost his bet, stared at the price board, gritted his teeth, and said to the counter, "$1.08, buy 5000 bushels!"

The trader looked up at him, opened his mouth as if to persuade him, but in the end he silently took the transaction form, asked him to fill it out as he wished, and then called over the order clerk to hand it over to the trading floor.

It was as if the first crack had appeared in the ice. Then, another voice rang out, "Give me five hands!!"

The speaker this time was an elderly man wearing a straw hat. He probably hadn't placed any orders before, but he seemed quite relaxed as he placed his order.

Matthew couldn't help but glance back at him, because according to the rules of the Chicago Mercantile Exchange, each lot is 5000 bushels, and this guy bought 25,000 bushels of wheat in one go.

Should we follow suit now? Has the price truly bottomed out?

Matthew turned to look at Dunbar, who gave him an inquiring look. Dunbar didn't understand trading; he was prepared to follow Matthew's instructions.

When Larry opened accounts at the three brokerage firms, he deposited $1500 at each. Later, he added another $10,000 in futures margin to each firm. Therefore, he now had $11,500 in margin with each brokerage firm.

At Stone's, Dunbar deposited the $16,000 Larry brought back from St. Louis. Therefore, the margin here is $27,500.

If you buy half your position now, that means at least 50 lots. Every cent fluctuation represents a gain or loss of $2500!

That's a whopping $2500! Matthew works at his own company, and his brother John Browning only pays him $150 a week.

Here, a fluctuation of just one cent is equivalent to four months' salary appearing or disappearing out of thin air.

Matthew couldn't help but be nervous.

But just then, a murmur rippled through the crowd. The latest price was out; not only had it not fallen below $1.08, but it had risen to $1.08 and a half!

Matthew's mind went blank for a moment; the voice there instantly drowned out all the other noise in his head—"Once the last batch of forced sell orders are absorbed by the market, the selling pressure will disappear in no time!"

Now!!

Matthew's fear was instantly replaced by a stronger emotion, a mixture of shock and excitement. He stopped thinking, as if he were Larry winding up a toy.

Matthew lunged at the Stone Company's counter and yelled at the trader in a booming voice he himself didn't realize: "1.08!"

Buy 50 lots of US dollars at market price! Be quick!

The trader glanced at the nervous young man with surprise. He understood what the young man meant, but still corrected him, saying, "Sir, if you specify $1.08, that's a limit price; and if you want to buy at market price, that's the current market price—there is no market buy order at $1.08!"

I guess you mean you want to buy 50 lots at market price, is that right?

Matthew nodded quickly, "Yes! Market price! Buy it now!"

The trader nodded, his hands moving swiftly as he relayed the instruction to the order clerk. Thirty seconds later, Matthew's instruction would be executed by the floor trader.

On the other side, Matthew nodded heavily to Dunbar, who then turned and disappeared into the crowd to place orders with the other two brokers.

Almost at the same time Matthew gave the order, the price on the quote board changed to $1.08. Matthew was startled, but fortunately, this price was short-lived.

Then, the price changed!

1.085, 1.09, 1.095 —

The rebound was so fast it was almost dizzying; the once lifeless hall seemed to have been hit by a boulder.

The price has broken through $1.10!

Exclamations, shouts, and the sound of rushing footsteps placing orders erupted. Short sellers who had just been making money were hurriedly covering their positions, while those waiting to pick up even cheaper shares were frantically buying in.

Matthew stared at the price board. In his eyes, it wasn't a fluctuation, but rather someone throwing a thick wad of $2500 onto one side of the scale.

One after another—

The price did not rise in a straight line; instead, it fluctuated between $1.12 and $1.14, with selling pressure reappearing, but it did not reach a significant scale.

The market is still generally on the rise!

Previously, when drawing candlestick charts, Matthew disregarded such fluctuations because candlestick charts only calculated the final closing price.

But when he was actually watching the market, Matthew could feel these tiny price fluctuations going up and down, which was absolutely agonizing!

Finally, the price broke through $1.14!

Matthew's heart was in his throat, because Larry had instructed him to buy in with all his funds if the price returned to $1.16!

If I add another 50 lots, then a one-cent fluctuation would be $5000! That's eight months' salary for me.

Damn it! Those sons of bitches trading futures! It's so exciting and terrifying.

Finally, the latest price has reached $1.16!

"Buy another 50 lots!"

Matthew felt a surge of heat rush to his head, burning away all his hesitation! And what ignited this fire was Larry's accurate prophecy.

Matthew practically yelled at the trader, repeating, "$1.16! Add 50 lots!"

This time, his voice did not tremble, but was resolute and decisive.

The traders were already incredibly busy, but Matthew's shout still jolted him awake. He immediately dropped all other orders and focused on assigning orders to Matthew.

"$1.18! My God, it's back to the opening price!"

In just 20 minutes, market sentiment underwent a dramatic reversal. Everyone gasped when they saw the stock price return to its opening level!

Matthew gripped the cold edge of the counter, his fingertips turning slightly white from the pressure. He stared at the changing numbers on the price list, his heart still pounding.

Unlike before, the previous burden has now transformed into a near-trembling sense of awe.

"He really—he predicted everything perfectly!"

Matthew stared in the direction Larry had disappeared, with only this thought in his mind.

From the extreme of the plunge to the exhaustion of the bears, and then to the triggering of the rebound—everything was within the blond boy's expectations.

This is not luck; it is a naked and precise insight into and mastery of the rules of the market game!

If Matthew had previously felt a pang of envy seeing Larry so easily amass wealth at such a young age—the shock of witnessing it firsthand was far more intense than the price fluctuations themselves.

Matthew understood that he was not merely accepting orders, but perfectly executing a command from a higher dimension.

Thinking of this, Matthew glanced at the alarm clock on the wall. It was only 11:05!

There are 55 minutes left until today's market close.

Meanwhile, three blocks away, Larry had just arrived at Taylor's Chicago betting office at 133 Canal Street.

Actually, this place is not far from the Chicago Mercantile Exchange, only a few hundred meters away.

Larry arrived here only now because he rushed to Western Union halfway through the journey to send a telegram to Senator Kennedy, who was in Boston.

Now, Larry finally rushed here, but instead of immediately pushing the door open and going in.

Larry took out his Colt Pony gold-cased pocket watch, checked the time, stood on the side of the street, took a few deep breaths, and then took out a handkerchief to wipe the sweat from his forehead.

Once he was completely out of breath and didn't look rushed, Larry forced a smile onto his face, gently pushed open the door of the casino, and went inside.

The Tyler betting agency in Chicago wasn't as extravagant and ostentatious as the one in St. Louis. The storefront here bore the name "Brokerage Firm," but it didn't dare to openly advertise stock and futures brokerage.

The betting shop was a very well-decorated customer lobby, somewhat like a high-end salon. Behind the counter were a large group of staff and a security guard in a gray uniform. About 25 customers were sitting in the trading hall.

Larry glanced around and found the casino manager, then walked straight over to him!

"Hello, sir! How can I help you?" The manager's eyes lit up when he saw Larry. Out of professional habit, the manager immediately noticed that Larry's hand was pressed tightly into his trouser pocket, which was bulging as if someone were holding a wad of cash inside.

"Oh! Nothing much—" Larry said cheerfully, glancing upstairs before asking, "Is the second floor a billiards hall?"

"Yes, sir!"

"So what is this place?" Larry frowned, turned around, and pointed to the price list and the people sitting in the trading hall.

"These distinguished gentlemen are looking at stocks. Do you know anything about stocks?" the manager said kindly.

"It's supposedly a very profitable thing—" Larry said, his mouth slightly agape, his eyes fixed on the price list.

The manager smiled and began to explain to Larry, "If you're talking about making money, I have to be honest! The stock market isn't necessarily the most profitable. Stocks only offer small, incremental gains, and you might have to wait day after day. If you want to make money, betting on the racetrack is much better! It's all about luck, and you can wager all your money and make thousands of dollars in minutes! We also accept racetrack betting!"

Seeing Larry staring intently at the price chart with curiosity and excitement in his eyes, the manager changed the subject, smiling as he continued to explain how stocks work, how safe stock investment is, and how some of their clients have made a fortune.

If you only listen to what the manager says, anyone would think this is a legitimate stock brokerage firm that will actually buy and sell stocks on the exchange for you, because they keep talking about "investment" and "value"!

But the manager kept urging Larry to be ruthless and aggressive, saying that this was the only way to make a fortune.

When the manager got to the more impassioned part, Larry smiled at him in agreement.

Clearly, the manager assumed Larry was planning to gamble in the billiards hall on the second floor, so he decided to strike first and cut a large chunk out of Larry's banknotes before anyone else could take advantage of him.

Therefore, the manager repeatedly urged him to enter the market as soon as possible.

"The stock market closes at 12 o'clock on Saturday, young sir! You can place your orders as you please; it won't stop you from having the whole afternoon to do other entertainment," the manager encouraged again.

Larry turned to look at the price list again, his face showing hesitation and disbelief.

The manager continued to nag Larry incessantly.

Larry glanced quickly at the clock on the wall; it was already 11:25, time was almost up!

Larry turned to the manager and said, "Alright—sir! Since you put it that way, I'll get some stocks—do you have any stock quotas here?"

"There's no upper limit. How much would you like to buy?" the manager said with a smile.

"—I heard you can even sell stocks, what's that called again? Short selling?!"

"Yes, sir! The stock market is entirely at your discretion!"

Larry nodded, feigning understanding, and looked at the price chart again, but this time his gaze quickly focused on several stocks he had long admired—

Larry has been keeping a close eye on the market this week, especially with Dolan & Co. in St. Louis.

The market has been rising for the first five trading days of this week.

But today is Saturday. On the one hand, there is pressure in the market to realize profits, and on the other hand, bank reports will be released on Saturday, and it is almost certain that banks' excess reserves will decrease significantly.

This is usually a convenient excuse for Wall Street. Large traders will definitely take advantage of such opportunities to launch a surprise attack, trying to shake out those with fragile margin accounts through a shakeout.

The market will see a significant pullback in the last half hour of trading, as always, for the most actively traded stocks among retail investors.

Of course, those stocks are also the ones that betting bank clients are most likely to go long on and hold in large positions.

The betting companies are naturally happy to see short-selling orders on these stocks; there's no better scenario, allowing them to manipulate these easy targets from both sides simultaneously. And it's easy to wipe out even one point of their clients' margin.

Larry finally took the $5000 out of his pocket and placed it on the counter in front of the manager.

Upon seeing the roll of magically inflated US dollars, the manager's eyes lit up, and he quickly instructed the young assistant next to him to start counting the banknotes.

"I want to sell this one, 500 shares! And that one, the one with the name in the corner, um, 1000 shares!!" Larry pretended he couldn't even name the stocks, as if it were just a guess, and placed an order with the teller on the price list.

The manager happily helped the teller place the order, checking the specific stock names and quantities while smiling and saying to Larry.

"Young sir! I have a feeling you're destined to make a fortune; you should visit us often."

Larry turned to look at the manager with a smile, nodded, put away his transaction slip, and said nothing.

Ten minutes later, things unfolded exactly as Larry had predicted.

Large investors began aggressively selling off stocks they believed were likely to trigger the most stop-loss orders, causing some stock prices to plummet and triggering a widespread market decline.

The stock ticker machine clattered incessantly, and the clerk, climbing a ladder, kept writing down new prices.

The manager glanced at the transaction slip Larry was holding, his face long and drawn.

With five minutes to go before midnight, Larry slammed his order on the counter. He knew that traders would also be buying to close their positions around that time, potentially causing a price surge. Larry didn't want to wait until then—

"Close all positions! Close all positions, at the current price you just mentioned!" Larry said to the manager with a smile.

"————Okay, okay, close the position for this gentleman!" The manager's face turned ashen.

The clerk at the counter took Larry's transaction slip, first had him sign the closing time and closing price, and then began to calculate the profit.

Larry smiled and said to the manager, "I'm so glad I got into the market! You're absolutely right, stocks are indeed a great investment, and it doesn't stop me from going out to do other things this afternoon!"

The manager's lips twitched; he wanted to laugh but couldn't.

The manager watched as the clerk at the counter finished calculating Larry's profit, then hurriedly asked, "How much—oh, how much did this gentleman earn in total?"

The young clerk looked up blankly at the manager, then at Larry, and said, "The total is—$13580!"

hiss----

The manager gasped. He turned around, about to say something to Larry, when he saw a surge in prices on the price chart.

If Larry had settled the account 3 minutes later, the betting company would have lost at least $2000 less!

But, what a coincidence!

The manager took a deep breath, turned to Larry, and said, "—I'm sorry, sir, I can't afford to pay you that much! I really didn't expect the market to be this competitive today—"

Larry frowned, his face turning grim. "Are you trying to renege on your promise?"