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CH111 | GSI
🕑 Added 2025-02-07 03:40:00 +0000 UTCAs both Landon & Andrew exchanged bewildered glances, Seok-won sat calmly in his seat.
Then, Andrew asked in a firm voice,
“You're not planning to attack the Bank of Japan like George Soros did, are you?”
At the shocking question, Landon swallowed dryly and looked at him with a tense expression.
Although its status had recently declined significantly due to the bursting of the economic bubble, the Bank of Japan still held influence and position on par with the Bank of England, making such a concern understandable.
No matter how much Eldorado Fund had grown over the past two years by hitting jackpot after jackpot, the Bank of Japan was still too formidable an opponent to take on.
As tension filled the room, Seok-won replied leisurely,
"Just as George Soros is known as the man who brought down the Bank of England, achieving a feat that stuns the world at least once in a lifetime isn’t such a bad thing, is it?"
“!”
Realizing that he might actually be planning something reckless, Landon and Andrew felt their hearts drop.
They knew Seok-won was incredibly capable, but going up against the Bank of Japan—of all places—was sheer madness.
Just as they were about to step in to stop him, Seok-won spoke first.
“But unlike the Bank of England, which was an aging lion, the Bank of Japan is still brimming with strength. I'm not foolish enough to charge in recklessly on my own.”
Indeed, unlike the Bank of England, which had been a shadow of its former glory, the Bank of Japan—though affected by the economic bubble’s collapse—was still at the early stages of a prolonged recession and boasted the world's largest foreign exchange reserves, making it a formidable institution.
Both Landon and Andrew, who had been growing increasingly anxious, finally let out sighs of relief, reassured that Seok-won wasn’t acting out of overconfidence.
Seeing their reaction, Seok-won put on a mock-hurt expression and said,
"What’s with that reaction? Are you saying that George Soros could do it, but I can’t?"
“N-No, of course not,” Landon quickly waved his hands in denial.
"Not at all. Given everything you've accomplished so far, there's no reason to say you're any less capable than George Soros."
Andrew nodded fervently, echoing his support for Seok-won.
Seok-won, sensing an opportunity for mischief, let out a thoughtful hum and casually floated an idea.
"Then... should we really take on the Bank of Japan?"
Just as they were beginning to relax, both stiffened in horror at his words.
“Please, Boss, let’s not,” Andrew pleaded.
"It’s not that we doubt your abilities, but we're already in a profitable position. There's no need to take unnecessary risks."
Watching them break into a cold sweat and desperately try to dissuade him, Seok-won chuckled and burst into laughter.
“I was just messing with you. Relax.”
“Haa…”
Landon let out a long sigh, looking as if he had just narrowly escaped death.
"I really thought you were planning to go to war against the Bank of Japan. You nearly gave me a heart attack."
"I think I just lost a year of my life," Andrew added.
Even the usually composed Andrew looked visibly pale after the brief but intense conversation.
"But you know…"
"Huh?"
As both looked at Seok-won, wondering what he was about to say this time, he slightly narrowed his eyes and responded,
"I said I wouldn’t make the first move—but I never said I wouldn’t take advantage of the situation."
"What…?"
"What do you mean by that?"
As the two men stared at him in confusion, Seok-won wiped the smile off his face and spoke seriously.
"George Soros will be going up against the Bank of Japan soon."
"…!"
The unexpected revelation left both men speechless, their eyes widening in shock.
"If, as expected, the exchange rate stalls at around 95 yen per dollar and fails to rise any further, he will make his move to push the yen higher."
Andrew, trying to calm his surprise, responded skeptically.
"But as far as I know, George Soros's Quantum Fund has been betting on a strong dollar—selling yen and buying dollars in massive quantities. Why would he sabotage his own position?"
Landon nodded in agreement.
"Exactly. If the yen strengthens, he would take a loss. Shouldn’t he be doing the opposite and trying to push the price down instead?"
Although they didn’t say it outright, both of them clearly thought Seok-won was mistaken this time.
Not missing their underlying skepticism, Seok-won leaned back against the sofa and said,
"What if George Soros doesn’t lose money when the yen strengthens—but actually stands to make even more?"
"That’s ridiculous…"
"Impossible. How could something like that even happen?"
Landon and Andrew each reacted differently, but both were equally unconvinced.
Seok-won took a slow sip of his coffee, then set the cup down before meeting their gazes.
"You've heard of a knockout option, haven’t you?"
"What’s that?"
Landon tilted his head in confusion at the unfamiliar term, while Andrew's eyes widened in realization as a thought flashed through his mind like lightning.
"A knockout option! My God, I completely overlooked that. What a fool I’ve been!"
Landon, sitting across from him, frowned.
"Don't just keep it to yourself. Explain it to the rest of us."
Andrew let out a sigh of astonishment before turning to Landon, his face flushed with excitement.
"You know that Quantum Fund—George Soros, to be exact—has been betting on a long dollar and short yen position, right?"
"Yeah, that’s common knowledge on Wall Street."
"Exactly. But while he was selling yen and buying dollars, he also sold a very particular type of derivative to Japanese financial institutions and corporations."
"And that’s the knockout option?"
"Yes."
Landon looked at Andrew with an expression that clearly asked, What the hell is this all about?
Still excited, Andrew continued explaining.
"A knockout option sets a specific price range. As long as the exchange rate stays within that band, there's no issue. But if it moves beyond the designated range, the buyer loses all rights and has to bear the full loss."
"…!"
"In other words, it's essentially a high-stakes gamble—where the winner makes an absolute fortune, and the loser gets knocked out, completely wiped out."
Landon let out a hollow laugh, finding the whole concept absurd.
"Why on earth would anyone buy such a risky product?"
Before Andrew could respond, Seok-won, who was sitting with his fingers interlocked, answered in his place.
"As long as the exchange rate stays within the predetermined range, it allows companies to hedge against currency fluctuations. Plus, if luck is on their side, they can even make a profit from exchange rate differences. So, for corporations and financial institutions that engage in frequent foreign exchange transactions, it's quite an appealing option."
"Ah, I see. If used wisely, it could actually be a decent tool," Landon nodded in understanding.
"Before the earthquake, everyone was expecting a strong dollar, so the companies that bought these options never imagined that the yen would surge like this."
Landon’s eyes lit up as Andrew excitedly explained.
"So, George Soros is planning to use the knockout options to offset the losses from his dollar purchases?"
Seok-won's voice dropped to a calm but firm tone.
"George Soros wouldn’t settle for just covering his losses. He will push the yen as high as possible to maximize his profits."
Despite being known as a prominent philanthropist, George Soros had a notorious reputation for ruthlessly exploiting every possible advantage in his investments, stopping at nothing to crush his opponents.
Landon and Andrew nodded in agreement, convinced that he would squeeze out every last bit of profit from the situation.
"So that’s why you said the dollar-yen exchange rate could drop to 80 yen."
"Exactly," Seok-won confirmed.
Andrew, now composed, spoke seriously.
"But the Bank of Japan won’t just sit back and let that happen. Do you really think it’s possible?"
Seok-won, feeling their gazes on him, simply shrugged.
"Not if George Soros acts alone."
"……."
"As I mentioned earlier, no matter how powerful a Wall Street giant may be, they can't single-handedly control the flow of a massive market. And when the opponent is the Bank of Japan—the institution with the world's largest foreign exchange reserves—it becomes even more difficult."
Seok-won continued speaking as he observed the slight confusion on Landon and Andrew’s faces.
"George Soros knows this well. That’s why he’ll deliberately make a grand spectacle, making sure the world knows he’s trying to drive up the yen."
"…!"
Typically, revealing one’s position in a market was a dangerous move, as it could invite counterattacks from other investors. Keeping such positions hidden was the standard practice.
If George Soros was openly revealing his bet, it could mean only one thing.
"He’s raising a flag, inviting others to join forces and take down a tempting target," Landon muttered in realization.
Seeing that he had grasped the situation, Seok-won nodded in approval.
"Defeating the Bank of England wasn’t something George Soros did alone. It was the result of Wall Street and speculative forces from around the world joining the attack."
Andrew, who had been with Goldman Sachs at the time and had personally witnessed that historic event, recalled the details as his eyes gleamed with recognition.
"So he’s planning to do the same thing to the Bank of Japan that he did in the UK."
"Exactly. This time, it’ll be more like the Tokyo Firebombing."
Seok-won responded with a slight smile.
Though he spoke lightly, the underlying implication was anything but. A colossal financial war was about to break out, with two financial giants clashing head-on. Landon and Andrew could feel the tension rise, but beyond their stiff expressions, a surge of excitement and anticipation also took hold.
After running some mental calculations, Andrew narrowed his eyes sharply.
"If, as you say, George Soros raises the flag, then profit-hungry hedge funds will swarm in like a pack of wolves. It certainly looks like a winnable fight."
"Shaking up Japanese corporations and financial institutions with knockout options, then immediately attacking the yen to maximize profits—he really lives up to his ruthless reputation," Landon said, shaking his head in disbelief.
Once again, he was struck by George Soros’s brilliance. Most investors, after failing in an initial bet, would focus solely on minimizing their losses.
But rather than retreating, Soros had quickly flipped the entire game board, turning the situation to his advantage.
He really is worthy of his title as one of Wall Street’s titans.
Through this, Seok-won clearly understood how Soros had survived and thrived in the brutal, cutthroat world of Wall Street.
"If only we had known earlier, we could have made a fortune selling knockout options ourselves," Landon muttered.
Andrew smacked his lips in regret, sharing the sentiment.
A surefire way to make easy money had been right in front of them, and they had failed to seize it. Their faces were filled with disappointment at the missed opportunity.
"But we haven’t completely lost our chance," Seok-won said calmly.
Both looked at him with puzzled expressions.
"When George Soros and the hedge funds drive the USD/JPY exchange rate up significantly, we’ll sell knock-in options."
"…?"
"Knock-in options, unlike knock-out options, allow the holder to sell dollars at a predetermined exchange rate as long as the rate stays within a certain range. However, if the rate ever crosses the upper limit, the option is activated, correct?"
"That’s right."
"Uh… but after being burned so badly by knock-out options, would Japanese financial institutions and corporations really be willing to buy these options again?"
Landon tilted his head, clearly skeptical.
"Precisely because they suffered heavy losses, they’ll be desperate to find a way to hedge against further currency losses."
"That does make some sense, but…"
Landon still seemed unconvinced, trailing off. Seok-won, speaking in a persuasive tone, continued.
"If we set a wide barrier range, say between 75 and 95 yen, they won’t be able to ignore it."
"What?"
Landon was taken aback.
"But in that case, we’d only make a profit if the exchange rate drops below 95 yen, wouldn’t we?"
With no signs of the yen’s strength weakening—and considering the impending attack by George Soros and the hedge funds—this bet seemed like an extreme underdog position.
"Boss, that sounds way too risky," Andrew added, concern evident in his voice.
Seok-won, however, remained unfazed.
"The current yen surge is the result of multiple negative factors converging at once. That means once fear and uncertainty subside, the market will inevitably revert to its original trajectory."
At that, Landon and Andrew recalled that before the earthquake, the USD/JPY exchange rate had been hovering around 100 yen.
"Most importantly, the U.S. government wants a strong dollar. There’s no way they’ll sit idly by and allow the yen to remain this strong."
Seok-won stated this with unwavering confidence.
Landon and Andrew were still unsure, but they couldn’t dismiss his reasoning entirely. More importantly, they trusted Seok-won’s judgment, given his track record. They decided not to argue further.
"Let’s make sure we have the product ready for sale by March at the latest."
"Understood."
"Move quickly, but also ensure that there are no legal loopholes or regulatory issues that could cause problems later."
"I’ll personally oversee everything, so you don’t have to worry."
Landon, a former lawyer, answered confidently.
Satisfied, Seok-won picked up his teacup and took a sip, silently reflecting to himself.
While George Soros and the hedge funds take all the heat from the public, I’ll be quietly raking in the profits from behind the scenes.
Unlike George Soros’s Quantum Fund, Seok-won’s firm had low visibility, meaning Japanese financial institutions and corporations would be less wary of them.
And that was precisely the advantage he planned to exploit.
TL/n -
A knockout option is a type of exotic option in finance that expires worthless if the underlying asset reaches a predetermined price level (the "knockout barrier") during its life. This means the option ceases to exist once the barrier is hit, regardless of whether it was in-the-money before that point.
Types of Knockout Options =>
1. Up-and-Out Option – Expires if the asset price rises to or above the barrier.
2. Down-and-Out Option – Expires if the asset price falls to or below the barrier.
For Finance People =>
Imagine you buy a call option on Tesla stock at $200, with a knockout barrier of $250. If Tesla's stock price hits or exceeds $250 at any time before expiration, the option automatically expires worthless, even if the stock later drops back below $250.
This makes the option cheaper to buy compared to a standard call option but riskier because it can be knocked out.
For Non-Finance People =>
Think of a knockout option like a sports bet. Suppose you bet on your favorite soccer team to win a tournament, but with a rule:
If they lose even one match, your bet is instantly canceled—even if they later make a comeback and win the tournament.
This means your bet is cheaper to place, but it carries the risk of early elimination.
###
A knock-in option is an exotic option that only becomes active if the underlying asset reaches a predetermined price level (the "knock-in barrier") during its life. Before hitting the barrier, the option does not exist and cannot be exercised.
Types of Knock-In Options =>
1. Up-and-In Option – Becomes active if the asset price rises to or above the barrier.
2. Down-and-In Option – Becomes active if the asset price falls to or below the barrier.
For Finance People =>
Suppose you buy a put option on Apple stock at $180, but it has a knock-in barrier at $150.
If Apple's stock never falls to $150 or below, your option never activates and is worthless.
If Apple's stock drops to $150 or lower, the option becomes active, allowing you to sell at $180 if needed.
Knock-in options are often cheaper than standard options but come with the risk of never becoming active.
For Non-Finance People =>
Think of a knock-in option like a spare tire in your car.
The spare tire is useless while your regular tires are fine.
If a tire gets punctured (hitting the barrier), the spare tire (option) becomes useful and can be used.
###
The exchange rate between the US dollar and the Japanese yen increased to 76.50 yen per dollar during the Great Hanshin earthquake in 1995.
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