Chapter 789 Put Option
Xu Liang shook his head, "It's too early now. Although the U.S. housing market looks riddled with holes and crumbling on the surface, it is now like a car running at full speed with a full tank of gas.
Even if it explodes, the strong inertia will make it slide far before it actually explodes.
Although we will reap some profits if we do it now. But he can only drink some soup and not eat any fat."
Everyone is convinced by his investment ability and long-term vision.
So no one questioned his decision.
Xu Liang knows better than anyone else when the subprime crisis really broke out.
It really started in 2007, and reached its peak in September 2008 with the collapse of Lehman.
So, they still have a long time to prepare.
“How much money did we make from subprime mortgages this time?”
Hanhua is not the only one who buys and sells 3B-rated subprime mortgages. Hongyan is also involved, but not many of them participate, and it is nowhere near as big as Hanhua.
But unlike Hanhua, the money Hongyan earns does not need to be distributed as dividends to investors.
“From October last year to now, Hongyan has purchased a total of 11.8 billion 3B-rated subprime bonds. After deducting the investment bank’s share and capital gains tax, Hongyan has gained US$5.49 billion.”
Among Hongyan’s 3B-rated subprime loans, only one-third are truly 3B-rated, and the rest are 2B and B-rated.
The costs of the latter two parts are relatively higher.
"Not bad."
Xu Liang nodded with satisfaction.
Although Hongyan’s benefits are far less than those of Hanhua, they can directly wipe out most of Delong’s debts.
“What about the guaranteed debentures?” Xu Liang asked.
“At present, through Capital Today, Thiel Fund and other channels, we have purchased approximately US$8.9 billion in secured debentures from 31 companies, including Lehman Brothers, Merrill Lynch, General Motors, Bear Stearns, etc.
If everything goes well, $18 billion could be purchased this year. "Xia Changsheng said.
"Yes, buy as many as possible. If there are not enough people, add more people. "
After agreeing, Xia Changsheng continued.
"Mr. Xu, if you just buy guaranteed debentures, talking to the insurance company will consume a lot of time, and it is difficult to get it in a short time. Expand the entire asset pool within.
So, can we buy put options on these companies through investment banks? ”
Put options, also known as "put options", are the symmetry of call options and are one of the types of options trading.
After the customer purchases a put option, he or she has the right to sell a certain securities to the put option seller at the price and quantity specified in the contract within a specified date or period.
Generally speaking, people are willing to buy put options only when the securities market has a downward trend.
Because during the validity period of the put option, only when the security price drops to a certain level can you make a profit by buying and exercising the option.
For example.
A customer bought a put option on a certain stock, which is valid for 2 months. The agreed price per share is 100 yuan, the quantity is 100 shares, and the option fee is 10 yuan per share.
In these 2 months, if the stock price drops to 50 yuan per share, the customer exercises the option to sell the stock.
At this time, the difference between the stock price per share and the agreed price is 50 yuan. After deducting the option fee of 10 yuan, the profit per share is 40 yuan (not counting broker commissions and other expenses for the time being).
100 shares can make a profit of 4,000 yuan.
In addition, since options are transferable to the buyer.
Therefore, if the stock market is bearish and the premium for selling options rises, the customer can sell the options directly.
In this way, he not only earned the difference in option premiums, but also transferred the risk of a sudden rebound in the stock market.
But if the stock is on the market, it has maintained a level of 100 yuan per share during these 2 months.
It did not fall, and even gradually recovered.
At this time, when the customer exercises the option, sells the stock or transfers the option, not only will it be unprofitable, but he will also lose the option premium.
Therefore, selling options is generally only used when the market for a security is bearish.
It is Lao Ba who makes the most of put/call options.
Lao Ba is often regarded as a conservative value investor in people's minds. He has long been fond of blue-chip stocks and has publicly called financial derivatives weapons of mass financial destruction.
But in fact, he himself is a die-hard put option player. He has used the method of selling put options many times to successfully complete asset allocation at high-quality prices.
It is undoubtedly an old coin with a modest mouth and an upright body!
His most famous example is Coca-Cola.
Everyone who knows Lao Ba knows that he is a long-time fan of Coca-Cola.
It is said that one should have a cup every day.
It is a miracle that I have not had diabetes for so many years.
In April 1993, Buffett sold 3 million put option contracts on Coca-Cola Company stock at a price of $1.50 per option.
The options have an exercise date of December 1993 and a strike price of $35.
Coca-Cola's stock price was about $40 at the time.
After that, he felt it was enough and sold another 2 million put option contracts.
In this way, by selling put options, Buffett received a total of US$7.5 million in cash.
If the stock price is higher than $35 on December 17, then Buffett will be safe with the option premiums.
If the price of Coca-Cola is below $35, then he must buy Coca-Cola at a price of $33.50 ($35-$1.5 option income).
Lao Ba is indeed Lao Ba. He has not drank Coca-Cola in vain for so many years.
Coca-Cola’s stock price skyrocketed.
Berkshire Hathaway made a fortune in option premiums for nothing.
So, if anyone says that Buffett is a staunch value investor in the future, they can take turns slapping him in the face.
This cunning old guy is also a seasoned speculator.
“Now is not the time.”
Xu Liang thought about it briefly and rejected Xia Changsheng’s suggestion.
The reason is simple.
Too much money was spent.
The insurance premium rate for secured debentures for triple-A corporate bonds is only 20 basis points, or 0.2%. The insurance premium rate for secured debentures for Class A corporate bonds is only 50 basis points.
The insurance rate for the worst 3B-rated corporate bonds is 200 basis points.
But the premium for the put option is 150 basis points.
In other words, it is the same asset pool of 30 billion. If it is all composed of AAA corporate bonds, then Hongyan only needs to pay an insurance premium of 60 million US dollars per year.
If converted into put options, it would become US$450 million.
It’s only 2005, and there are still two years left before 2007.
Xu Liang didn’t want to spend nearly 1 billion US dollars in vain.
“There is no rush for the put option, let’s get the guaranteed debentures first.” Xu Liang said directly.
It’s not too late to buy put options next year.
After hearing what he said, no one objected.
"Lao Qiu, have you bought all the legal person shares and tradable shares of Zhongyan Co., Ltd., Shancheng Industrial Co., Ltd., Tianshan Building Materials and Tianshan Co., Ltd.?"
"They have all been bought, and the overall price is 530 million. Huaxia coins, plus debt, the total is 2.49 billion Huaxia coins," Qiu Youren said quickly.
If Xu Liang wants these companies to integrate according to his own requirements, he must remove all constraints.
The easiest way is to kick out other shareholders.
The process has certainly not been smooth sailing.
After all, he is the third richest man in the world, and there are many people who want to take advantage of it.
But Xu Liang doesn’t like them either. Don’t you want to make a profit?
Very good.
I am the major shareholder and I will inject capital. If you don’t want your equity to be diluted by me, you must inject capital accordingly.
Also, the company still has a lot of debt to repay.
It doesn’t make sense for me to pay it back myself, right?
What?
You said I promised to the higher-ups to repay all Delong’s debts?
Yes, that’s right.
But I didn't say that I am responsible for the debts of all Delong's assets.
I will exchange as much stock as I hold, and you will pay back the rest.
In addition, the price he gave was also fair.
So other investors basically cashed out and left.
After Xu Liang nodded, "Of the four companies, Tianshan Building Materials merged with Tianshan Co., Ltd. according to the original plan. I have selected the CEO candidate in the past two days and sent the information to you.
You asked the due diligence team to cooperate with them in rectifying the company.
Also, according to the original plan, people from Hongyan must be responsible for finance, supervision and security. ”
The CEO can select outstanding people from various companies. After all, they have worked within the company for many years, are familiar with the inside situation, and are easy to implement reforms.
If they are replaced by outsiders, just research will be enough. It will take several months.
When embarking on reform, it may not be able to directly address the company's pain points.
But the key financial matters must not be left to the company's elders.
Otherwise they will work together, and Xu Liang will suffer the loss.
Supervision and security are based on the same considerations.
"Okay, Mr. Xu."
"Send me a copy of BYD's latest information." Xu Liang said.
"Okay."
After the video conference, Lu Hui took the faxed information about BYD and placed it in front of Xu Liang.
When we talk about BYAT, we must first talk about its soul figure - Lao Wang.
Lao Wang is born in the 1960s. There are 8 brothers and sisters in his family. He is the seventh and has a younger sister.
With a large population, eating becomes a problem.
The king's father is a carpenter with excellent skills. With his skillful hands, he can barely support his family.
But when the house leaked, it rained all night, and the hemp rope was broken at the thinnest places. When Wang Chuanfu was about to finish junior high school, his parents passed away one after another.
It is said that the eldest sister-in-law is like the mother, and the eldest brother is like the father.
My brother and sister-in-law supported Lao Wang’s family and saved money to support him through college and a master’s degree.
After graduating with a master's degree, Lao Wang's wife of many years became a mother-in-law.
He successfully entered a research institute and made three consecutive jumps in the workplace.
He became the director at the age of 26, and became the general manager of Pengcheng Company under the institute at the age of 27.
It can be said that the spring breeze is proud.
If it were an ordinary person, it would probably last a lifetime.
But who is Lao Wang?
That's the man who poops in the latrine with his face facing outward.
There is a restless heart in my belly.
After working for many years and understanding the sales, assembly and other aspects of the battery industry, Lao Wang decided to start a business.
Starting a business requires a huge amount of capital, and my brother and sister-in-law, who have not studied much and have little money in their pockets, will definitely not be able to afford it.
What to do?
Lao Wang changed his mind and thought of his wealthy cousin Lu Xiangyang who had successfully started his own business.
When Lao Lu was 31 years old, he quit his bank job that was envied by countless people and came to Yangcheng to start a business.
With many years of experience and keen sense of smell, Lu Xiangyang made his first pot of gold in the trading industry and made his fortune.
(End of this chapter)