While 'Run Lola Run' and 'The Butterfly Effect' were still in theatres, Disney announced the very next day that it would be partnering with Daenerys Entertainment for the distribution of 'When Harry Met Sally'.
At Daenerys Entertainment,
Although there was dissatisfaction with Simon's promise of a $6 million minimum commission to Disney, due to the original contract stipulating that Daenerys Entertainment would lead the project's distribution, Dennis O'Brien, head of Handcraft Entertainment, could only grumble.
After several days of negotiations, on May 5th, Daenerys Entertainment officially signed the distribution contract for 'When Harry Met Sally' with Disney.
With the distribution of 'When Harry Met Sally' finalized, Daenerys Entertainment now only needed to focus on completing the production of the three films, and Simon began to shift some of his attention to another one of his plans.
May 6th, Wednesday.
Simon did not leave his apartment in Century Tower this morning.
For the sake of confidentiality, two managers from Lehman Brothers personally came to his residence to handle the futures account opening procedures.
Around 11 o'clock, Jeff Robertson, Senior Vice President at Lehman Brothers, re-checked all the documents and certificates, carefully put some papers into his briefcase, and then stood up, saying to Simon, "Mr. Westeros, for the matters that follow, you can directly contact Noah. Of course, if you need any assistance, you can always call me as well".
Simon politely shook hands with Jeff Robertson, saw him to the door, and then looked at the white man in his thirties who had stayed behind. The man was about Simon's height, with brown hair, a clean face, and was meticulously dressed in a white shirt and black trousers.
This was Noah Scott, the classmate Janette had introduced to Simon. He was currently serving as Vice President at Lehman Brothers' Chicago branch, primarily responsible for commodity futures business.
To sign Simon as a major client, Noah Scott had specifically travelled from Chicago.
The two sat down again on the living room sofa, and Simon looked at the young man opposite him, testing, "Noah, if I'm not mistaken, you and Janette weren't in the same graduating class, were you?"
Noah Scott shook his head, also observing Simon, and said, "Unfortunately, Simon, Janette and I were indeed in the same class".
Simon raised an eyebrow slightly and said, "Then you must be more capable than I imagined".
If he was in the same graduating class as Janette, Noah Scott might only be 27 years old this year. Becoming a Vice President at Lehman Brothers at 27 was somewhat beyond Simon's expectations.
The job hierarchy in investment banking differs from other companies.
In the early days of investment banking, to maintain an equal footing with corporate executives during business negotiations, investment banks began to bestow titles such as Managing Director, Executive Managing Director, Senior Vice President, Vice President, Assistant Vice President, and so on, upon their employees. These titles were all retained later.
Therefore, on Wall Street, slightly larger investment banks typically have several hundred vice presidents.
However, this certainly doesn't mean it's easy to become a Vice President at an established investment bank like Lehman Brothers. For an excellent business school graduate joining an investment bank, it's usually impossible to climb from the lowest analyst position to Assistant Vice President and then to Vice President without seven or eight years of hard work.
Facing Simon's surprise, Noah Scott was quite frank, saying, "Actually, Simon, my father is a senior executive at American Express. Of course, I also have enough confidence to be competent in my current position, and your funds are very safe with me. So, what are you planning to do next?"
Simon vaguely recalled that American Express seemed to have acquired Lehman Brothers a few years ago, though his memory of that detail wasn't very clear. However, Simon also knew that while large investment banks were full of elites, they were also filled with various 'connected' individuals.
Out of trust in Janette, Simon didn't dwell on this point.
However, upon hearing the other party's question, Simon did not intend to fully disclose his plan to Noah Scott. The two had not reached that level of trust, and there were simply too many instances on Wall Street of firms turning on their own clients.
"Noah, $75 million will be deposited into Westeros Company's account this afternoon. Once you return to Chicago, what you need to do is, in the last two days of this week, buy 1,000 September long contracts for the S&P 500 index futures".
Noah Scott nodded slightly and pressed, "And then?"
Simon succinctly replied, "Wait. Wait for my next instruction".
Noah Scott thought for a moment, then probed again, "Simon, you want to go long-term?"
"Perhaps," Simon replied noncommittally, looking at the young man opposite him, and said, "Noah, you need to understand one thing: I don't need investment advice. My request is very simple: I say, you do".
Noah Scott felt Simon's gaze instantly sharpen. After a moment, he shrugged, shifted his posture slightly on the sofa, and said, "Of course, Simon, the customer is king. However, you don't seem to trust me very much".
Simon countered, "If our positions were swapped, would you trust me at our first meeting?"
"If I were 19, perhaps I would" Noah Scott said with a hint of teasing in his voice, but then added, "In that case, Simon, perhaps we don't have much to discuss business-wise. So, can you tell me how you managed to win Janette over? Many of us tried to pursue her back then, but we all failed".
Simon didn't want to discuss too much of his and Janette's private life; he simply shook his head and stood up, saying, "Sorry, Noah, I can't treat you to lunch today. Perhaps there will be another opportunity".
Noah Scott didn't press the issue, stood up, and shook hands with Simon, saying, "I look forward to our trust increasing the next time we meet".
After seeing Noah Scott off, Simon found a recent S&P 500 index chart on the living room coffee table and went to his study.
Standing in front of the large white whiteboard on the study wall, Simon held up the S&P 500 index chart, which was current as of yesterday, and compared it to another S&P 500 trend curve he had drawn on the whiteboard from memory.
To avoid memory interference, Simon had not paid attention to any recent stock index curves until today. But now, the S&P 500 curve in his hand, up to May 6, 1987, largely matched the other curve on the whiteboard before the corresponding time points.
Thus, his memory was clearly not mistaken.
Simon also felt largely at ease. Although his 'butterfly' presence might exist, he didn't believe the S&P 500 index futures market, with its daily trading volume exceeding $1 billion, would be too severely affected.
Based on the information accumulated during this period, Simon discovered that 1987 was entirely the 'wild west' of stock index futures trading. This era was full of opportunities, but also countless traps; it could make one rich overnight, or instantly bankrupt them.
Unlike commodity futures, which had been developing for over a century, the world's first stock index futures appeared in the United States only in 1982, just five years ago.
1982 happened to be the beginning of a new round of bull markets in the United States.
From 1982, the Dow Jones Industrial Average, the most important measure of the US stock market, rose from 800 points to a recent 2300 points. Simon also knew that in the coming months, the Dow Jones would peak above 2700 points.
The booming stock market easily masked the various shortcomings in stock index futures trading.
Anyone with a basic understanding of futures knows that stock index futures have trading rules such as daily price limits, circuit breakers, mark-to-market settlements, and position limits, all designed to protect the market.
However.
In 1987, none of these existed.
The Dow Jones Industrial Average futures had not yet been launched. Taking the currently mainstream S&P 500 index futures as an example, the trading process for stock index futures was actually very simple.
The recent S&P 500 index was around 270 points. Simon remembered the S&P 500 peaking above 330 points by the end of August.
So, taking the S&P 500 index at 300 points as an example:
Every stock index future has a 'contract multiplier.' The later S&P 500 index futures had a 'contract multiplier' of $250, but currently it is $500.
Thus, the actual value of each S&P 500 index futures contract is 'index points' multiplied by 'contract multiplier,' totalling $150,000. However, futures traders only need to pay a 10% margin to buy one contract, which is $15,000.
Subsequently, every 1 point rise or fall in the S&P 500 index means a profit or loss of $500 per contract.
While $500 may not seem like much, if multiplied by 10,000 contracts, a 1-point change in the index would represent a profit or loss of $5 million.
Calculated at a margin of $15,000 per contract, 10,000 contracts would require $150 million in margin. So, on the surface, a $5 million profit or loss still doesn't seem like much.
From 1982 until now, the North American stock market has shown a very stable upward trend, with little violent fluctuation. Because of this relatively calm market, the 'minimum price fluctuation' for S&P 500 index contracts is actually 0.1 points.
Having not experienced any major upheavals, federal regulatory agencies had not imposed various restrictions on the stock index futures market for five years.
No price limits, no circuit breakers, no daily mark-to-market settlement system, no position limits... And so, when the great crash of October 19, 1987, occurred, disaster struck.
In Simon's memory, on October 19th, the S&P 500 index directly gapped down from its previous Friday closing of 281 points to below 200 points.
A drop of 80 points.
What did this mean?
Still calculating with 10,000 contracts.
If someone had mistakenly established 10,000 long contracts at 281 points on October 16th, the total margin would have been approximately $140 million. On October 19th, their loss per contract would be $500 multiplied by 80 points, which is $40,000.
For 10,000 long contracts, with each contract losing $40,000, the total loss would reach $400 million. Relative to the $140 million margin, the loss percentage would be close to 300%.
In fact.
In the 1987 stock market crash, there was indeed such an unlucky fellow who mistakenly bet on a huge amount of long contracts. That person was George Soros, and the later financial magnate lost a staggering $800 million in that single event.
The final result was that the Quantum Fund, whose net assets had just exceeded $3 billion that year, shrunk by more than a quarter in just a few days.
Now.
In the apartment at Century Tower.
Simon looked at the S&P 500 index on the study whiteboard, which was steadily climbing until the end of August, and his fingertips felt a slight tingling sensation due to the plan he was about to implement in the coming months.
In the curve before his eyes.
From 270 points in early May to 330 points at the end of August. A total rise of 60 points, with fluctuations no less severe than a stock market crash. A 60-point gain would mean a profit of $30,000 per long contract. The profit margin would easily exceed 200%.
The volatile month of September.
Avoid it.
October 19th.
From 281 points to 200 points, an 80-point drop, a true stock market crash.
Soros has a famous theory of reflexivity, which simply states that market participants and the market itself are constantly generating unpredictable mutual influences.
Simon had naturally considered that his inclusion as a 'butterfly' might alter the original market trend.
However.
Counting all foreseeable chips, he now only had a little over 100 million dollars.
If he really lost, then he lost, he would just start over.
But, if he won.
In his journey to the top of the pyramid, Simon would climb many steps at once.