Chapter 834: The Game of Capital

"Aluminum futures rose a cumulative 1.9 cents last week, with a floating profit of 475 yuan per lot. We hold 6,500 lots, with a floating profit of 3,087,500 dollars last week...'

In the US futures market, a standard lot of copper and aluminium futures is 25,000 pounds, and the quotation rule is cents per pound, with a minimum fluctuation unit of 0.05 cents/pound and a daily limit of 20 cents/pound.

One US dollar is equivalent to 100 cents.

It may seem that the daily limit of 20 cents/lb is very small, but if you look at the opening prices on the New York Mercantile Exchange this morning, the price of high-grade copper futures is 0.5890 US dollars/lb, and the price of aluminium futures is 1.2125 US dollars/lb.

If the daily limit can be reached every day, the price of high-grade copper futures can double in three days, and the price of aluminium futures will double in about six days.

If we consider that the futures market price has a guiding effect on the spot price, if the futures price skyrockets, it will push up the spot price. If the price does not fall over time, the impact will increase, and when that happens, the spot price will rise, and all the factories that need copper and aluminium will suffer.

Therefore, under normal circumstances, it is difficult for metals such as copper and aluminium, which are used in large-scale industries, to reach the limit.

After everyone present had reviewed last week's investment situation, Song Yang said to the group, 'We have all seen the situation. What are your thoughts?'

Xue He spoke first: 'Based on the market situation over the past two months, last week's high-grade copper futures and aluminium futures rose rapidly, and the trading frequency rose by more than 20%. The reasons for the rise have been analysed. There is news from a US southern peer company that copper production in the second quarter will fall by 4.5%, and that the Peruvian copper company's copper production in the second quarter will fall by 5.2%. Some media predict that the global supply of copper will shrink and copper prices will rise further.

'The situation is similar for aluminium.'

'Our information was much later, so now there is already more capital speculating in high-grade copper futures and aluminium futures.'

'Currently, we hold US$117.8 million worth of high-grade copper futures and US$197.03 million worth of aluminium futures.'

'The boss once told us that in the coming year, high-grade copper futures and aluminium futures are on an upward trend. After several months of verification, the boss's guidance has been fulfilled. I personally suggest that there is no need to hesitate any longer and that we can invest heavily in high-grade copper futures and aluminium futures.'

After Xue He finished speaking, Ma Kai also stood up and agreed, 'I agree with Xue He's analysis. Since we first entered the advanced copper futures and aluminium futures markets, our total floating profit has already exceeded 25 million US dollars. It has been several months since the beginning of the year when gold futures and silver futures plummeted, passed, and the capital has recovered. It has just been waiting and watching. Now that the price of copper and aluminium is about to rise, the capital that has been waiting and watching will enter the market again. In the field of rare metal futures, advanced copper futures and aluminium futures are the most suitable incubators.'

Immediately afterwards, Wang Gang, Li De and others, as well as several elites recruited by the Milky Way Fund after taking root in New York, also expressed their opinions one after the other. Although some people had different opinions, the minority obeyed the majority, and in the end it was decided to follow up on a large scale.

No wonder they were so surprised. The Philipp Brothers were really too powerful. Not only did they speculate on futures, they also used their connections to say hello to mining companies and get the media to spread the news, making it seem very real.

With careful planning, it was impossible to defend against it, and it was inevitable that Song Yang and Xue He would fall prey to it.

...

After the meeting, Song Yang called Xia Yu for instructions. After understanding the situation, Xia Yu didn't pay much attention to it and directly approved Song Yang's plan.

After getting the approval, Song Yang and the others were like people on amphetamines, each one ready to go. Subsequently, large sums of money poured into the New York Mercantile Exchange.

Song Yang and the others frequently opened and closed positions, all of which fell into the eyes of those who were paying attention.

The rare metals investment department of Philipp Brothers.

Albert Raphael, the general manager, walked around the trading desk and received reports from Harun Drayden and Sean Andrew one after the other. After listening, the corner of his mouth could not help but rise.

'Very good, the big fish has taken the bait!'

Upon hearing this, Harun Drayden, the senior copper futures department manager, and Sean Andrew, the aluminium futures department manager, both laughed.

'Yes, boss, it seems that the Galaxy Fund has made up its mind. It's happening faster than we expected. They're not slow at all!'

'So shall we implement the next step ahead of schedule?'

Albert Raphael shook his head and said, 'No, we need to be more patient. In the next few days, continue to drive up the price, leaving us more room to short, and continue to deliver some of the goods.'

'Of course, there are too many smart people on Wall Street. Our plan is not complicated, so it must be implemented as soon as possible, otherwise we will be the ones to suffer.'

'If the plan goes well, we will officially place a short order on Thursday.'

'Okay boss~'

'Then give them some more feed to make them fatter, hehe.'

After saying that, Harlan Drayden and Sean Andrew immediately went downstairs to make arrangements.

In the following days, the prices of senior copper futures and aluminium futures on the New York Mercantile Exchange continued to rise.

Not only that, but the related supporting measures were also in place. Not only did Song Yang and the others believe it, but other capital and retail investors also believed it, and large sums of money poured into senior copper futures and aluminium futures, further pushing up the prices.

Song Yang and the others were not to be underestimated. Once they had made up their minds, in just three days, they had doubled their total investment.

And they had just made a profit of nearly ten million US dollars, which further proved their analysis.

On Thursday, at the order of Albert Raphael, they began to use the Phillip Brothers' subsidiary, Little Horseshoe, to place short orders to sell contracts. At first, they were very slow and cautious, placing short orders of ten to twenty contracts at a time. Once they were thrown into the heated market, they were all sold out without a trace.

Soon after, the number of short orders gradually increased, and they were all gobbled up by the surging bulls.

Before they knew it, Galaxy Fund had become a major bull in the high-grade copper and aluminium futures markets.

At first, Song Yang and Xue He didn't feel anything was wrong.

After all, the futures market was different from the stock market. Short selling was very common in the futures market, and it was much simpler than short selling in the stock market.

In the stock market, if you want to short sell, you must first borrow stocks from a gambling partner, then sell the stocks, and finally buy them back at a low price and return them to the gambling partner.

In this way, the stock market is like a gambling table, and the two sides of the gamble are clearly defined.

However, the futures market is different. The entire futures market is like an oversized gambling table, where gamblers can buy big or buy small. At the beginning, there is no clear opponent, or the opponent is too broad, divided into long and short positions.

Longs believe that the price of futures contracts will rise, so they keep building positions and buying contracts.

On the contrary, shorts believe that the price of futures contracts will fall, so they sell the contracts they hold.

And unlike the stock market, short sellers can 'create something out of nothing' to sell short.

What does it mean to 'create something out of nothing'?

That is, if you don't have any futures contracts yourself, but you want to make money by selling short, what do you do?

Then you 'borrow' from the exchange, sell the futures contracts after borrowing them, and then wait until the price drops before buying them back and returning them to the exchange.

Although you borrow the futures contract from the exchange, you are actually not making money from the exchange, but from the long side. The exchange is just a platform.

But what if you fail to short or long?

At this time, the margin placed with the exchange will be used up, and the amount of margin varies.

For example, on a certain exchange for a certain product, when the open interest of a single-month contract is below 200,000 lots (long and short combined), the margin is 5%; when it is between 200,000 and 300,000 lots, the margin is 8%; when it is between 300,000 is 10%, 400,000 to 500,000 is 15%, 500,000 to 600,000 is 20%, and so on.

In theory, as long as the margin is sufficient, you can open an unlimited number of positions.

After all is said and done, the futures market is a more pure capital game than the stock market, and it places great emphasis on the hard power of short and long positions.

It's like a seesaw, and it all depends on who weighs more!

Of course, apart from the two sides of the seesaw trying to gain weight, there are also uncontrollable external factors that can affect the outcome.

In the futures market, strength and luck are equally important!

It's Monday again in the blink of an eye.

It's only been seven days, and it's also Monday.

However, Song Yang and the others are not as relaxed as they were last week.

The situation with the New York Mercantile Exchange's copper and aluminium futures seems to be getting worse.