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Started By
Message
Trading Places: Need Clarification
Posted on 1/9/14 at 10:22 am
Posted on 1/9/14 at 10:22 am
Okay, I don't know much about stock trading, so the end has always confused me a little. Please tell me if I have this right.
The Dukes bought the crop report from Beeks so they would know the outcome on FCO harvest. The fake report stated the crops were affected by the winter. The plan was to buy FCO futures up until the crop report came out, knowing it would be bad, and the sell as the price went up on the perceived shortage, right?
Now, Valentine and Winthorpe gave the Dukes the fake report, knowing it was bogus. They bought a buttload of futures at the opening price, watched the Dukes drive the price up, then started the selling rally after the report by selling at the higher price, driving the price down. Once it was far lower than what they started with, they bought again as the price went lower and lower.
So, it ended up that V&W doubled their money and then had a bunch of FCO futures to sell to companies, and the Dukes bought a bunch of FCO futures at double the price which they would never be able to recoup the losses on. Is that correct?
The Dukes bought the crop report from Beeks so they would know the outcome on FCO harvest. The fake report stated the crops were affected by the winter. The plan was to buy FCO futures up until the crop report came out, knowing it would be bad, and the sell as the price went up on the perceived shortage, right?
Now, Valentine and Winthorpe gave the Dukes the fake report, knowing it was bogus. They bought a buttload of futures at the opening price, watched the Dukes drive the price up, then started the selling rally after the report by selling at the higher price, driving the price down. Once it was far lower than what they started with, they bought again as the price went lower and lower.
So, it ended up that V&W doubled their money and then had a bunch of FCO futures to sell to companies, and the Dukes bought a bunch of FCO futures at double the price which they would never be able to recoup the losses on. Is that correct?
5
Posted on 1/9/14 at 10:26 am to elprez00
Jamie lee..... 
Posted on 1/9/14 at 10:30 am to elprez00
I think you missed some points. Here's how I understand it.
-crop report fake, says winter had big effect on crops
-dukes start buying frenzy trying to corner the market, know they price will skyrocket when the report is released (so they think)
-valentine and winthorpe sell futures (that they don't have btw, you can do that). They sell a ton and the price goes way up and they rake it in.
-real report is released and price plummets. Now they have to BUY because they don't actually own any contracts to sell in the first place. So they buy back every future they sold and net the difference... which is huge.
So they walk away with a boatload of cash and didn't actually have to any physical product, nothing actually changed hands, which I find amazing. Money has only the value we assign it and the value they had was fabricated and made in 20 minutes haha.
-crop report fake, says winter had big effect on crops
-dukes start buying frenzy trying to corner the market, know they price will skyrocket when the report is released (so they think)
-valentine and winthorpe sell futures (that they don't have btw, you can do that). They sell a ton and the price goes way up and they rake it in.
-real report is released and price plummets. Now they have to BUY because they don't actually own any contracts to sell in the first place. So they buy back every future they sold and net the difference... which is huge.
So they walk away with a boatload of cash and didn't actually have to any physical product, nothing actually changed hands, which I find amazing. Money has only the value we assign it and the value they had was fabricated and made in 20 minutes haha.
Posted on 1/9/14 at 10:53 am to elprez00
quote:
So, it ended up that V&W doubled their money and then had a bunch of FCO futures to sell to companies, and the Dukes bought a bunch of FCO futures at double the price which they would never be able to recoup the losses on. Is that correct?
Yes - well not technically true - they sold futures (short) at a high price, then bought them back at a low price, but the effect on the Dukes was the same - they had to buy high (long) and sell low.
quote:
I don't know much about stock trading
This was commodity futures trading - and simplified to a degree for the viewing audience, but you have the essentials.
This post was edited on 1/9/14 at 10:55 am
Posted on 1/9/14 at 11:13 am to elprez00
It was the Dukes, it was the Dukes!
Yeah, Coleman, I think I will .... retire.
Yeah, Coleman, I think I will .... retire.
Posted on 1/9/14 at 11:15 am to HerbEaverstinks
The only part I understood was, "Turn those machines back on!"
Posted on 1/9/14 at 12:24 pm to elprez00
quote:
So, it ended up that V&W doubled their money
I think they far more than doubled their money. They short sold at first, presumably on margin, and then bought back what they originally sold at about 1/5 the originally selling price. I have never short sold on margin so I do not know how much you can leverage, but if they only needed, say, 10% in cash for the amount they short sold, then they made a profit of 800% after buying back the stock they short sold.
i.e., they possibly octupled their money.
This post was edited on 1/9/14 at 12:26 pm
Posted on 1/9/14 at 1:59 pm to LeonPhelps
My question is...why in the hell was the trading only open for about 10 minutes?
Posted on 1/9/14 at 2:07 pm to SDTiger15
The exchange had been open for a while. The crop report was televised near closing.
Posted on 1/9/14 at 2:12 pm to THRILLHO
Posted on 1/9/14 at 3:08 pm to iggle
quote:
-valentine and winthorpe sell futures (that they don't have btw, you can do that).
Ah ha. This is the part I always missed. Them buying them back was fulfilling the obligations they sold. So they were selling at a ridiculously high price, then fulfilling those sales at the absurdly low price.
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