September 22, New York.
Early the next morning after returning to Manhattan from Las Vegas, Zhao Chen was sitting at the conference table in Era Vanguard's office.
The dry air of Las Vegas still remains in the nasal cavity, but the autumn of Manhattan has seeped in from the window--
The morning fog on the Hudson River disperses more slowly than in the desert, and the spire of Empire State Building is looming in the thin mist.
Su Wantang Put Zisha Pot on the table and go to the tea room to boil water.
Shen Zhiyi pushed the door open at eight o'clock sharp, holding a folder in his hand, with pencil markings on the cover.
"GME Position Structure - As of September 21st".
Lin Shicheng arrived the earliest and had already drank his second cup of coffee. Arriving early has always been his habit.
There were three printed documents spread out in front of him,
The K-line Chart of GME (GameStop) on Bloomberg Terminal stopped at the closing position on September 21 - 11.88 cents.
From around 6 yuan when Zhao Chen was first reported on September 8, the stock price has nearly doubled in less than half a month.
Ryan Cohen submitted an amended document on September 14, increasing his shareholding from 9.6% to 9.98%.
After the news came out, the stock price jumped from eight yuan to more than ten yuan, and has been fluctuating between eleven and twelve yuan in recent trading days.
Zhao Chen opened the position details list submitted by Shen Zhiyi.
Era Vanguard holds GME Common Stock through multiple Offshore SPV, with a total of approximately 840,000 shares.
It accounts for about 1.2% of the total share capital of GME, and the average price of opening a position is around 6 US Dollar.
There is also Out-of-the-Money Call Options due in June and July 2021,
Strike Price is concentrated in the 15th to 25th US Dollar range, and the total cost of Premium is about 12 million US Dollar.
If converted according to the most conservative Delta value, Options's exposure is approximately equivalent to 0.8% of the total equity.
Common Stock plus Options, the total exposure is approximately two percent.
"Yesterday's closing price was eleven dollars and eighty-eight cents.
Ryan Cohen's position cost is eight yuan and forty-three cents, and the cost of our Common Stock is six yuan.
Cohen's public holdings are taking a bullet for us --
The market focused all its attention on him, and no one would ask who bought the batch of chips near six US Dollar.
But this protective umbrella won't last forever."
Zhao Chen Turn to the second page of the control position details list.
"We want to continue Add Position. This is a once-in-a-lifetime opportunity, and the current goal is to achieve a total exposure of 4.99%."
Lin Shicheng's pen tip paused on the notebook for a moment.
"Common Stock plus Options, converted according to the most conservative Delta?"
"Yes. Each share of Common Stock is counted as one share, and Options is calculated as Delta equal to one, that is, each contract corresponds to one hundred shares.
When all channels are combined, the total exposure cannot exceed 4.99%.
We try not to reveal our identity until the position is completed."
Shen Zhiyi opened her notebook and found several calculation plans listed in advance.
"GME's total share capital, according to the company's latest quarterly report, is approximately 69.74 million shares.
Four point ninety-nine percent corresponds to approximately 3.48 million shares.
We currently have 840,000 shares of Common Stock, plus a conservative conversion of about 560,000 shares of Options, for a total of 1.4 million shares.
The gap is approximately 2.08 million shares."
"Two million and eighty thousand."
Zhao Chen repeated the number and turned his attention to Lin Shicheng,
"How to distribute Common Stock and Options? Do you have any plan?"
Lin Shicheng switches Bloomberg Terminal to GME's Trading Volume page.
"GME's daily average Trading Volume has averaged approximately 12 million shares over the past ten trading days,
But that number includes the surge in volume following news of Ryan Cohen's additional holdings.
If news days are excluded, the normal daily average trading volume is about three to five million shares.
Our buying speed must be controlled within 3% of this Trading Volume,
Otherwise, any slightly larger buy order will push the stock price up."
"Three percent, three percent of three to five million shares, buying up to 90,000 to 150,000 shares every day."
Shen Zhiyi took the call,
"At this rate, 2.08 million shares will require at least fourteen to twenty-three trading days.
Considering that we still have the Options side to synchronize, the actual time may be longer."
"Then extend it to one month."
Zhao Chen picked up the teacup that Su Wantang had just put down and took a sip.
"Completed before October 20th. Common Stock bought about 2.1 million shares, and the remaining exposure was covered with Call Options.
The average price of Common Stock is controlled below 13 US Dollar, and the total cost of Options Premium is controlled within 20 million US Dollar."
Lin Shicheng quickly listed a few lines of numbers in his notebook.
"Common Stock Two million and one million shares. Based on the estimate of US Dollar range from twelfth to thirteenth, the investment is about 25 million to 27 million US Dollar.
Including the existing Common Stock position of 840,000 shares, the total number of Common Stock shares is approximately 2.94 million shares, accounting for approximately 4.2% of the total share capital.
The remaining exposure is 0.7%, which will be covered with Options.
In terms of Options, the existing 12 million US Dollar Options positions plus the new ones, the total Premium is controlled within 20 million.
The newly added Options and Strike Price are moved upward, ranging from twenty to thirty US Dollar, with expiration dates mainly in January and June of 2021."
"Why is it January?" Shen Zhiyi was a little confused.
"Because Options Gamma, which expires in January, has the strongest effect."
Lin Shicheng switches Bloomberg Terminal to GME's Options Chain page,
"GME's Market Maker's open interest on Out-of-the-Money Call Options has increased significantly over the past two weeks,
Most of them are concentrated in the Strike Price range from fifteen to twenty-five US Dollar.
If the stock price rises above Strike Price before expiration, Market Maker must buy Common Stock to hedge Delta.
The more concentrated the open interest, the greater the buying volume of Market Maker.
Options expires in January, and there are still four months from now to the expiration date. The Gamma hedging rhythm of Market Maker coincides with our position building cycle."
Zhao Chen put the teacup on the table. "January 11th."
Shen Zhiyi raised his head and looked at him.
"The date Ryan Cohen entered Board of Directors.
It is widely expected that he will officially receive Board of Directors Seat at the annual Shareholders' Meeting in January next year.
If he officially joins Board of Directors in January, that will be the catalyst."
Zhao Chen closed the folder and tapped the cover twice with his fingers.
"Our position building should be completed in October. November and December are the observation periods. January -"
He didn't finish what he said. But Lin Shicheng and Shen Zhiyi both understood.
January is not the end of building a position, but the starting point of detonation.