From legendary short seller to god of American capital

Chapter 381 Strange Transaction Orders: A Long-Planned Deadly Move

Monday, October 9.

The autumn winds of Chicago blow from Lake Michigan, carrying the slightly fishy smell of the lake water and the chill of early autumn. This is Chicago's windy season—a true reflection of its nickname, the Windy City.

At eight o'clock in the morning, Larry pushed open the glass door of the stock exchange, and a strong gust of wind immediately rushed into his collar. He instinctively pulled his coat collar tighter and pressed his fingers lightly against his top hat to prevent it from being blown away by the wind.

Matthew and Dunbar followed Larry in single file, followed by Rattlesnake Cole, who was carrying two large paper bags.

Larry and his entourage walked through the idle traders and spot dealers, arriving in front of Stone Company's trading counter.

Larry spotted old Stone tidying up the trading counter immediately and greeted him with a smile, "Mr. Stone, good morning! Have you had breakfast yet?"

Old Stone looked up in surprise and saw that the visitor was his distinguished guest, Larry Livingston. He immediately put on a smile and came out from behind the counter to greet him.

"Good morning, Mr. Livingston! Today must be my lucky day. What brings you to the stock exchange in person?"

"Good morning! I'm here to make a deal," Larry said with a smile, then continued, "Have you had breakfast yet?"

'

"Have you eaten?" is a Chinese way of greeting someone.

Americans had no precedent for this kind of greeting, and Larry's question left old Stone completely bewildered, not knowing what he meant.

Then, I could only honestly reply as I would when answering a customer's question, "Not yet."

Larry nodded, looked at Cole behind him, and said with a smile, "Oh, perfect! We haven't had breakfast either, but we brought some. If you'd like, let me invite you and your staff to have breakfast together."

Old Stone hesitated for a moment before nodding and saying, "—Okay, okay! Thank you, it's our pleasure!"

Cole then placed two large bags of milk tea, hot dogs, and kebabs on the table, and old Stone hurriedly invited his son and employees to join the client for breakfast.

There's no such rule in the US, but even the smallest gift can win someone's favor. Although everyone thought Larry's way of greeting was very unusual, they all happily accepted Larry's "gift."

Of all the people, only Matthew had gotten used to Larry's strange "little gifts." Under Larry's influence, he now habitually offered cigarettes to people before starting a conversation.

This behavior, though strange, was surprisingly effective. After men shared cigars, the distance between them naturally shortened, and it became much easier to ask for information.

After Old Stone finished his hot dog, Larry, holding a cup of milk tea, asked with a smile, "Could you help me calculate my previous positions and profits? I plan to continue trading today!"

Old Stone quickly called over a trader and showed Larry his current account details. After Larry received the trade slip, Old Stone stood aside and explained it in detail.

本轮做空之前，拉里在斯通公司帐户的本金是8万1875美元。第一次做空的位置是1.26美元，做空32手；第二次是在1美元追加的40手空单。

The third time was at $0.92, when Cole relayed Larry's trading instructions to short all the floating profits at $0.92, opening a total position of 76 lots.

Therefore, the total number of short positions in the account is now 148, with an average opening cost of $1.04 per bushel.

周六收盘价格为70美分，如果按照当天的收盘价，每一手（5000蒲式耳一手）的盈利是1695美元，148手的总浮盈是25万860美元。

This is an amazing profit figure, tripling the initial investment, not even including the principal.

Standing next to Larry, Old Stone finished introducing the basic information about Larry's account, and then sincerely exclaimed, "Mr. Livingston, you did a truly brilliant job! I've lived in Chicago my whole life, and I've never seen anyone with such a perfect grasp of market trends."

Larry smiled but didn't respond. Instead, he asked, "I'm thinking of doing a day trade. How many lots can I open with these unrealized profits?"

"Intraday trading? Oh, intraday leverage is 10x! Your floating profit should be enough to support—" Old Stone did a quick mental calculation and replied, "Based on Saturday's closing price of 70 cents, the margin for one lot should be $350 with 10x leverage, so your floating profit should be enough to open about 700 lots!"

After he finished speaking, Old Stone looked puzzled. "Are you still going to add to your position? Forgive my bluntness—this position is only a step away from the historical low of nearly ten years. As your loyal client, I must warn you of the risks—this is the position to take profits, not to continue adding to your short position."

"Thank you for your kindness!" Larry responded with a smile, but added, "My thinking is a little different from others, so—I have a request for you: whatever trading order I issue today, you must execute it immediately and unconditionally, is that alright?"

Old Stone paused slightly, then nodded and said, "Don't worry! I will respect any of your requests, and I will execute your trading orders immediately."

Larry nodded and handed the accounts back to old Stone; the latter suggested that Larry and his party could conduct the transaction in a private room on the second floor, with the Stone Company covering the costs.

"You should be matched with a trading room that matches your status." Old Stone meant that it was my pleasure to spend money on you.

Larry thanked him for his kindness and led his team to the private room on the second floor. Old Stone had arranged for his youngest son to stand guard at the door, specifically to handle Mr. Livingston's requests.

After closing the door, Larry took off his coat and stood by the window of the private room, looking down. From there, he could not only clearly see the price list, but also the trading taking place inside the room.

"Matthew! Where's the chart you made? Let me see it!" Larry said, turning to Matthew.

Matthew nodded, took a roll of logarithmic coordinate paper from under his arm, and placed it on the large coffee table in the private room.

This is a monthly chart of wheat futures, recording the price movements of all wheat futures on the Chicago Mercantile Exchange since the American Civil War.

It took Matthew two days to draw this monthly chart. But the effect was obvious, because the historical price trend of wheat futures is clearly displayed on the candlestick chart, and anyone who looks at it can intuitively feel the volatility of the futures.

Larry leaned down to look at the chart, nodded in approval, and said, "Great! Matthew, now I can see all the historical price movements—well, the previous lows were all around 68 cents, but the lowest price for wheat futures was '64.25 cents in September 1888!'" Matthew added, pointing to the candlestick chart.

Larry nodded again, staring at the candlestick chart in deep thought for a long time. Suddenly, he looked up at Matthew and asked, "My brother, do you think we can break through this level today?"

"It's tough!" Matthew said frankly. "Not to mention that the historical support level is between 68 and 64 cents, even this historical low price was the lowest price reached on that day, and it was subsequently recovered."

Larry nodded without speaking, but frowned and continued to look at the candlestick chart.

Matthew has been running around the exchange these past few days and has a very good understanding of the historical price and current situation of wheat. He added from the side, "Besides, the current spot price of wheat is 74 cents, and that's the purchase price you arranged—if the futures price is 10 cents lower than the spot price, then naturally there will be arbitrage funds involved. People won't pass up this risk-free arbitrage opportunity."

Futures prices are significantly lower than spot prices; in trading terminology, this is called a "spot premium" or "discount." This highly irrational phenomenon means that if someone buys futures, takes delivery, and then sells them in the spot market, they can profit without risk.

This is a strong theoretical safety net, and a situation that shouldn't occur. But in the futures market, this scenario is frequently seen.

In the midst of extreme bear market panic, short sellers recklessly suppress the market, believing that prices will go even lower, and have no interest in picking up these "seemingly cheap chips".

Meanwhile, potential bulls were terrified by the market decline, fearing that spot prices would also collapse along with futures prices after they took delivery, so they dared not enter the market.

Larry just asked Matthew, "Can the futures price fall below 64 cents?"

This means that a deep discount of ten cents between wheat futures and spot prices is generally not expected to result in such an extreme price movement.

Matthew was simply stating the facts in his answer.

Larry nodded in agreement with Matthew's analysis, but still didn't say anything.

Dunbar and Cole stood guard on the sofa by the door, not wanting to disturb the two's analysis.

The private room was eerily quiet. After a while, Matthew felt he should say something and said in a low voice, "I think—"

The market will definitely open below 70 cents today; panic selling will be released at the very beginning of the trading session—based on the strength of the past few days' price action, it will test the support level of 68 cents today, and then rise! Therefore, I think Old Stone is right; you should gradually take profits!

Larry nodded in affirmation of Matthew's assessment, "You're right! If the market opens lower today, it will inevitably test the bottom immediately—"

Because of the recent decline, many long positions have already exited at a loss, so we can't expect to trigger their stop-loss orders. Generally speaking, it's unlikely that today's price will break the historical low.

"Yes!" Matthew echoed, staring at the blueprints. But he immediately sensed something was off, because Larry's words were clearly loaded with meaning.

"Then—what about special circumstances? Could the price drop below 65 cents?" Matthew asked solemnly.

Larry flashed a pre-prepared smile. "Unless the market opens high today—we give all the bulls hope—and then dump the market hard! That would cause a total collapse of market confidence—"

Upon hearing Larry's words, Matthew's eyes widened in shock. He instantly grasped the possibility and the terrifying consequences it might cause—

"No, no way—this, this—this is terrifying! If you really do this, the risk is huge—" Matthew stammered.

Larry smiled again. "It's all about human effort! How will you know if you don't try? Besides, how can I call myself a trader if I'm afraid to take a gamble at the market's tipping point?"

Matthew stared into Larry's eyes, his heart pounding in his chest. Having followed Larry for so long, he already understood the rules of the trade!

But it is precisely because he is familiar with the rules that he can feel how difficult and how destructive Larry's "give it a try" really is!

If the bulls are given hope, and then their confidence is shattered in the short term—the market could very well be heading into a collapse!

This will break the floor price for wheat futures and allow subsequent wheat futures and spot prices to enter an unknown range of low prices as they search for a bottom.

But this also means enormous wealth!

Oh! Right. Larry just told old Stone that no matter what strange instructions he gives, he needs to execute them accurately!

Does this mean that Larry had already planned to break through the price low at this level?

Thinking this, Matthew's mind went blank, as if struck by lightning. He looked up at Larry, his eyes filled with admiration and shock, and after a moment said, "If you're really going to do this! Larry, well, you're fucking amazing!"

Matthew's shock could not be fully expressed without swearing.

Larry, still wearing that smiling expression, simply nodded slightly and said, "Give it a try! It shouldn't be too difficult—call little Stone in from the doorway!"

It was a quarter to nine o'clock, the opening time for trading. Old Stone, dressed only in a shirt and overalls, stood in the trading floor. He had his sleeves rolled up high, preparing for what was bound to be a very exciting day of trading.

Everyone knows that wheat prices will fall below the 70-cent mark today!

Just then, Stone's youngest son rushed over and slapped a commission form on his hand.

"Does Mr. Livingston have any commissions? How much does he intend to sell?" Old Stone asked casually without looking at the commission list.

But his youngest son had a constipated expression on his face. He hesitated for a moment, then sighed, "—You'll see for yourself."

Old Stone was a little curious, so he picked up the trading order and looked at it—his eyes almost popped out of their sockets!

"Buy?! 300 lots! My God—"

"And it's still at a limited price—73 cents, my God!!"

"They're even having pre-market trading! Is he fucking insane?! My God!!!"

Old Stone nearly had a heart attack from his exclamation! Fortunately, he adhered to his trader's instincts and, even in his extreme shock, kept his voice down so that no one else could hear his exclamation.

"Is this for real? Livingston actually issued such an absurd trading order?" Old Stone grabbed his youngest son, as if expecting him to say something like, "This is a trading order I made up," because such a fantastical answer would be more in line with reality.

But the youngest son forced a smile that looked more like a grimace. "Father—I saw Mr. Livingston place the order with my own eyes, and I confirmed it with him repeatedly. He gave me a definite answer three times—it wasn't a short position, but a long position!"

Old Stone's mind went blank, but he immediately recalled Larry's strange instruction—"No matter how strange the trading order is, you must execute it unconditionally!"

Old Stone gritted his teeth and stood there thinking for a long time, until the bell rang in the exchange floor—five minutes before the opening, signaling the traders to prepare to place their first bids.

"Damn it!" Old Stone muttered, instructing his youngest son to return to Larry and wait for further instructions. He then clutched the trading order and walked step by step into the exchange like a martyr going to his death.

At that time, the Chicago Board of Trade did not use the auction system that would later be used to determine the opening price.

After the trading floor host announces the opening, the traders in the trading floor will immediately start bidding, and the first price that is generally accepted by the market and is traded becomes the opening price for the day.

At this moment, the wheat futures counter was already crowded with the largest number of floor traders in the entire exchange, filled with resentment and hostility.

They each held a commission form in their hand, their faces showing both seriousness and eagerness.

Old Stone stood silently in the crowd, clutching the commission form in his hand.

Time ticked by, until the large clock inside the market struck 9 a.m., signaling the start of trading, and until the announcer declared the market open for business.

The floor trader next to Old Stone started gesturing with his famous hand gestures to quote prices —

"69.5 cents! I want to sell 30 lots!"

"I have a limit buy order here, but the price is 68 cents!"

"Sell 15 lots at market price! Listen carefully, it's market price! You must submit a quote first."

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Clearly, today's opening price for wheat will be determined by these open bids.

Old Stone jerked his head up, clutching the order book, and shouted as if using all his strength, "73 cents! Limit price, I'll buy 300 lots!"

In an instant, the once noisy wheat counter fell silent.

The eerie atmosphere that suddenly cooled down seemed contagious. Within ten seconds, the traders at the other counters also stopped talking and moving their arms, staring blankly at Old Stone.

People couldn't believe their ears! Someone had actually bought wheat at a premium while prices were plummeting!

And that's a huge undertaking of 300 hands!

This is impossible! But it actually happened!

The trading hall was eerily quiet! The air was so thick it was hard to breathe.

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