Chapter 108: If Won

Taking advantage of the continued box office success of "Run Lola Run" and "The Butterfly Effect," Disney announced the next day that it would embark on a distribution partnership with Daenerys Productions for "When Harry Met Sally."

At Daenerys Productions, although displeased with Simon's promise of a guaranteed $6 million commission to Disney, Dennis O'Brien, head of Handicraft Productions, could only verbally complain due to the initial contract stipulation that Daenerys would lead the project's distribution.

After several days of negotiations, on May 5th, Daenerys Productions officially signed the distribution contract with Disney for "When Harry Met Sally."

With the distribution set, Daenerys Productions needed only to focus on producing three films. Simon began to shift some of his attention to another plan.

On May 6th, a Wednesday, Simon stayed in his Century Tower apartment.

For confidentiality, two managers from Lehman Brothers personally visited him to set up a futures account.

Around 11 AM, Jeff Robertson, Senior Vice President at Lehman Brothers, after rechecking all the procedures and documents, packed them into his briefcase. Standing up, he said to Simon, "Mr. Westeros, from now on, you can directly contact Noah for further matters. Of course, you can also call me anytime if you need assistance."

Simon politely shook hands with Jeff Robertson, escorted him out, and then turned to the thirty-something Caucasian man who had stayed behind. The man, roughly the same height as Simon, had brown hair and a clean-shaven face, dressed meticulously in a white shirt and black trousers.

This was Noah Scott, introduced to Simon by Janet. Currently a vice president at Lehman Brothers' Chicago branch, Noah was responsible for futures brokerage.

To sign Simon as a major client, Noah had made a special trip from Chicago.

The two sat down again in the living room. Simon, eyeing the young man across from him, ventured, "Noah, if I'm not mistaken, you and Janet weren't in the same class, right?"

Noah shook his head, sizing up Simon in return, "Unfortunately, Simon, Janet and I were indeed classmates."

Simon raised an eyebrow, "Then, you must be more capable than I expected."

If he was Janet's classmate, Noah would likely be only 27 years old. Becoming a vice president at Lehman Brothers at such an age was somewhat beyond Simon's expectations.

Investment banks have a unique job hierarchy.

In the early days of investment banking, to maintain an equal footing with corporate executives during negotiations, banks bestowed titles like Managing Director, Executive Director, Senior Vice President, Vice President, and Assistant Vice President on their employees, which have all been retained.

In Wall Street, larger investment banks typically have hundreds of vice presidents.

However, this doesn't mean it's easy to become a vice president at an established investment bank like Lehman Brothers. Normally, it would take a bright business school graduate about seven to eight years to progress from an entry-level analyst to an Assistant Vice President and then to a Vice President.

Faced with Simon's surprise, Noah Scott remained composed, "Actually, Simon, my father is a senior executive at American Express. Of course, I'm also confident in my abilities to handle this position effectively. You can rest assured that your funds are safe with me. So, what are your plans?"

Simon vaguely remembered that American Express had acquired Lehman Brothers a few years ago, though his memory of this was not detailed. He knew well that large investment banks were full of elites but also fraught with nepotism.

Trusting Janet, Simon did not dwell on this point.

However, when Noah asked about his plans, Simon was not ready to divulge his strategy. The two hadn't established that level of trust yet; Wall Street was too full of tales of brokers stabbing their clients in the back.

"Noah, $75 million will be deposited into Westeros Corporation's account this afternoon. Once you're back in Chicago, what I need you to do is to purchase 1,000 September long contracts of the S&P 500 index futures in the last two days of this week."

Noah nodded slightly, asking, "And then?"

Simon responded tersely, "Wait. Wait for my next instruction."

Noah pondered briefly, then probed, "Simon, are you planning to go long?"

"Perhaps," Simon replied noncommittally, looking at the young man, "Noah, understand this—I do not need investment advice. My requirement is simple: I say, you do."

Feeling the sharpness in Simon's gaze, Noah shrugged after a moment and shifted in his seat, "Of course, Simon, the customer is king. However, it seems you don't trust me much."

Simon retorted, "If our positions were reversed, would you trust me on our first meeting?"

"If I were 19 again, perhaps I would," Noah said with a hint of

 jest before adding seriously, "Since that's the case, Simon, it seems we don't have much business to discuss. But could you tell me how you managed to win over Janet? Many of us tried and all failed."

Not wanting to delve into his personal life with Janet, Simon shook his head and stood up, "Sorry, Noah, I can't invite you to lunch today, but perhaps another time."

Noah didn't press further, standing and shaking hands with Simon, "I look forward to building more trust between us at our next meeting."

After seeing Noah out, Simon picked up an S&P 500 trend chart from the coffee table in the living room and walked into his study.

Standing before the large white board in his study, Simon held up the S&P 500 chart up to yesterday and compared it with another chart drawn from memory on the white board.

To avoid any interference with his memory, Simon had not followed recent stock index trends until today. Now, the S&P 500 curve he held, detailing trends up to May 6th, 1987, matched the one on the board up to the same date.

His memory, then, was accurate.

Simon felt somewhat relieved. Despite his influence as a 'butterfly,' he didn't believe he could seriously disrupt the S&P 500 futures market, which handled over a billion dollars in daily transactions.

From his accumulated data, Simon knew that 1987 was a 'wild era' for stock index futures trading, filled with opportunities and traps alike. It could make fortunes overnight or lead to rapid ruin.

Unlike commodity futures, which had been developed over more than a century, the world's first stock index future had only been introduced in the United States five years ago, in 1982.

1982 marked the start of a new bull market in the U.S.

From then, the Dow Jones Industrial Average climbed from 800 points to a recent high of 2300 points, and Simon knew it would soon reach over 2700 points.

The flourishing stock market easily concealed the many flaws in stock index futures trading.

People with even a basic understanding of futures knew that stock index futures came with daily price limits, circuit breakers, no-debt settlements, and position limits to protect the market.

However.

In 1987, none of these were in place.

There was no limit rule, no circuit breaker, no no-debt daily settlement, no position limit...

Then came the great crash on October 19, 1987.

Simon remembered that on that day, the S&P 500 had plummeted from the previous Friday's close of 281 points to below 200 points at the opening.

An 80-point drop.

What did that mean?

Using 10,000 contracts as an example.

If someone had mistakenly established 10,000 long contracts at 281 points on October 16, the total margin would be about $140 million. On October 19, each contract would lose $40,000 (500 dollars x 80 points), totaling a loss of $400 million. Against the $140 million margin, this represented a loss of nearly 300%.

Indeed.

During the 1987 crash, there was such an unfortunate person who bet heavily on long contracts—George Soros, the later financial mogul, lost $800 million in this debacle.

As a result, his Quantum Fund, which had just surpassed a net worth of $3 billion, shrunk by more than a quarter in just a few days.

Now.

In his Century Tower apartment.

Simon looked at the whiteboard chart showing the S&P 500 index climbing from 270 points in early May to 330 points by the end of August. This 60-point rise was as significant as a market crash, with each long contract potentially earning $30,000—a profit margin of over 200%.

September's volatility.

To be avoided.

October 19.

From 281 points to 200 points, an 80-point drop, the real crash.

Soros famously theorized about reflexivity, suggesting that market participants and the market itself constantly influence each other unpredictably.

Simon had considered how his 'butterfly' effect might alter the original market trajectory.

Yet.

Even with all foreseeable assets, he now had just over $100 million.

If he lost, he would lose.

And start over.

But.

If he won.

In his journey to the pinnacle of the financial pyramid, Simon would skip many steps in one giant leap.