Chapter 54

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Translated by Heavenly Cat

Read it only at Novelbyu.com & Utoon.net

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Futures and options.

Investing for hedging purposes, or for speculative purposes.

That’s exactly what derivatives are.

Derivatives in particular are also called zero-sum games.

One of the two dies.

That’s why people usually don’t trade alone.

They join hands with someone, move together, devise strategies, then target a specific position and enter operations.

There are tremendously many people who lost their entire fortune to these forces, and who that force is can never be known.

Also, in futures, since they give individuals maximum leverage of 10x, increasing profits are tremendous, but conversely losses are also dizzying.

That’s why sometimes people who wrongly enter futures get accounts stamped with hundreds of millions in minus.

The reason people go to the Han River while investing is usually because of derivatives.

Because of this risk, they recommend doing ETFs rather than directly doing futures or options.

“In the case of oil futures, globally the daily trading volume is currently from hundreds of billions to trillions of won at most. But as you know, oil prices keep only falling. So trading volume has also decreased a lot.”

To do futures in Korea, you must first go through securities firms, and that securities firm purchases volume from CME, the world’s largest futures exchange.

The futures exchange also operates actively 24 hours, but unlike FX, hundreds or thousands of trillions of won don’t move per day.

Especially oil, despite belonging to those with high trading volume, has at most only a few trillion won in daily trading volume.

“So it would be impossible to digest 2 trillion won at once?”

“Yes. If we suddenly release 2 trillion won here, CME will immediately halt trading.”

So if we suddenly try to purchase oil with 2 trillion won at once here, it could give a strong shock to the market, so CME side judges it as a market disruption force and immediately slaps a trading halt.

“So it seems the only way is to buy in portions. With intervals of several days. If we do it this way, we can somehow digest the 2 trillion won volume.”

When thinking of futures, what comes to mind first is leverage.

Usually in the stock market, individuals can get 2x leverage, securities firms are allowed up to 3x. But futures are different.

Individuals can get more than 10x leverage.

Conversely, securities firms?

Securities firms can also get leverage, but when the unit exceeds hundreds of billions, they get rejected.

Naturally there’s no place that approves trillion-unit leverage.

Even with really high credit, from trillion units onward it far exceeds the risk management range.

If they approve trillion-unit leverage and face forced liquidation, even the broker faces high risk of bankruptcy together.

“We’re buying so the price doesn’t break within maximum $40.. But even as we buy purchase volume, the price only keeps falling. So even today alone we purchased at $38.”

“I hear now there aren’t many people trying to buy oil, so ships loaded full with oil are just drifting around aimlessly.”

“Trying to put it in storage, just the storage fees alone are tremendous per day.”

Dig here, dig there, only oil keeps coming out.

If you put oil in storage, much more storage fees come out, so they’d rather load it on ships and just let them drift.

“At this rate, everyone will just do futures trading and few places will actually receive oil, so they’re predicting prices will drop to the $20 range.”

“The research team also analyzed that unless a big war breaks out once, it looks hard to remove this much volume..”

“What’s the possibility of OPEC production cuts?”

OPEC.

An oil-exporting country organization where countries producing oil including Saudi Arabia gathered.

“Talk of production cut possibilities has come up since before. But even if they do cut production, everyone’s viewing that the shock won’t be big.”

“Plus nowadays their member countries are all growling at each other, causing chaos. Most people think even if they want to discuss production cuts, they’re too busy fighting to do it.”

The report I saw last time was in short just a scenario preparing for contingencies.

If there’s this much oil, naturally cutting production to raise prices a bit would be good.

The problem is whether they can even sit at the negotiation table since OPEC member countries are currently at war with each other.

Even if they somehow negotiate, opinion conflicts will obviously occur, and most predict that even if they cut production, the amount will be minimal.

It’s exactly for these reasons that current oil prices keep being in that state.

‘I’m a bit scared.’

Since everyone’s reaction is like this, I also got a bit worried.

If oil prices really hit bottom more like this, only our money placed in futures will fly away for nothing.

Moreover, since money amounting to 2 trillion won is being invested at intervals of several days, the big problem was that we can’t settle positions all at once either.

“…”

But the production cut scenario report I kept beside me was still sparkling and shining brightly.

“Please keep buying. Until all 2 trillion won is spent.”

***

Do you know how much oil Korea uses on average per day?

About 2.5 million barrels.

But now about 13 million barrels of oil were coming over to the port.

Though it’s bunker oil needed for container ships, just counting as oil alone, it was a tremendous amount that all of Korea could easily use for about 5 days.

Pulling all funds at the company, the result of pouring about 600 billion.

“They say if we rent about 5 storage facilities, storage is possible. Currently three places are full, and it’s moving to the remaining two.”

“…”

Listening to the report, President Kim Du-yeong felt complicated.

He doesn’t know what he’s doing now.

Following the rule to unconditionally follow Department Head Jeong’s words regardless of reason, he first pulled all money to spend on buying oil.

But no matter how much he thought, he questioned whether this was right.

A whopping 13 million barrels.

The amount of bunker oil a large container ship uses per day is about 1,500 barrels.

With this alone, they can operate for 24 years.

Even with 10 large container ships, it’s a whopping 2.4 years.

It was truly a tremendous amount of oil.

Especially bunker oil is frequently used for large container ships, and since it has many impurities and poor quality, the price is cheaper than crude oil.

If current crude oil price is $40, it was oil that could be bought at about $35 level.

“Probably we’re the only place buying this much bunker oil, not even regular crude oil, with 600 billion, President.”

“Thanks to that we won’t worry about oil. But the problem is we also don’t have work. At this rate the oil will rot in the warehouse for a long time.”

“Plus prices keep falling in real time.. It’s truly creative loss.”

Right now the remaining funds are minimal, and there’s not even much work, so at this rate it’ll be exactly like Hanjong times. Only debt will keep increasing.

Employees also started having doubts.

No. From the start they were full of suspicion.

No matter how much it’s orders from above, they thought there’s also a problem with President Kim Du-yeong who followed such decisions without a single protest.

“…”

Until quitting time like that, Kim Du-yeong sat in his chair blankly staring at empty space.

What he did since joining the company was only buying bunker oil for several days.

He did nothing else besides that.

He tried to get work, but everything got stolen by China side, so he’s just going to twiddle his thumbs.

In such circumstances, he spent all the money that would’ve kept the company afloat.

The 500 billion obtained from selling bonds, plus the remaining 100 billion at the company, he scraped all of it.

What remains after doing so is only oil.

Exactly why did Jeong Jin-ho, that person give such orders..

“President!”

Then the vice president entered the president’s office with a bang.

“Wh-what’s wrong? Without even knocking.”

“Ah. I’m sorry. But right now the matter is too urgent.”

“What exactly happened?”

“Just now an announcement came from OPEC. They say they’re cutting production to raise current crude oil prices!”

Hearing that, President Kim Du-yeong wasn’t very surprised.

Production cuts, well, they’ve done it a few times before too.

Plus that production cut amount wasn’t big, so it only raised prices a bit.

“This time it’s not that level. OPEC’s position is to raise current crude oil prices to $60.”

“What?”

This was a bit surprising.

No. Very surprising.

“$60!? How much is the price now?”

“It’s been going back and forth between $38-40, but they’re saying they’ll raise it almost 50%.”

“Wait. To reach that level, how much exactly will they reduce production?”

“Everyone’s predicting they’ll reduce at minimum 30%.”

Minimum 30%!

The largest production cut in history.

But the problem is this is the minimum.

“Because of that, as soon as the announcement appeared, crude oil prices are rising crazily now. They already broke through $50.”

“..!”

In the shipping business, crude oil prices account for about 50-60% of costs.

It means the higher oil prices go, the harder shipping business becomes.

So shipping prices also change according to crude oil prices, and customers choose by finding the cheapest place.

But until now, crude oil prices were low.

Then operating costs also get cheaper.

Here China went one step further and presented prices lower than other places to customers.

“But if prices rise to this degree..”

“No matter how much it’s China, they can’t withstand it. This might really go to $60.”

China deliberately lowered prices even taking losses to become number one in the chicken game until now. But the most important crude oil price soars?

This was an unbearable disaster.

“And conversely, what’s overflowing for us now is oil, right?”

President Kim Du-yeong’s head started turning quickly.

“Vice President. Tell all executives to gather now. Even if they left work, tell them to come. Now is the opportunity. Open all lines so we sweep contracts at the cheapest price.”

“A-yes!”

President Kim Du-yeong’s blood boiled after a long time.

With rising dopamine, his head tingled to the point he couldn’t even feel sensations.

He thought he was cornered at the cliff’s edge.

Yet such a great reversal would happen.

They couldn’t even imagine OPEC would make such a crazy decision.

No. No one would’ve predicted it.

Except one person, Jeong Jin-ho.

‘What exactly does that person do?’

How did that man foresee this situation?

Even if he foresaw it, how many people in the world would give orders to burn hundreds of billions to buy oil?

‘This is why he emphasized that rule.’

First rule.

Completely trust Department Head Jeong Jin-ho’s words.

Second rule.

Remember the first rule.

‘I won’t doubt anymore from now on.’

President Kim Du-yeong carved this rule into his heart once more today.

***

“When he became president, he made a sad face saying he’s not doing anything. Now he’s moving busiest in the world.”

“President Kim Du-yeong?”

“Right. Crude oil prices are rising ridiculously. Seems China side that held out to eat all the chicken also eventually raised their hands. Since they absolutely can’t handle the price, they raised it.”

“And conversely we’re the same?”

“No. Rather we raised it a bit. But even so, now our Gwangwoon Shipping transportation price is cheapest. So we’re sweeping all contracts from everywhere now.”

Thanks to that, they say President Kim Du-yeong is only smiling brightly even while busy without time to breathe.

“That gentleman also said he wants to have a meal with you sometime. He said if you hadn’t ordered buying crude oil then, they would’ve closed doors again without escape.”

“You should’ve brought him along.”

“Haha. I told you. He’s the busiest person in the world now. Contracts are pouring in, so they say figuring out how to handle all that is the problem now?”

Shipping companies don’t directly operate ships.

Usually they charter.

In other words, renting ships.

The problem was that as contracts started flocking to our side, the amount was too much for Gwangwoon Shipping to handle alone.

“So it seems he’s thinking of linking with Daegwang Shipping side. We receive contracts and charge fees to Daegwang side. A bit expensively.”

“Will they accept on that side?”

“What choice do they have. Even if expensive, they have to accept. Since Gwangwoon is sweeping work now, if they don’t receive work from us, they also have to close doors.”

Gwangwoon Shipping currently has stored oil exceeding 13 million barrels.

Storage costs will be a bit much.

But if they sweep all that work and keep sending ships, would that be regrettable?

“Probably if utilized well, they’re happy saying they can leave more than 3-5x the investment. Well, if crude oil prices defend well until then.”

Current crude oil prices broke through $50 and are running toward $60 that OPEC set.

Since we invested 600 billion, even if we just eat 3x from there, it becomes an amount close to 2 trillion won.

“They said they’ll fix the minimum price at $60, so probably they’ll keep cutting production for a while to match the amount.”

“Then Gwangwoon Shipping just sits still and makes money?”

“Yes. Actually we’d hope prices rise more.. But if that happens problems multiply, so OPEC side will probably also try to match $60 as much as possible.”

That was a bit regrettable.

Not $60 but trying to raise it to $70 once.. But since so many interests are entangled, actually even $60 was an extreme choice.

Right now isn’t the entire world experiencing all kinds of chaos from sudden oil price increases?

Just looking at shipping business alone shows it.

If China raises white flags and screams, the situation is serious.

Plus our country’s gas stations were also very quickly raising prices high.

“Gas stations now are no joke either. Liter prices are trying to rise to 2,000 won.”

Though prices are rising abnormally due to shock, they’ll gradually return to normal. Before that, we also need to settle positions.

“Haven’t sold all yet?”

“No. When selling timing comes, I’ll slowly release volume from then.”

Since it’s not a place where trillion-unit money can be hit at once like the FX market, we need to do split selling. And the appropriate price we’re thinking of is $60.

“Then profit is almost 1 trillion won.”

“Probably about that much.”

“Whew..”

Hyung-nim shook his head and downed his drink.

Actually from hundred billion units onward, producing high profit rates gradually gets harder.

Because there aren’t many places that can handle such amounts, and FX also has low volatility right now.

“Yet you put in 2 trillion won and produced a profit rate of a whopping 50%..”

We got back the amount we spent on purchasing Gwangwoon Shipping shares.

“What cashback is this, really.”

“Right. Middle East hyung-nims gave us cashback. Haha.”

At my small joke, hyung-nim chuckled and filled my glass.

“I’m really a fortunate person. If not for you, the company wouldn’t have grown this much.”

“I also, well, came this far thanks to hyung-nim picking me up.”

“Even if it wasn’t me, eventually you would’ve done well somehow.”

Suddenly giving compliments, it seemed like he had other things to talk about.

“Hyung-nim. Seeing you keep being serious, what are you trying to say?”

“We must have known each other long. Whenever I say something, you always see through my inner thoughts.”

Hyung-nim cleanly emptied the drink in his glass, then was speechless for quite a while.

“Jin-ho.”

“Yes.”

“I’ve really thought about this for a very long time.”

I smiled and grilled meat.

“What is it?”

“You, want to be president?”

I stopped grilling meat and looked at hyung-nim.

“My seat, you sit in it.”