Chapter 251: Position Established

In fact, Merrill Lynch executives had already analyzed at the meeting the internal causes of next week's stock market crash.

But they all overlooked the most important point.

During this period, individual trading on the stock market still relied on manual operations.

Ordinary investors sent their orders through stockbrokers or exchange floor traders to the trading hall, where professional traders manually matched them for execution.

Even a big player like Chen Mo used the same method.

All his orders were handled by Hengli and Pite, the two operators, who used a dedicated phone line from the trading room to contact floor traders inside the exchange.

Institutions, however, were different.

They had already begun using computer programs for stock trading.

Slightly larger institutions would have their internal mainframe systems automatically generate trade orders based on market conditions and send them directly to the exchange.

Because computer programs could execute complex strategies, institutions started engaging in index arbitrage and portfolio insurance.

The so‑called portfolio insurance is a dynamic hedging strategy; when the market falls, the program automatically sells futures to protect the value of the stock portfolio.

Thus, when the market dropped to a certain threshold, a massive number of institutional programs simultaneously triggered sell orders.

At the same time, the index‑arbitrage program was activated; detecting that shorting the index would be profitable, it automatically began shorting.

It can be said that "Black Monday" was entirely a market chain reaction caused by automated trading.

It could also be considered a bug that emerged in early systematic trading.

All institutions and brokerages had only just started using this trading system and were completely unaware of the problem.

Therefore, Merrill Lynch's senior analysts examined many reasons but did not analyze this factor.

However, to be safe, they still chose to quietly follow and set up a small‑scale short position of their own.

In fact, if Chen Mo were willing, he could now dump a large amount of his contracts, actively triggering a market decline, and the crash could erupt early.

But Chen Mo did not do so.

Pre‑positioning and waiting for the crash to occur is the only way to maximize profit.

After leaving the Merrill Lynch building, Chen Mo, with Gangsheng Qiu Di and Ahua, started sightseeing in New York.

Chen Mo held the two women in front as they played, while Ahua cradled a camera to take pictures.

The four's first stop was the World Trade Center Twin Towers.

Shopping is a woman's nature, especially in a world‑renowned commercial building like the World Trade Center.

Gang Sheng and Qiu Di really let loose inside.

They could shop and also take the chance to talk with sales staff, practicing their English, and the two women felt a kind of blissful abandon.

It must be said that a woman's stamina while shopping knows no limit.

After a full day, even Chen Mo felt leg fatigue; Ahua was as if his legs were filled with lead, exhausted like a dead dog, while Gang Sheng and Qiu Di remained full of enthusiasm.

In the end, it was Ahua's self‑pity that finally got the two women to stop.

After dinner at the "World Window" restaurant, the group finally returned to the hotel.

Of course, they took plenty of photos that day.

They snapped many solo shots, duos, trios, and group photos, especially numerous panoramic pictures of the Twin Towers from various outdoor angles.

According to Chen Mo, each time you photograph it, you lose one opportunity; if you don't shoot now, you might never get another chance.

Although Ahua didn't know why Chen Mo said that, when Chen Mo asked him to take a few more shots, he obliged.

It's only a matter of a few rolls of film.

The next day, the group spent another day exploring a different place.

That night, Jimi brought Hengli and Pite to report to Chen Mo.

"Boss, the contracts have all been sold; over the past two days the price dipped slightly, with a final average execution price of 315 points."

"Among them, Merrill Lynch charged a commission of 5.9 million, plus exchange and clearing fees of about $5 per contract, roughly $187,500, which have already been deducted from your account."

"Boss, the 10 million IBM out‑of‑the‑money put options you wanted have also been fully purchased. The transaction fees …"

Chen Mo raised his hand and cut them off: "That's enough, you don't need to tell me that, it's just a few ten‑thousand‑something dollars."

"Your performance these two days has been good; I have no further plans for the next few days, so stay in the trading room and alert me if any major swings occur.

Alright, go rest!"

"Okay, Boss. Good night, Boss."

After they left, Jimi couldn't help but ask: "Mo Ge, is it really true that Meiliguo is about to experience a stock crash?"

When he was in Gangdao, Jimi had learned a lot about stocks from Lu Bin Sun, and these past two days shadowing Hengli and Pite, he also picked up a lot.

He now fully understands what Chen Mo's maneuver means.

Chen Mo looked at Jimi and smiled: "You're right, the crash is indeed about to happen. When it does, we'll truly get rich."

"But I see on TV programs and financial magazines that those experts say the US market is heading into a bull market; right now it's just a technical correction, isn't it?"

"Damn! Can you trust the experts? According to my analysis, the crash will come next week; if you don't believe me, just wait and see."

"And also, once a US crash occurs, it will inevitably affect Hong Kong stocks."

"Right now it's daytime over in Gangdao; go quickly notify the brothers and have them dump any stocks they still hold."

"Especially that old man Lu Bin Sun—I've reminded him many times; remind him again."

Upon hearing that, Jimi became a bit urgent: "I'll go right now!"

Just kidding, he also has a sum of money invested in stocks that hasn't been sold yet; he doesn't want to be trapped.

Shortly after Jimi left, Shen Guodong's call rang in Chen Mo's room.

"Mo Ge, this is Guodong."

"What's up? Is something wrong?"

The moment he received Shen Guodong's call, Chen Mo began to suspect that something had happened.

"It's a bit of a matter, but not a big one. It's something on the film company's side."

"What's going on with the film company?" Chen Mo frowned; what big issue could the film company have that would make Shen Guodong call him.

"First, recently the newspapers on Gangdao have been publishing many negative reviews of our film..."

"That one can be ignored; I arranged it," Chen Mo cut off Shen Guodong.

Shen Guodong hurried to explain: "No, Mo Ge, you misunderstood. A Jie has already told me about the people you arranged; those were done by people you didn't arrange."

"Huh? Others also posted newspaper insults? Does it affect the box office?"

"Seems not. A few days ago the box office dipped, but after the newspaper flame war you arranged started, the box office actually rose instead of falling."

"Today's newspapers did have more people insulting, but the effect seems small; I still see quite a few people buying tickets at the theater entrance."

Chen Mo heard this and felt a surge of pride; my way of promotion is just awesome.

"Since someone arranged to insult our film, let our people praise it. After all it's a quarrel; a real fight is obviously more effective than a fake one."

"And also find out who arranged it; then I'll go thank them."