Recently, the Korean stock market has seen a surge in IT stocks, leading the stock market. Both institutions and foreigners were raising their target stock prices and taking long positions.
Seosung Electronics was breaking through all previous highs and breaking all-time highs, and the stock market was the same.
Slowly, there was talk that it was too overheated compared to the real economy, and there were also expectations that there would be an adjustment due to profit taking.
The announcement of the discontinuation of the L6 at this point was like pouring cold water into a heated furnace.
The rosy outlook disappeared, replaced by pessimism. Not only Seosung Electronics, but also related stocks and even unrelated stocks plummeted.
Individuals in fear threw away their stocks, and foreigners, who had been selling heavily from the beginning of the market, instead of turning to buying, increased their selling.
In the second half of the market, institutions turned to buying, and even pension funds began buying, but it was not enough to stop the downward trend.
* * *
Everyone, including the Korea Exchange and securities, investment trust, and fund companies, was in chaos.
This was the same for KYB Investment & Securities, the largest securities company in Korea.
It was the first time that Seosung Electronics hit the lower limit since the 2008 financial crisis. But things were very different then and now.
During the financial crisis, not only Seosung Electronics but also top global companies were falling by tens of percent.
Above all, the biggest difference was that at the time, the upper and lower price limits were limited to 15%. However, it has now expanded to 30 percent.
In other words, today is the first time in history that Seosung Electronics fell 30 percent.
After the launch of L6, Seosung Electronics was on the rise, and since the stock price was predicted to rise in the future, pension funds and funds alike were accumulating Seosung Electronics stocks.
Institutional holdings of investment trusts and securities companies were also significant.
No one could have predicted this situation.
Park Jong-il, executive director in charge of securities affairs at KYB Investment & Securities, sat down and loosened his tie. The graph floating on the monitor was frozen.
Due to the sidecar activation, the stock market was currently suspended from trading. It may seem like the storm has calmed down for a while, but once the trading suspension is lifted, an even bigger storm will hit.
The cell phone that had been ringing since before opening was still ringing. These are all inquiries and complaint calls from big customers.
It's been a long time since he turned it on silent because he couldn't respond to it in person like usual.
!!!
Team leader Kim Un-yong came inside with a knock.
"Did you find it, Director?"
"Have you figured out the put option loss?"
"We are currently investigating. "There are differences depending on the exercise price, but KOSPI200 put options are hundreds of times higher."
"What about Seoseong Electronics put option?"
Team leader Kim Un-yong bowed his head and said.
"More than 1,000 times more."
"······."
Executive Director Park Jong-il closed his eyes tightly.
He was already expecting it, but hearing it in person made him feel like he was losing his mind.
As Seosung Electronics hit the lower limit, the spot loss amounted to -30%. The problem was derivatives.
Until then, put options were scraps of paper, and call options were within the exercise range.
However, the sudden announcement completely changed the situation. While all call options are outside the scope of exercise, all put options can now be exercised.
You might think that's it, but the price paid for the call option was not large. On the other hand, the price paid for put options soared to more than hundreds of times the issue price.
He had no idea how much the loss would be.
Tens of billions? Hundreds of billions?
The derivatives market was practically a place where ants were blindly making money. Ants hoping to win the jackpot would donate money to financial companies.
But he never thought it would suddenly turn into a boomerang and come back.
It will be difficult for all securities companies that issued put options to avoid losses this quarter. Because of this, securities stocks were already plummeting by more than 10 percent.
It will probably be difficult for several small and medium-sized financial companies to avoid bankruptcy.
Executive Director Jong-il Park gave instructions.
"Check the status of derivatives, find out how much the ELW and put option payments are, and check the issued ELS knock-in section. "Somehow find a way to reduce losses on the option expiration date."
"All right."
Even when the conversation was over, Team Leader Kim Un-yong did not leave the room.
When he looked at Park Jong-il, he hesitated and carefully opened his mouth.
"I have one thing to tell you."
"Something?"
"I'm not sure, but it seems like Golden Gate bought put options on Seosung Electronics before the incident happened."
"what?"
At those words, Executive Director Park Jong-il felt a shock as if he had been hit on the head with a hammer.
What does this mean?
"Could it be that Golden Gate knew the information in advance and collected it?"
Team leader Kim Un-yong shook his head.
"At first, I thought it was like that too, but it seems like that's not the case. Golden Gate is also suffering significant damage due to this incident."
Golden Gate also issued various put options using KOSPI200 and Seosung Electronics as underlying assets. They also had to pay hundreds of times the issue price.
"If they had received information in advance, they would have sold futures and spot stocks, but there was no such movement."
If Golden Gate had known the information faster than they did, it would have disposed of all futures and spots at the time it purchased put options. Unless you were planning on sitting back and taking losses.
"then?"
"It appears that a specific corporation purchased it through Golden Gate."
No matter how you invest, it is up to you.
However, there is something strange about the fact that it was not an index, but rather a concentrated purchase of put options for a specific stock.
If the prediction was correct, it would have been a disaster, but if it had been wrong, the money would have become the issuer's profit.
Unless you know the information in advance...
If this happened due to insider trading, it is usually a big deal.
Executive Director Jong-il Park gave instructions.
"Let's find out who it is. Also check how the information was obtained."
"All right."
Team leader Kim Un-yong turned and left the room. There is now less than a minute left until the trading suspension is lifted.
Executive Director Park Jong-il looked at his watch and muttered.
"What kind of people are they?"
* * *
Taekgyu and I were speechless as we watched the stock prices fall.
Both the KOSPI and KOSDAQ indices, which were hitting previous highs, returned to where they were a few months ago.
Seosung Electronics, which hit an all-time high of 1,797,000 won the day before, suddenly fell to 1,258,000 won.
It was below the 52-week low.
When we sell short and buy put options, the average price is 1.6 million won.
Short sellers recovered their losses in one go and turned into profits of more than 20 putts. And it is not enough to say that put options are a jackpot.
All options that were nothing more than scraps of paper until yesterday can now be exercised.
Things that rose a little rose hundreds of times, and things that rose a lot rose more than 1,000 times.
Of course, this is based on when it plummeted, and based on our purchase price, it is much lower than that.
Stocks are not a zero sum game.
Since it is not a closed market, there are many cases where everyone gains or loses together.
However, due to the structure of short selling and option trading, someone's loss inevitably leads to someone else's gain.
Everyone's disaster became a blessing for us.
The community, including the stock gallery, erupted in laughter.
-The Han River Jeongmo is being held today.
-We are recruiting an expedition team to bungee jump from Mapo Bridge.
-This is some kind of ant hell.
-If the sidecar is released, it will fall further, right?
-iced coffee! I wish this was a dream
-First, I have to hit Im Jin-yong's neck first.
-Let's wear L6 all over our bodies and rush to the Seosung Electronics Gangnam headquarters!
-I want to throw L6 at Jo Dong-jun's face.
-Wouldn't it be possible to reduce losses by reselling the collected L6 to IS?
On the other hand, a very small number of investors who invested in inverse ETFs or put options cheered.
-I bought a leveraged inverse ETF yesterday, +13.8% in one day!
-KOSPI200 put option 270 times!
-It's a Put Party that comes once every 10 years . I lived just waiting for today.
-If you were holding a put option on Seosung Electronics, how much would it be worth?
-Thank you to Vice Chairman Lim Jin-yong and President Cho Dong-jun. Thanks to this, I was able to recover in one day the money I had lost while trading stocks for 20 years.
-putmen will all be smiling today.Putputputhaha!
-This is Put Man, who caught Seosung Electronics' put job. I will go to the Lamborghini store today, pick up an Aventador, and post a proof photo along with a photo of my put . Phew~!
Taekkyu blinked and asked.
"Is this true?"
I, too, find the situation unbelievable.
I desperately wanted this to happen, but when it actually happened, it didn't feel real. My head felt blank, as if I was dreaming.
"It's probably not a dream."
Taekkyu raised his arms and screamed.
"Wow! "We're rich now!"
I burst out laughing as I saw Taek-gyu cheering.
"You were originally rich."
But now the 10 billion rich person has become hundreds of billion rich.
Taekgyu hugged me tightly.
"I love you, dear friend!"
Normally, I would have pushed him away, asking he was doing...
I hugged Taekgyu and shouted.
"We did it!"
* * *
Seosung Electronics, which closed trading at the lower limit the previous day, began trading at 1,224,000 won, down 2.7 percent as soon as it opened the next day.
Fortunately, with the influx of counter-buying, it managed to rebound and closed at 1,288,000 won, up 2.4 percent.
The stock market, which had shown panic the previous day, managed to regain stability and the index succeeded in rebounding by 0.95 percent.
The next day was the option expiration date.
Seosung Electronics announced an exchange program along with a refund policy through the media and announced that it would release the NT6, a derivative model of the L6, early, focusing on minimizing the impact of the discontinuation of the L6.
In addition, thanks to purchases by institutions and pension funds, the stock price of Seosung Electronics rose 6.6 percent on the option expiration date, recovering to 1,373,000 won, and both KOSPI and KOSDAQ rose more than 2 percent.
The prices of the dollar, gold, and crude oil all fell, and the financial market showed stability.
* * *
From the moment Seosung Electronics hit the lower limit, we started selling options. However, put options had already skyrocketed to the point where selling them in the market was impossible.
And finally, the option expiration date arrived. We liquidated the short selling and confirmed the profit.
The final rate of return is 5,170 percent.
[685,000,000,000]
We earned more than 50 times the investment, and the KRW 13 billion we invested increased to KRW 685 billion.