Chapter 13: Earning Pocket Money (2)

One characteristic of derivatives is that they are zero-sum games.

When someone wins, someone loses.

That’s the nature of such contracts.

Why would anyone take on such risk without a substantial return? Derivatives perfectly exemplify high-risk, high-reward.

“My goal is 10 billion won.”

I calmly stated this, sipping the remaining milk from the dish. Lee Sihyeon’s eyes widened.

“…10 billion? 10 billion won? H-how?”

“Why? If my judgment is correct, earning 100 times the investment is easy.”

Turning 100 million won into 10 billion won.

That happens fairly often in the options market. The opposite also occurs frequently, however.

For reference, during the 9/11 attacks in 2001 and the options shock in 2008, there were returns of 50,000%, or 500 times the investment. Those who profited made a fortune, and those who lost…

Hmm, they went broke. Even now, thinking about it makes my hands tremble. Those damn Deutsche Bank bastards.

“What if you lose?”

Lee Sihyeon, unaware of the future, naturally voiced this concern. I shrugged, nonchalantly replying,

“Then I lose 100 million won. I’ll just sell some stock.”

“…”

This investment strategy is only possible because I’m a third-generation chaebol. A gamble that could ruin someone’s life becomes just another investment for me.

I honestly couldn’t have done this in a normal family. Even a small, unknown event could cause a butterfly effect.

“It’s still a net long position in options, so at worst, we’ll only lose the initial investment. We won’t lose more than that.”

The person selling me the options will be unlucky. The 10 billion won I’ll earn will come from their pocket. Still, since it is a purchased option, the situation will be similar to the original history for them.

“…We could lose more than the initial investment?”

Lee Sihyeon shakes her head, weary of this extreme aspect of capitalism.

“That’s right. I told you, the risk is incredibly high. My position is safe.”

“Losing only the initial investment is safe…”

“Alright, let’s stop here for today. Any more explanations will only give you a headache. Time to start preparing. Contact that broker we met last time.”

Lee Sihyeon slowly nods, taking out her notepad.

“Ah, yes. You mean Mr. Ha Jeonmu of Daeha Securities, right?”

“Yes. He worked at the Tokyo Stock Exchange, so he’ll have a good understanding of this. He’s not on the main succession line, so he’ll listen to me…”

As it gets closer to working time, energy surges through me.

My relaxed posture straightens, and my usually smiling eyes sharpen.

I look in the mirror. Yu Hayeon still holds the innocent smile of a child, but her aura is completely different.

Time to make money.

***

Without smartphones or modern computers, stock trading is mostly done in person or by phone.

Hollywood films often depict old Wall Street, offices filled with ringing phones, brokers persuading people to buy stocks.

Fortunately, I don’t need to engage in that chaos. A minor like me can’t do it myself. It’s usually left to brokers.

“Ah, Miss. You’ve arrived.”

A kind, generous-looking man.

But his eyes are sharp, and there’s a chilling air about him, a bit like a seemingly good character in a comic book who reveals their true nature a few chapters later.

His name is Ha Jusung, executive director of Daeha Securities.

Ha Jusung, with a hearty laugh, bows politely. While initially wary of me, his attitude changed 180 degrees after seeing my knowledge and ability.

In this field, ordinary people can never beat a genius.

-Those who can smell money and those who can’t are worlds apart. You can see that from the Chairman, right…?

It was obvious flattery, but I have the ability to back it up.

“Sir, I want to trade options.”

“Ah, I’ve heard. Foreign exchange options, right? Haa. If you weren’t a Miss, I would’ve dissuaded you. I’ve only traded stock options. It’s absolutely nerve-wracking…”

While wiping his brow, he doesn’t exactly seem trustworthy, but Ha Jusung is one of the few practical-minded executives at Daeha Securities, which is only two years old.

‘Until last year, foreign investment was impossible.’

If Daeha Securities hadn’t been established, I might have struggled, but with Daeha Group operating a securities firm, it would be absurd not to use it.

Well. Once the succession battle heats up, I won’t trust anyone here…

Fortunately, Daeha Securities was established just as I started becoming aware.

Chairman Yu Seongpil’s heart softened following Yu Jincheol’s death, allowing me to place my people in Daeha Securities.

That person is Ha Jusung. He was on the verge of ruin because of his wrong connections. I picked him up cheaply.

“You must understand the risks of options trading… Let me confirm. Foreign exchange options, right? Yen/dollar call options.”

If the yen’s value rises, call options to buy yen at a low price will skyrocket. Similarly, put options to sell the relatively undervalued dollar at a high price will surge.

“Yes. If I have money left, I’ll buy other options, like dollar/yen put options.”

Ha Jusung questions me.

“Why…? Didn’t you say you’re only investing 100 million won? Everyone’s watching the exchange rate, so volume should be high.”

While the scale of options trading in the 80s was small, that’s by US standards.

The Chicago Board Options Exchange (CBOE), the world’s first and largest options exchange, has already started computerizing trading, and the volume is considerable.

Even for foreign exchange options instead of stock options. 100 million won is a lot of money for an individual, but just small change for an institution.

“I don’t want ordinary options. The G5 finance ministers’ meeting is on September 22nd, everyone knows this, right? That means I can’t make a huge profit. I want to buy rarer options, but because the volume is low, it’s hard to trade large amounts at once, so I need to split it.”

“…Is that why you’re using foreign exchange options and not stock options?”

I nod in confirmation.

“Yes. Stock options have a maturity date of 20 days. Foreign exchange options allow you to freely set your own maturity date.”

Lee Sihyeon beside me seems oblivious, but the seasoned trader, Ha Jusung, understands immediately.

There are many options related to the exchange rate, even if it wasn’t necessarily minor foreign exchange options. You could trade options on Japanese company stocks, for instance.

But there was one problem.

The traditional US options expiration date is the third Friday of each month. This September, it’s the 20th.

Unfortunately, the G5 finance ministers’ meeting and the Plaza Accord are on September 22nd. A two-day difference.

This means I need to buy options for the following month… but that leaves too much time until maturity.

People aren’t stupid. From the moment the Plaza Accord is announced, even without me, everyone will predict the future exchange rate, and the profit I’ll make on standard options will decrease.

Therefore… stock options are out.

“…Um, could you explain that?”

My bewildered secretary asks. She’s asking even with someone else present, which is admirable.

‘An excellent reaction.’

Because Lee Sihyeon showed such a good reaction, I added an explanation.

“Option prices decrease as they approach maturity.”

Options and futures have maturity dates. It’s a contract, it needs an expiration date, similar to an expiration date on food. The closer the date, the lower the value of the same product.

“So, if I buy an option on the 21st in anticipation of the finance ministers’ meeting, I’ll have to buy at a very high price. The maturity is the day before, and a new contract is made, meaning the maturity is a month away.”

The G5 finance ministers’ meeting isn’t a secret. The Plaza Accord’s results will be shocking, but those in the CBOE will already be betting on the outcomes of the meeting at the Plaza Hotel.

“So, to make a lot of money, you have to predict something that no one else knows.”

Predicting that finance ministers from various countries will meet to adjust the yen-dollar exchange rate, which has been a thorn in America’s side, is relatively easy.

In short, it’s not profitable.

“That’s right. The lower the probability, the higher the payout. And I will bet on the extreme end. On an option that is far more extreme than typical foreign exchange options.”

Ha Jusung opens his mouth slightly, turning his gaze to me. He seems to have noticed my plan.

“Y-you wouldn’t be…”

“Yes. There are even more extreme options, right? Ones that aren’t officially traded, only on the over-the-counter (OTC) market.”

“Most foreign exchange options are already traded OTC… but that’s not what you mean. You wouldn’t be thinking of…?”

“Yes. You’re right.”

An option that becomes a standard option once the conditions are met, but becomes worthless if they aren’t.

I’ll buy barrier options.

“Barrier options, specifically knock-in options.”

Ha Jusung takes a deep breath and asks me.

“What barrier price are you considering?”

“215 yen per dollar.”

“…!”

It’s currently over 240 yen per dollar.

“W-what’s the reference? Maturity, I mean.”

I smile brightly. An innocent, childish smile.

“Maturity is the 23rd. By New York cut, it should be around then.”

The day after the Plaza Accord, the exchange rate, which had been 235 yen per dollar, plummets to 215 yen overnight. It will drop by half within a year.

“……Are you crazy?”

Ha Jusung’s eyes tremble. Even during his trading days, no one had ever done such a crazy thing.

“Why? I’m perfectly rational. The outcome is simple, clear.”

Win: 10 billion won.

Lose: 0 won.