Cedric thought for a moment and said,
"However, many institutions in the market should generally have some expectations for the Scottish referendum results, right? Based on the preliminary vote count results from England, it should already be enough to offset the less-than-expected results from Scotland, right?
In other words, even if there is some discrepancy between the vote count results from Scotland and the initial expectations of major institutions.
There won't be any change in the final vote outcome.
Although Salmond has always wanted to promote Scottish independence, he has not shown a clear stance on the inclination of this round's Brexit referendum.
Therefore, I think that for Scotland, which has the greatest uncertainty in the voting results among various institutional expectations.
The difference in the voting results regarding Brexit should not be too large.
Also, judging from the current attitude of the Bank of England and its monetary policy inclination, it is unlikely that the pound exchange rate will face an extreme sharp decline."
Guy nodded slightly and responded,
"From the analysis of current market data, institutional expectations, investor sentiment... and various other factors, the risk of an extreme sharp decline in the pound exchange rate is indeed not high. However, overly consistent expectations are usually difficult to fully materialize in the financial market."
"Oh, there's also an unconfirmed market rumor."
During the discussion among the core figures of the 'Amanda' hedge fund, Bella, a researcher from the Market Information Department, paused and then added,
"I heard that several British financial institutions are secretly increasing their long positions in the pound exchange rate, especially 'Huifeng Bank'. Preliminary estimates suggest that this institution's long position size has reached around 300,000."
"'Huifeng Bank' is a giant among British investment banks. Could it be that the exact referendum results are already out?"
Cedric exclaimed.
Guy thought for a moment and said,
"That's impossible. If the referendum results were truly out, the market trading trend of the pound exchange rate wouldn't be the current volatile pattern; it would have already broken straight towards the bullish direction. However... the widespread long positions taken by a large number of local British financial institutions in the pound exchange rate is indeed worth pondering and paying attention to!"
"Even if the referendum results aren't out, with these local British financial institutions generally increasing their long positions, it's unlikely there will be any surprises in the June 23rd referendum results, right? In fact, from a fundamental perspective, the pound exchange rate at this stage is not high and has full potential for a strong rebound."
Cedric said.
Trader Caroline thought for a moment and suggested,
"Actually, if we're worried about an unexpected outcome from the June 23rd referendum... I think we can use a small portion of our funds to hedge with gold spot."
"Hedging with gold spot?"
Cedric's gaze instantly turned to Caroline.
Caroline noticed Cedric's gaze, nodded, and continued,
"Currently, in the pound exchange rate market, due to changes in exchange trading rules, opening positions is relatively restricted for everyone. This means that whether shorting the pound or going long on the pound, a huge amount of capital is required.
If the certainty is not high enough... The input of huge capital, position risk, and capital holding costs would definitely be unbearable for many investors. This has led to the recent pound exchange rate market exhibiting extremely high volatility and intense fluctuations.
However, the gold spot market is currently not restricted in trading. Under the rules of margin trading, investors can still open standard contract orders with 100x leverage using a relatively low margin.
In other words, if we go long on 10,000 lots of pound exchange rate, we might need to invest 50 million US dollars. But if we go long on 10,000 lots of gold spot, only a maximum of 10 million US dollars would be enough."
"Do you mean... we can simultaneously open long positions in the pound exchange rate and long positions in gold spot for hedging?
If we judge incorrectly, and an unexpected result occurs in the June 23rd referendum, causing the pound exchange rate to move extremely towards the short direction, can the long positions in gold spot help us recover losses if we don't have time to stop loss?
Similarly, when we judge correctly and the pound exchange rate moves extremely towards the long direction, can we also make a profit in the gold spot market by quickly stopping loss on gold spot short positions?"
Cedric said.
Caroline nodded with a smile and said,
"Yes, exactly. This is like adding an insurance policy to our trades in the pound exchange rate market. After all, the gold spot market is not currently the main battlefield for long and short positions, and the number of long and short positions accumulated in its market is far less exaggerated than in the pound exchange rate market.
And with a smaller magnitude of long and short positions, it means that stopping losses won't be as difficult.
In fact... Many institutions are currently making two-way bets, using the gold spot market to carry out hedging trades and control the risks of one-sided betting in the pound exchange rate market."
Guy thought for a moment and responded,
"I think what Caroline said is indeed a viable method. Hedging through the gold spot market can prevent us from over-investing in the pound exchange rate market, and also avoid the awkward situation where we cannot stop loss and close positions if extreme market conditions occur.
Of course, this method is just a precaution. Based on the market information we currently have and the comprehensive analysis of various sources, I still believe that the June 23rd referendum results will not bring any surprises, and at the same time, the Bank of England will continue to intensify its open market operations, thereby pushing the pound exchange rate to continue moving upwards."
"Alright then."
Seeing Guy's agreement, Cedric pondered for a moment and then nodded.
In contrast to the varying degrees of worry among everyone, he was actually very resolute internally, not believing that there would be any surprises in the June 23rd referendum results, nor did he think there was any risk of an extreme sharp drop in the pound exchange rate.
Of course, using the corresponding one-fifth of the funds, and establishing an equivalent long position in gold spot for risk hedging.
In his view, it wouldn't consume much of the fund's reserve capital, and if their judgment was correct, an immediate stop-loss wouldn't erode too much profit from the fund product's massive long positions in the pound exchange rate.
So, after pondering for a while, he also agreed.
Caroline saw that both fund managers had agreed to establish some hedging orders to prevent risks.
A smile instantly appeared on her face.
Then, without waiting for the two leaders' instructions, she conveyed the relevant trading orders to the traders in the trading room.
And with the influence of 'Linghang Capital', a global asset management institution, increasing its long positions in the pound exchange rate while also establishing long positions in gold spot.
The trend of the pound exchange rate.
After severe volatility at the start of the US trading session and a brief pullback,
slowly began to rally towards the range above 1.5300, gradually recovering from the initial dive in the US trading session.
At the same time, everyone seemed to realize the use of gold spot to hedge against the risks in the pound exchange rate market.
When the pound exchange rate fluctuated upwards, gold spot also clearly moved in the opposite direction, forming a clear negative feedback relationship with the pound exchange rate trend.
"The pound exchange rate actually swayed and surged back up."
Seeing that after the intense volatility at the start of the session, bullish forces once again dominated the pound exchange rate market, Enoch, the fund manager in charge of foreign exchange investment at Citibank's Foreign Exchange Investment Trading Department, also on Wall Street, showed a slight look of surprise on his face.
"This indicates that there is actually no shortage of capital in Wall Street going long on the pound exchange rate."
Edmund, head of the Market Research Department at 'Citibank Foreign Exchange Investment Center', said with a smile,
"Many European capital institutions are clamoring that... it's our Wall Street capital shorting the pound exchange rate, which is completely fallacious."
Enoch nodded,
"That is indeed fallacious. According to the preliminary position data of major institutions in the market, the ones holding the most short positions in the market should be capital institutions from the Asia-Pacific region, right?"
Edmund replied,
"To be precise, it should be Chinese capital institutions. Oh... and of course, 'Aberdeen Asset Evolution No. 1' major hedge fund, managed by Frederick, is also an absolute core force for shorting in the pound exchange rate market. It seems that the number of short positions it holds has already exceeded 300,000 lots."
"To be honest, unilaterally shorting the pound exchange rate... this really doesn't seem like Frederick's past investment style.
But then again, last year during the 'Swiss Franc Black Swan' event, this guy, amidst numerous bullish expectations, uniquely and aggressively shorted the Swiss franc exchange rate, betting big that the Swiss National Bank wouldn't easily prop up the Swiss franc's market rate, and instantly made a profit of over 1 billion US dollars, which was truly remarkable."
Enoch said.
"Could it be that... Frederick believes this long-short storm in the pound exchange rate market will also be another 'Swiss Franc Black Swan' event? Analyzing from current fundamental and news conditions, it's unlikely, but not entirely impossible."
Edmund said.
"This guy might actually have such a thought. However, in the current pound exchange rate market, net long positions are already approaching 1 million lots. Under such highly consistent bullish expectations, continuing to go long on the pound exchange rate has become meaningless; it's difficult to achieve excess returns from the market."
Enoch said.
"But heavily shorting also carries extreme risks."
Edmund said.
"Let's continue to observe and see what 'Blackstone Group's' Humphrey will choose. I actually hope that the bulls in the market at this moment can push the shorts even further, driving the bullish expectations before the referendum higher. This way, if we short at a high position, betting on that sliver of 'black swan' opportunity, both profit and investment value for money can reach their peak."
Enoch said.
"It seems Humphrey has a very good private relationship with Frederick. This guy recently suddenly flipped from long to short, it's hard to say he wasn't influenced by Frederick."
Edmund said.
"Hmm, that's possible."
Enoch nodded.
"Oh, right, Chinese capital institutions led by 'Huayin International' are also heavily shorting the pound exchange rate in this round. Furthermore, there's no news of this Chinese capital institution engaging in hedging trades on other foreign exchange products, which is rather strange.
After all, in past history, due to Chinese capital institutions being repeatedly exploited by numerous capitals in the international financial markets, in recent years, 'Chinese capital' has been extremely cautious in its overseas investments, especially in international financial markets. It's rare to see such large-scale capital input for one-directional shorting or long positions."
Edmund said.
"The true reason why 'Huayin International' is heavily shorting the pound exchange rate is unknown to us. But the underlying logic must exist. We don't need to analyze their reasons for shorting or the logic they follow right now. It's more important to start from our own perspective, to choose the timing and select opportunities."
Enoch said.
"That's true."
Edmund nodded, wanting to say something more.
At this moment, market intelligence officer Boris pushed open the trading room door, quickly walked in, and reported to Edmund,
"According to the latest market news, 'Blackstone Group' is still significantly increasing its short positions in the pound exchange rate, and it's heard that the hedge fund trading department managed by Mr. Humphrey has already mobilized tens of billions of US dollars, intending to continue shorting the pound exchange rate."
"My goodness... Is this guy crazy?"
Edmund exclaimed.
Enoch was also somewhat shocked to hear this news; he took a moment to compose himself before saying,
"It seems Humphrey is convinced that there will be an unexpected outcome in the June 23rd referendum. I wonder what specific information he has received. Could it be that the preliminary vote count in Scotland... has yielded an outrageous result?"
Edmund subconsciously replied,
"Impossible, right? I don't think there would be an issue in Scotland."
"It seems this long-short battle for the pound exchange rate is getting more and more exciting."
Enoch smiled and said.
"Should we... follow?"
Edmund asked.
Enoch didn't answer immediately; instead, he paced around the trading room, deep in thought for a while, before finally making up his mind and replying,
"When it's time to be greedy, one must be greedy. Currently, our institution's cost basis for positions is notably influenced by 'Aberdeen Asset', 'Blackstone Group', and the 'Chinese capital' institutions, which are the core shorting forces in the market. Let's follow... Under overly consistent expectations, the probability of success for shorting at this point should be higher than going long."
After speaking, he sharply turned his gaze to the various trading groups in the trading room.
He quickly issued the corresponding trading instructions to continue following the trend and short.
And as his instructions were issued, concurrently with 'Blackstone Group's' aggressive shorting operations, almost instantaneously, the slowly oscillating upward pound exchange rate once again sharply dived, crashing by over 50 points in a rapid movement, falling back below the 1.5300 level, once again forming a comprehensive suppression against the actively bullish forces and various long institutions in the market.
(End of chapter)