Zhao Chen nodded. "Long-Dated Call Option. Before buying Common Stock, use Options to lock part of the position.
Options has leverage, and you can control a large number of shares with a small amount of money.
When we start buying Common Stock and the stock price rises, the Options in our hands will also rise - not only can we dilute the cost, but we can also make extra money."
Chen Xi's eyes lit up.
Although she is not very professional, she has gained a lot of knowledge about finance Derivatives during the year she followed Zhao Chen.
"What you mean is - first build a Options position, which is equivalent to locking in the future buying price in advance.
Then we slowly buy Common Stock. Every time the stock price rises by one dollar, Options will earn one more dollar?"
Zhao Chen nodded. "Yes. This is called 'Synthetic Long'.
Hedge Fund of Wall Street often does this - buy the call first, then buy Common Stock, and use the buying of Common Stock to push up the stock price and drive the call value increase.
Spend one money and earn two benefits."
Su Wantang asked softly from the side, "What about the risks?"
Zhao Chen said, "The risk is mainly Time Value and volatility.
If the stock price does not rise, the value of Options will decay over time.
But our judgment on Tesla is that it will rise in the short term.
The production capacity problem of Model 3 is being solved, and market expectations are being repaired. If you buy forward calls now, your chances of winning are very high."
He looked at Chen Xi:
"Go and check Options Chain of Tesla. I need some data - Strike Price, Premium, and contract period.
Choose a term of 6 to 12 months. If it is too short, the risk will be high, and if it is too long, the liquidity will be poor.
The most important thing is - Strike Price plus Premium cannot exceed 320 US Dollar."
Chen Xi nodded, opened the laptop, and logged into the Options trading interface of US Stocks.
The office became quiet except for the sound of her typing on the keyboard.
A few minutes later, Chen Xi raised his head and turned the computer screen to Zhao Chen.
"I found the Options data of Zhao Zong, Tesla. As of the closing price of Friday - January 5, the stock price of Tesla was 315.58 US Dollar."
She read out several key contracts:
"The first is the contract that expires on July 20, 2018, with six and a half months left.
Strike Price 280 US Dollar, Premium is about 42 US Dollar. Strike Price plus Premium 322 US Dollar is slightly more than 320."
Zhao Chen shook his head. "It's high. Keep watching."
Chen Xi Turn to the next page. "Strike Price 290 US Dollar, also expires on July 20, 2018.
Premium approximately 36 US Dollar. Strike Price plus Premium 326 US Dollar."
Zhao Chen frowned. "It's still high. Are there any longer-term ones? The longer the time, the more expensive Premium is, but Strike Price can be higher, and the total cost may be lower."
Chen Xi flipped to the contract expiring on September 21, 2018, with eight and a half months left.
"Strike Price 290 US Dollar, due in September 2018. Premium is about 31.5 US Dollar. Strike Price plus Premium--321.5 US Dollar."
Zhao Chen's eyes lit up. "This is close. Is there anything more suitable?"
Chen Xi continues to scroll down. "Strike Price 300 US Dollar, expires in September 2018. Premium is about 27 US Dollar. Strike Price plus Premium 327 US Dollar."
Zhao Chen shook his head. "327, too high."
Chen Xi flipped through a few more pages and suddenly stopped. "This--Strike Price 295 US Dollar, expires on September 21, 2018."
Premium approximately 29.2 US Dollar. Strike Price plus Premium 324.2 US Dollar."
Zhao Chen stood up, walked to Chen Xi, and looked at the screen.
He scanned around, then pointed at the screen and said:
"That's it. Strike Price 290 US Dollar, expires on September 21, 2018. Premium 31.5 US Dollar, Strike Price plus Premium 321.5 US Dollar.
Although it is a little higher than 320, the eight and a half month period is safe enough."
Chen Xi asked, "Then you want this?"
Zhao Chen nodded. "That's it. One contract is enough.
Dispersing the expiration dates will increase the complexity of the operation. It is better to concentrate on one contract and the position will be clearer."
He returned to his seat, leaned back, closed his eyes and thought for a while.
Then he opened his eyes and his tone became decisive. "Buy 5 million shares of hedging amount. Strike Price 290 US Dollar, expiring in September 2018."
Chen Xi did a quick mental calculation:
"5 million shares, each contract corresponds to 100 shares, and 50,000 contracts are required.
Each share of Premium is 31.5 US Dollar, and each contract is 100 shares, so the Premium of each contract is 3150 US Dollar.
50,000 contracts - total Premium 157.5 million US Dollar."
She paused and added, "5 million shares of Options, accounting for approximately 2.98% of the total share capital of Tesla."
Zhao Chen nodded. "Less than 3% will not trigger disclosure requirements.
We will consider disclosing it later when we buy Common Stock and the total position exceeds 5%."
He looked at Chen Xi: "Contact the dealer tonight.
US Stocks opens tonight, we want to buy Options as soon as the market opens. At the same time, we start to open a position Common Stock."
Chen Xi was stunned for a moment. "Will you do it tonight?"
Zhao Chen said, "Yes. We don't have to wait for tomorrow. It only takes one night for the news to spread.
If we try again tomorrow, someone may have already escaped."
He glanced at the clock on the wall - Beijing time was nine-thirty in the evening.
US Stocks will open in one hour.
"You should contact Goldman Sachs immediately and ask them to quote 50,000 contracts, Strike Price 290 US Dollar, expiring in September 2018.
Ask them to quote a package price. The requirement is - Strike Price plus Premium should be controlled within 322 US Dollar. If you can do it, the transaction will be completed."
Chen Xi took a deep breath, picked up the phone and walked out of the office.
Su Wantang looked at Zhao Chen: "Xiao Chen, are you worried about something in such a hurry?"
Zhao Chen said, "It's not that I'm worried. It's just that the time window is so narrow.
In January, the stock price of Tesla was still hovering over 300 US Dollar. When Market Reaction comes over, it will not be at this price."
He paused. "Moreover, if we buy Common Stock, it will push up the stock price.
If you buy Options first and then Common Stock, the increase in Common Stock will drive the increase in value of Options. This order cannot be wrong."
Su Wantang nodded and did not ask any more questions.
Fifteen minutes later, Chen Xi opened the door and came back.
"Goldman Sachs quoted 50,000 contracts, Strike Price 290 US Dollar, expiring in September 2018.
Premium 31.2 US Dollar, 0.3 US Dollar lower than what we saw.
Total Premium 156 million US Dollar. Strike Price plus Premium 321.2 US Dollar."
Zhao Chen nodded. "Deal."
Chen Xi said, "I have confirmed it verbally. They will execute the transaction within ten minutes after the market opens.
50,000 contracts, bought in three batches to avoid impact on the market."
Zhao Chen stood up and walked to the window. Outside the window was the night view of Shan City, and the intersection of the Yangtze River and Jialing River was brightly lit.
He was calculating another account in his mind - after the Options position was established, the buying of Common Stock was about to begin.
"Common Stock," he said without looking back, "will also start building positions tonight.
I'll buy 500,000 shares first to test the market's capacity. If the liquidity is good, I'll continue to add more shares tomorrow."
Chen Xi wrote in his notebook, "What is the target position of Common Stock?"
Zhao Chen turned around:
"The ultimate target of 19 million shares remains unchanged. But with these 5 million shares of Options as a hedge, Common Stock can buy more calmly.
First buy 10 million shares of Common Stock, and the rest will depend on the situation."
He paused and said, "The total holdings - Common Stock plus Options - should be controlled within 15 million shares. We will buy them later depending on the situation."
Su Wantang asked, "What about the remaining funds?"
Zhao Chen said, "Buy Treasury Bonds first. 940 million US Dollar Treasury Bonds, and operate it tomorrow. Maintain liquidity and can call it at any time."
US Stocks After the market opens, the operation starts on time.
Traders of Goldman Sachs bought 50,000 Tesla Call Options contracts in three batches - Strike Price 290 US Dollar, which expired on September 21, 2018.
The average price was 31.2 US Dollar, and the total price was Premium 156 million US Dollar, all of which were sold.
Almost at the same time, Chen Xi started buying Tesla Common Stock through the account of Citigroup.