January 29, Friday.
New York Manhattan The morning fog has not cleared yet, Wall Street The eyes of traders at major investment banks are red.
The coffee in my hand was replaced by cups of concentrated dark roast.
After GME (GameStop) experienced the stormy plunge and buying restrictions of January 28, the entire capital market did not calm down as the regulators wanted.
On the contrary, Fear Index (VIX) of Chicago Stock Exchange is still hanging above 30,
Like a Sword of Damocles hanging over the heads of all Short Selling mechanisms.
The CNBC morning news announcer's voice was a little hoarse, and the background screen was flashing green and red pre-market data wildly:
"... even though retail brokerages like Robinhood have restricted buying permissions for stocks like GME,
But the WallStreetBets (WSB) forum on Reddit didn't die down.
Last night and this morning, the number of posts exceeded the historical extreme.
Retail investors are looking for the next target that can tear open the gap in the institution Hedge Fund..."
In Era Vanguard's hotel Suite, the TV sound was turned down to an extremely low level.
Zhao Chen is sitting on the sofa, with three open laptops on the coffee table in front of him.
The Bloomberg Terminal and WSB real-time crawler hot word lists are displayed respectively.
As well as US Stocks and bulk commodity market delivery data sent by Lin Shicheng.
Shen Zhiyi placed a cup of freshly brewed warm water next to Zhao Chen's hand, sat down next to him, and opened the compliance trace log in his hand.
"The last delivery confirmation letter from GME has been received."
Shen Zhiyi has a calm voice,
"All funds have been transferred to Era Vanguard's custody account at Cayman Islands. SEC and CFTC routinely retrieved yesterday's transaction flow.
But the compliance report provided by Lawyer Lin is very complete and there is no cross-shareholding or undisclosed manipulation."
"Wall Street's lawyers are busier than traders right now."
Zhao Chen picked up the water glass and took a sip, his eyes fell on an abnormal movement that suddenly appeared on Bloomberg Terminal.
That's the pre-market Trading Volume of SLV (iShares Silver Trust, Silver ETF).
At this moment, the tablet placed on the desktop sounded a video call request.
The screen lights up and Chen Xi's face appears in the camera lens.
She was in the office of Shan City Henglong Capital. In the background, several researchers could be vaguely seen working overtime to check data.
"Zhao Zong, New York, the WallStreetBets Forum hot words sent over last night have been counted."
Chen Xi got straight to the point, tapped his fingers on the keyboard a few times, and pushed an analysis chart to Zhao Chen's screen.
"The number one spot is no longer GME, nor is it AMC."
Chen Xi pointed to the surging red bar at the top of the histogram, "It's 'Silver' (Silver)."
"Silver?" Shen Zhiyi frowned slightly and took a closer look, "Retail investors want to buy Silver?"
On the TV, CNBC's scrolling subtitles just switched:
"WSB retail investors shouted a new slogan: Silver is the most severely manipulated commodity by Wall Street Market Maker!
Buy SLV, squeeze JPMorgan Chase!"
"Look at the number of likes on these posts."
Chen Xi said on the other end of the video,
"The logic of several high-like posts is very crude--
They claim that JPMorgan Chase (JPMorgan) and several major investment banks have long used Paper Silver (Paper Silver) to lower the price of physical Silver, and the scale of naked Short Selling is as high as hundreds of millions of Ounce.
Retail investors believe that as long as everyone buys a few hundred US Dollar SLV or Physical Silver Bars, the Short Squeeze (short circuit Short Squeeze) in the Silver market can be forcibly triggered."
Zhao Chen looked at the crazy posts on the screen:
"Buy all SLV! Pull Silver to 100 US Dollar!"
"Wall Street unplugged the network cable on GME, but they can't unplug the network cable on physical delivery of commodities!"
"Let JPMorgan Chase taste the power of retail investors!"
Seeing these fierce words, Zhao Chen raised a playful sneer at the corner of his mouth.
The phone vibrated, and a call from Lin Shicheng came in.
"Zhao Zong, did you see any changes in SLV before the market?"
Lin Shicheng's voice revealed a hint of exhaustion, but more of a vigilance.
"SLV rose nearly 7% before the market opened, and Call Options (Call) Trading Volume on Options Chain instantly exploded.
New York Many Hedge Fund managers here are going crazy in the group, saying that these retail investors are crazy and actually want to go to the Short Squeeze trillion-level commodity market."
"Lawyer Lin, what do you think?" Zhao Chen leaned back on the sofa and asked calmly.
"I think it's a moth flying into a flame."
Lin Shicheng answered decisively,
"Silver is not a small-cap stock like GME with a market value of two to three billion US Dollar.
Silver is a globally recognized precious metal and commodity.
There are tens of thousands of tons of physical Silver lying in the Underground Vault of LBMA (London Bullion Market Association) and COMEX (New York Commodity Exchange).
JPMorgan Chase and other Market Maker have a huge Cash-and-Carry Arbitrage quota. It is simply impossible for retail investors to rely on hundreds of millions of US Dollar to blow up Silver Market Maker."
"Lawyer Lin is right."
Chen Xi in the video added,
"We Research Institute just pulled out the inventory data and position structure of COMEX Silver Futures.
Behind Market Maker's Short Sellers position, there is a large amount of Spot hedging and OTC Derivatives at the bottom.
The average daily trading volume of the Silver market is hundreds of billions US Dollar. Faced with such a volume, retail investors' Buying Pressure is like using a sprinkler gun to put out a forest fire."
Listening to the clear logical analysis of the two people, Shen Zhiyi looked at Zhao Chen:
"Since everyone knows that Short Squeeze Silver is a dead end, then we just ignore it and prepare to return to China according to the original plan?"
"No."
Zhao Chen shook his head, his eyes deep.
"Don't ignore it, on the contrary, we have to enter."
The room was quiet for half a second.
Shen Zhiyi and Chen Xi in the video were both stunned for a moment.
Lin Shicheng also held his breath on the other end of the phone:
"Zhao Zong, you mean... we want to buy Silver together with retail investors?"
"Retail investors think they are at Short Squeeze and think they can pull Silver to 100 US Dollar. This is of course a fantasy."
Zhao Chen pointed to the steeply rising transaction volume curve on the screen and said slowly and clearly,
"But the most interesting thing about capital markets is -
When enough fools run in one direction at the same time, even if there is a cliff ahead,
The surge they rode before they fell was enough to generate a huge liquidity premium."
Zhao Chen stood up and walked to Suite's huge Floor-to-Ceiling Window.
Manhattan There are many high-rise buildings outside the window, and the sunlight shines on the cold glass curtain wall, reflecting the dazzling light.
"Lawyer Lin, Chen Xi, remember."
Zhao Chen looked back at the screen,
"Silver Short Squeeze is not a 'long-term value investment', nor is it a GME-style complete victory that can blow up JPMorgan Chase.
This is an ultra-short-term pulse-like liquidity squeeze driven by emotional catharsis."
"How short is the time?" Lin Shicheng asked immediately.
"No more than forty-eight to seventy-two hours."
Zhao Chen Hold up two fingers,
"Retail investors' funds can't last three days in a trillion-dollar market.
The regulatory agency CME (Chicago Mercantile Exchange) will never let the commodity market get out of control. As soon as the margin is raised, smashing orders will follow.
But during these 48 hours, the premium is real.
What we have to do is eat up the emotional premium of these 48 hours at a very small cost."
Shen Zhiyi Quickly open the notebook:
"If it is ultra-short-term arbitrage, the position size must be controlled in compliance with regulations.
The CFTC has very strict position limits on Commodity Derivatives. Once Large Trader Reporting System is triggered, Regulatory Inquiry will be triggered."
"So we don't use Common Stock and we don't buy futures contracts."
Zhao Chen has sharp eyes,
"Lawyer Lin, use Offshore SPV, only buy SLV's Out-of-the-Money Call Options (Out-of-the-Money Call Options), Strike Price hangs between 25 and 30 US Dollar.
The principal is controlled within Over Eighty Million US Dollars, and the leverage is full.
When Asia Session opens on Monday, as long as retail investors Buying Pressure rush in and the price of Options doubles, we will immediately sell it to Market Maker in batches."
"Understood! Use the Options lever to eat the pulse and stop when it's good." Lin Shicheng immediately understood the intention.
"One more thing."
Zhao Chen changed his tone and his eyes became extremely deep, "This is the bright line. What about the hidden line?"
Chen Xi's eyes lit up at the other end of the video:
"Zhao Zong, that bulk commodity purchase plan that you asked Lawyer Lin to arrange with Europe and Asia?"
"Yes." Zhao Chen raised the corner of his mouth slightly,
"Silver Short Squeeze will make the cameras of all financial media in Wall Street, the United States and even the world stare at Precious Metals Desk (Metal Desk).
Traders of JPMorgan Chase, Citigroup, and Goldman Sachs will be forced to deal with the abnormal fluctuations of Silver in the past few days."
Zhao Chen walked back to the table, pressed his fingers heavily on Bloomberg Terminal's commodity list, and pointed at the extremely inconspicuous noun:
"When everyone's attention is attracted to Silver, the defense lines of Europe and Asia metal exchanges are the loosest.
Lawyer Lin, let Offshore Entity of Singapore and London speed up, while Silver is making an uproar,
Dark Chencang, on the LME and Shanghai Futures Exchange, give me the full sweep for delivery grade Pure Nickel Plate Spot."
On the other end of the phone, Lin Shicheng took a deep breath.
The GME craze has not subsided, Silver storm is rising again,
But his boss is already taking advantage of the cover of this storm,
The chess piece was moved to another grand battlefield more than a year later.
"Understood, Zhao Zong."
Lin Shicheng's voice revealed an unprecedented excitement,
"Silver is a cover, a real big net, weaving for nickels."
"Go get ready." Zhao Chen hung up the phone and turned off the video.
Outside the window, the sunshine New York is getting brighter and brighter, and a commodity craze involving trillions of capital is quietly kicking off.