The American Kill Line: I Can Predict the Future

That night, countless investors around the world were sleepless.

Someone stared at the soaring long positions in their account, and a joyful scream pierced the night sky.

Some people, faced with the devastating news of their accounts being liquidated, collapsed to the ground, filled with regret and despair.

London, Merrill Lynch European Trading Desk.

The moment Henry, the person in charge, received the news, the image of that "whale"-level holding flashed through his mind.

His heart tightened, and he hurriedly dialed the New York headquarters.

"That order from Friday..."

"Don't worry, Henry, the market was very liquid this morning, and this order was entirely purchased from the market and institutions. If it were this afternoon, it would be hard to say."

The head of the risk department at Merrill Lynch headquarters was also shaken by the experience.

"That's good!"

Top investment banks like Merrill Lynch have a special role on major options exchanges – they are market makers.

Unlike ordinary middlemen who earn money by running errands, Merrill Lynch can also earn the difference between buying and selling prices.

The drawback, or rather the responsibility, is that regardless of whether there are buyers or sellers in the market, they must always quote "buy price" and "sell price" to ensure that there is always someone to sell when a trader wants to buy and someone to buy when a trader wants to sell.

They also have to bear all the profits and losses of the positions they hold.

In fact, market makers like Merrill Lynch essentially use Delta hedging to mitigate directional market risks.

The two sides cancel each other out, so the portfolio value remains stable regardless of whether the index rises or falls.

For example, Ron bought the French CAC40 at the market price of 35 euros.

At the time, the EU market was affected by the "flash crash," and there were many buy and sell orders in the market when the market opened in the morning.

Merrill Lynch easily split this large order and matched it with other traders.

But there is another situation, which this London official had previously worried about.

That means there is a shortage of market liquidity, making it impossible to buy such a large number of call options.

In response to this situation, investment banks will either reduce the size of their offers or raise their offers to scare away clients.

What the London-based manager was concerned about was that Merrill Lynch's risk department failed to respond in a timely manner.

Or, to put it another way, the New York headquarters is betting that the impact of the flash crash in the US stock market will not subside so quickly, and that the market will not experience a major correction within a month.

This is not impossible.

The subprime mortgage crisis is a typical example.

Merrill Lynch fell from its position as the "top" independent investment bank on Wall Street to its current "junior" status after the subprime mortgage crisis because its internal risk management mechanism became chaotic, and senior executives ignored risk warnings in order to make profits.

This led to severe losses after the subprime mortgage crisis.

As the two breathed a sigh of relief, they couldn't help but look at Ron with envy and say:

"What a lucky guy! Wall Street is about to produce another legendary billionaire. I heard he shorted the Dow Jones by $200,000 on the 6th? I hope there's something wrong with that deal?"

"We conducted a thorough background check, and so far there are no problems. He's just a lucky guy who won the gamble."

"We still need to find out the truth; we can't afford to make any mistakes at this point."

"Don't worry, I've already had someone verify it, and I've even sent someone to meet with this lucky person in person to confirm it."

Merrill Lynch's people arrived very quickly.

Ron had just hung up on Victor when the hotel butler called the internal line, saying that people from Merrill Lynch had come to their door.

A moment later, there was a knock on the door.

"I'm sorry, Mr. Hunter, for disturbing your rest so late."

"Come in!"

The visitors were polite; it was a man and a woman.

The man works at Merrill Lynch, and the woman works at Bank of America.

"Alcohol or coffee?"

"Coffee bar."

Ron gave an instruction to the hotel butler.

Two cups of coffee were served quickly.

Ron sat by the window with a glass of vodka in his hand. The evening breeze was slightly cool. He pulled his pajamas tighter and waited for the two of them to speak first.

At this point, the middle-aged woman from the risk department of the American bank asked first:

"Mr. Hunter, why did you go bearish on the Dow Jones Industrial Average on the 4th? I mean, why did you choose a deep out-of-the-money option with a strike price of 100, instead of a more conservative at-the-money or slightly out-of-the-money option? I understand that you seem to have never dealt with options before?"

Ron frowned: "Am I the only one with a deeply out-of-the-money bearish view on the Dow Jones?"

"No, but I'd like to know what your motivation for buying it was?"

"Motive? Is this an interrogation?" Ron stared at her irritably. "Ma'am, are you also working part-time for the FBI?"

The middle-aged woman didn't answer; she just stared calmly at Ron.

The atmosphere froze instantly.

The middle-aged man from Merrill Lynch next to him seemed not to see anything, sipping his coffee with his head down.

After a moment of silence, Ron lowered his voice and said, "Your name is Adela, right? I noticed the wedding ring on your hand. If you went home now and caught your husband in bed with another woman—"

As he spoke, Ron abruptly stood up, his gaze fixed on the woman opposite him: "Adela, tell me, will you bless them, or will you take a gun and shoot those two sons of bitches?"

Adela stared at Ron for a long while before looking down at the documents in her hand and continuing to press for answers:

"So, Mr. Hunter, why did you use all your profits of $250 million to buy French CAC40 options and German options in three separate transactions on Friday morning, the 7th, through Merrill Lynch broker Victor Thorne?"

"You want to ask me if I engaged in insider trading, right?"

Before she could finish speaking, Ron impatiently interrupted her, simply nodding and saying, "You guessed right, I do have inside information."

Upon hearing this, not only was Adela from Bank of America completely taken aback, but even the middle-aged man from Merrill Lynch, who had been watching the show with amusement, looked up at Ron with some confusion.

"Mr. Hunter, do you know what you're saying?"

"certainly."

Ron nodded again, raising an eyebrow. "Victor is my insider. He told me that when the market is at its most panicked, that's the best time to buy. For a newbie like me who knows nothing, this money will be lost sooner or later anyway, so I might as well take a big gamble."

"I won. I've completely turned the tables. Those two sons of bitches are doomed."

"If we lose, so what? We can just go back to where we were a week ago, and I'll grab a gun and go kill them all again."

According to Victor, no matter what excuses or reasons Ron used, he could not dispel their doubts.

The best approach is to steer them toward something that is "absurd but reasonable."

A broker who will stop at nothing to retain clients uses the clichéd phrase "panic is opportunity" to trick a novice into placing an order.

This kind of thing happens every day on Wall Street, and nobody finds it strange.

Unless they find direct evidence that Ron obtained the inside information.

Otherwise, even if there are still doubts, one can only accept his explanation.

The middle-aged man next to Merrill Lynch reacted quickly, immediately standing up and even spilling his coffee. He exclaimed in shock:

"Mr. Hunter, did Victor really resort to such despicable means to deceive you?"

He ignored the coffee spilled on his expensive suit, his anger blazing.

"Damn it, I have to report this to the company! This kind of black sheep must be severely punished! Merrill Lynch will never tolerate brokers like this!"

"Victor meant well," Ron quickly realized, feigning concern. "Without his advice, I think I would be at a huge loss by now."

"Mr. Hunter, you don't need to defend such a despicable person. God, I can't even imagine how much it would cost you if he caused you losses; it would be an indelible disgrace for Merrill Lynch!"

After saying that, the middle-aged man looked at Adela and said, "Adela, I'm sorry, the situation is serious. I must return to the company immediately to report!"

Before Adela could respond, he turned to Ron, his face full of sincerity:

"Mr. Hunter, your troubles are due to our lax internal review process at Merrill Lynch. Fortunately, God has blessed us and you have suffered no loss. I assure you—tomorrow, no, tonight, tonight, Merrill Lynch will give you a satisfactory answer."

Adèle could only watch helplessly as the two put on their act, unable to do anything about it.

In the end, they had no choice but to leave together.

About ten minutes later, Victor called again:

"Ron, well done! Remember, if anyone asks again, just insist that I taught you. But I reckon no one will ask you again."

Victor said enviously, "Congratulations, Mr. Ron Hunter, you will be the most legendary investor on Wall Street since the subprime crisis."

"Your name will be featured in every major newspaper across America tomorrow!"

Wall Street has been quiet for too long since the subprime crisis.

It's been going on so long that people are starting to lose patience with Wall Street.

Ron's success this time will refocus the attention of the entire United States and the world on Wall Street.

Tell the world that Wall Street will always be the birthplace of legends and myths!