Zhao Chen Open your eyes.
"Strike Price 350, expires in three months. Premium target is controlled within 10 US Dollar.
The total position is 16 million shares - corresponding to 160,000 contracts, which exactly hedges the downside risk of 16.6 million shares of Common Stock.
It will be executed by three companies, each with about 50,000 copies."
Lin Shicheng said, "I understand. I will go and talk immediately."
Zhao Chen said, "One more thing. If Premium exceeds 10.5 US Dollar, don't want it.
10 US Dollar is my Target Price. If it exceeds this number, the price/performance ratio is too low."
Lin Shicheng said, "I understand. I will contact the three companies now and try to lock in the price before the market opens."
The phone hung up.
Zhao Chen put the phone back on the coffee table and leaned on the back of the sofa.
Su Wantang was still sitting next to him and said nothing.
She just stayed with him quietly, occasionally looking at him and occasionally looking out the window.
"They think Put Option is waste paper." Zhao Chen said.
Su Wantang asked, "What do you think?"
Zhao Chen thought for a while. "What they see is the probability of successful privatization.
What I see is that even if privatization is successful, it will take time.
Within three months, will the SEC intervene? Will Board of Directors hesitate? Can the funds be truly implemented? Every level is a variable.
For things like Options, time is the most expensive cost.
After three months expires, if the privatization is not completed within three months, the value of Put Option will not return to zero, but the loss of Time Value will be great.
So I want to set Strike Price at 350 and Premium within 10 US Dollar.
Even if the privatization is delayed for three months, as long as the stock price falls below 350, my Options will have intrinsic value."
He paused and lowered his voice a little.
"And I don't need to bet that the privatization fails. I just need to bet that the stock price won't stay at 378 forever.
Within three months, it will definitely fluctuate. If there is fluctuation, there will be opportunities."
Su Wantang said softly, "Every time you say 'there is a chance', I am not too worried."
Zhao Chen smiled. "As long as you don't worry."
New York time is 4:05 pm, NASDAQ fifteen minutes after the close.
Lin Shicheng is sitting in Goldman Sachs's office at Wall Street 200, opposite Michael Chen, Options's trading director.
Various numbers were dancing on the screen in front of Michael Chen, and the closing price of Tesla was circled - 378 US Dollar.
"Lawyer Lin,350 Strike Price, due in three months, Premium 10 US Dollar."
Michael Chen's voice was very calm, as if he was talking about an ordinary thing,
"This is also the best price I can give."
Lin Shicheng looked at the quotation on the screen and did not answer the call immediately.
He quickly ran through the numbers in his mind.
Premium 10 US Dollar, 160,000 contracts correspond to 16 million shares, totaling Premium 160 million US Dollar.
This number is within 10 US Dollar Target Price given by Zhao Chen, and it just happens to be stuck on the line.
"Michael, 9.5 US Dollar. If you can give this price, Goldman Sachs will take 80,000 contracts."
Michael Chen shook his head.
"Lawyer Lin, you have seen the current market expectations, otherwise why didn't the stock price rush to 420 US Dollar?
Although Put Option is not valuable, the risk still exists.
I can give 10 US Dollar just for the sake of old customers. 9.5 US Dollar, I can't do it."
Lin Shicheng was silent for two seconds. "10 US Dollar, 80,000 contracts were sold."
Michael Chen stretched out his hand. "Deal."
Lin Shicheng held his hand, then stood up, walked to the corridor, and dialed Zhao Chen's phone number.
The phone rang twice and was connected.
"Mr. Zhao, Goldman Sachs has negotiated 80,000 contracts, Strike Price 350, expiring in three months, Premium 10 US Dollar."
The voice of Zhao Chen came from the receiver very clearly. "Premium?"
"80 million US Dollar."
"Where are JPMorgan Chase and Morgan Stanley?"
"I'll go and talk right away. I hope we can finalize all three deals tonight."
"Okay. Thank you for your hard work, Lawyer Lin."
The phone was hung up.
Lin Shicheng put away his mobile phone and walked out of Goldman Sachs's building.
The afternoon sun in Manhattan is very strong, and the skyscrapers on both sides of Wall Street are shining dazzlingly in the sun.
He walked along Broadway Avenue for a while and turned into No. Park Avenue 270--
JPMorgan Chase's office building. James Holbrook is already waiting in the office.
The negotiation was smoother than that at Goldman Sachs.
Holbrook's attitude towards Put Option is almost exactly the same as that of Michael Chen--
"Selling it to you at this price, we will definitely make a profit." JPMorgan Chase agreed to sell 50,000 contracts at Premium of 10 US Dollar, for a total of Premium 50 million US Dollar.
Lin Shicheng went to Morgan Stanley without delay.
Sarah Wu's office is at No. Broadway 1585, which is as simple as an interrogation room. Her style is more direct than the previous two.
"Lawyer Lin, Goldman Sachs and JPMorgan Chase were all given to 10 US Dollar, and we also paid the same price.
30,000 contracts, 30 million US Dollar. You don't need to run through all three companies, we can communicate with each other."
Lin Shicheng looked at her and smiled. "Sarah, you are very direct."
Sarah Wu's expression did not change at all. "In this industry, it is more efficient to be direct. Deal?"
"Deal."
Three agreements were finalized on the same day. Goldman Sachs 80,000 copies, JPMorgan Chase 50,000 copies, and Morgan Stanley 30,000 copies.
A total of 160,000 contracts, corresponding to 16 million shares of Tesla Put Option.
Strike Price 350 US Dollar, three months after the expiration date, Premium unified 10 US Dollar.
Total Premium 160 million US Dollar.
Beijing It was around four o'clock in the morning, and Zhao Chen's cell phone vibrated again.
Lin Shicheng sent a message:
"Mr. Zhao, all three companies have negotiated, and will be delivered tomorrow. 160,000 contracts, Strike Price 350, expires in three months, Premium 10 US Dollar, total Premium 160 million US Dollar."
Zhao Chen looked at the line of words on the screen and was silent for a few seconds.
Then he replied, "Okay. Thank you for your hard work."
He put his cell phone on the coffee table, leaned on the sofa, and took a long breath.
Su Wantang looked at him from the side and asked softly, "Is the negotiation done?"
Zhao Chen nodded. "The deal was negotiated. 160,000 Put Option, Strike Price 350, due in three months, Premium 10 US Dollar. The cost of 160 million US Dollar."
Su Wantang asked, "If the privatization is really successful, will the 160 million be wasted?"
Zhao Chen said, "No. Common Stock earns far more than the 160 million."
Su Wantang asked again, "What if the privatization fails and the stock price falls back to 330?"
Zhao Chen Forget it."Common Stock The floating profit shrank by about 660 million US Dollar. But Put Option will become a real value--
Strike Price of 350, stock price is 330, intrinsic value per share is 20 US Dollar, 16 million shares is 320 million US Dollar.
After deducting the cost of 160 million Premium, the net profit is 160 million US Dollar. Adding both sides together, the overall floating profit is still a positive number."
Su Wantang looked at him, was silent for a while, and then said:
"You calculated this probability very clearly."
Zhao Chen smiled. "I can't figure it out clearly. The cost of 160 million US Dollar is not a small amount."
Su Wantang didn't ask again.
She stood up, walked to the kitchen, boiled a pot of water, made two cups of tea and brought it over.
One cup was handed to Zhao Chen, and one cup was held by himself.
Shan City outside the window, the night is beginning to fade.
The fog on the Yangtze River is looming in the morning light, and the shadows of distant mountains slowly emerge from the darkness.
Zhao Chen held the tea cup and took a sip. The tea was still very hot, leaving a burning sensation on the tip of his tongue.
He glanced at the mobile phone on the coffee table, and the message Lin Shicheng was still on the screen.
160,000 contracts, Strike Price 350, expires in three months, Premium 10 US Dollar, total Premium 160 million US Dollar.
It's not a small amount of money, but for Zhao Chen, it's money well spent.
If the privatization is successful, Common Stock's revenue will cover all costs.
If the privatization fails, the gains of Put Option make up for the drawdown of Common Stock.
Neither side loses money, this is the safest hedging plan he can think of.
Traders at investment banks think Put Option is useless paper because they believe the privatization will be successful.
Zhao Chen doesn't think so. It's not because he knows the future, but because he believes that market sentiment will always be overdone.
The expectation of successful privatization has pushed the stock price to 378 US Dollar, but how long can this expectation last?
One month?
Two months?
Three months?
Will the SEC intervene?
Will Board of Directors hesitate?
Can the funds be actually implemented?
Every level is a variable.
Put Option, is to deal with potential variables.