A $50 million margin call? I'll short Wall Street.

Friday, June 6th.

This is a dark day for the US real economy.

The U.S. Labor Department released May's non-farm payroll data before the market opened: the unemployment rate jumped to 5.5%, the largest monthly increase in four years. Non-farm payrolls decreased by 49,000 – not a slowdown in growth, but a contraction.

On television news, images of people lining up to receive unemployment benefits were playing on a loop. A Detroit auto parts factory announced it was laying off 2,300 workers. Foreclosure auctions in Florida hit a record high. A construction workers' union in California said 40 percent of its members hadn't received any new work for over three months.

The echoes of Bernanke's hawkish speech yesterday, in which he warned of "high vigilance against inflation," had barely faded when the cold reality of an economic recession was ruthlessly slammed into everyone's faces.

According to classic economic logic: a surge in unemployment leads to an economic recession, a sharp decline in real demand, and a drop in oil prices.

And that was indeed the case—in the first fifteen minutes after the release of the non-farm payroll data, the WTI crude oil futures contract plummeted, quickly falling from $134 at yesterday's close to around $128.

In Farstar Capital's trading room, CNBC's live broadcast was displayed on a screen in the upper right corner.

An unemployed middle-aged man said to the camera, "I worked at Ford for seventeen years. Last month they told me my job was gone."

Behind him was a line that stretched for nearly two blocks, with each person clutching a stack of documents.

On the left side of the same large screen, the intraday chart for crude oil was fluctuating wildly around $128.

Then, in this market that has completely lost its rationality, logic has reached its expiration date.

Fifteen minutes.

It was exactly 10:00 AM.

While traditional bulls were still hesitating about whether to cut their losses, and bears thought they had finally seen the light at the end of the tunnel—an extremely large and completely irrational torrent of funds rushed into the New York Mercantile Exchange without warning.

They're not buying physical crude oil. They're frantically buying up all call options expiring in July and August, as well as forward futures contracts.

The logic behind this investment is extremely simple and crude:

The US economy is in shambles. The credit market is frozen. The stock market is falling. The dollar is depreciating. The subprime mortgage hole is bottomless.

Aside from commodities, there are no other hard assets in the world that can be used as a safe haven.

Buy oil. Buy everything that can be burned.

128...131...135...138...

The price was climbing on the screen so fast that Lin Tao could barely keep up.

In the CNBC footage in the upper right corner of the trading room, the unemployed middle-aged man is still talking. He's saying his daughter is going to college next year, and he doesn't know how he'll pay for the tuition.

On the left side of the same large screen, the intraday chart for crude oil resembled an arrow released from a bowstring, shooting at an almost vertical angle towards a height that all textbooks believe should not exist.

139...139.50...

"Boss."

Lin Tao's voice was strained. His eyes were fixed on the screen, and fine beads of sweat appeared on his forehead.

"It's 139.50 now."

No one responded to him.

Lu Ze had not yet come out of his office.

140.

Matt stood up.

This seasoned trader, who had weathered many storms at Lehman Brothers, rested his hands on the table, staring intently at the options profit panel. The numbers on it were fluctuating by millions of dollars per second.

"That's not scientifically sound."

Matt's voice was extremely deep, but Lin Tao could hear the underlying tension within it.

"Physical demand is shrinking. Unemployment is soaring. How can they possibly buy 140?"

No one can answer this question.

Because the answer isn't in economics textbooks. The answer lies in fear—when all traditional safe havens are collapsing, money will flow into any place that doesn't seem to have collapsed yet, regardless of whether that place's foundation is already cracking.

Isabella stood in front of her workstation, her pen clutched tightly in her hand. She turned to look towards the main office.

The door opened.

Lu Ze came out. He wore a white shirt with the cuffs rolled up to his elbows. In his hand was the same black coffee he would never change.

He walked to the center of the trading room, sat down, and looked up at the large screen.

141.25 dollars.

The price surged by more than ten dollars in a single day.

The CNBC footage cut to a different man. The unemployed middle-aged man was gone, replaced by a radiant energy analyst, gesticulating wildly in front of the camera and shouting "supercycle" and "$150 is not a dream."

The same screen. On the left are unemployed workers. On the right are skyrocketing oil prices.

Lu Ze looked at the scene and took a sip of coffee.

"Boss."

Lin Tao's voice came from the side.

Lu Ze turned his head.

Lin Tao's face flushed slightly from the surge of adrenaline, and there was something extremely complex in his eyes that he himself was probably unaware of—fear and greed intertwined, like two snakes coiling deep within his pupils.

"Yesterday we closed out almost a third of our futures contracts in the 130-135 range."

Lin Tao's voice was low, but he spoke quickly, "According to yesterday's plan, the second batch should be shipped out today."

He paused.

"But the boss—it went up by ten dollars today. If we hadn't shipped that batch yesterday—"

He didn't finish his sentence.

But his meaning was extremely clear.

If the batch sold yesterday had been kept until today, we would have made tens of millions more.

Did we sell too early?

Should we continue selling today?

What if it goes up another ten dollars tomorrow?

This wasn't just Lin Tao's thought. At this moment on Wall Street, in every trading room still holding long positions in crude oil, in the mind of every trader staring at the almost vertically upward candlestick on their screen, the same thought was flashing through their minds:

hold on.

Let's wait one more day.

Maybe it will rise another ten dollars tomorrow.

When the market rewards you in an irrational way, it takes far more effort to leave the table than to stay there.

Lu Ze looked at Lin Tao.

He did not answer immediately.

He first glanced at the CNBC screen in the upper right corner of the trading room.

The energy analyst was still shouting, his voice muted, but the movements of his lips and exaggerated gestures conveyed a frenzied fervor that could be felt even through the screen.

Then he shifted his gaze to the other screen on the left. It was showing Bloomberg TV, and a scrolling text was slowly crawling across the bottom of the screen:

The U.S. unemployment rate jumped to 5.5% in May, the highest level since 2004. Nonfarm payrolls declined for the fifth consecutive month.

Two scenes. Two worlds.

One world is collapsing. Another world is celebrating.

They cannot both be true at the same time.

"Lin Tao," Lu Ze's voice was calm, "take a look at that screen."

He was referring to the CNBC segment.

"What are they shouting up there?"

"One hundred and fifty...two hundred US dollars," Lin Tao said.

"Look at that one next."

Lu Ze pointed to the scrolling text on Bloomberg TV.

Lin Tao glanced at it: "Unemployment rate 5.5%."

"On one hand, unemployment is at a four-year high. On the other hand, crude oil prices surged by $10 in a single day."

Lu Ze's voice was completely flat, as if he were stating a physical phenomenon.

"Which of these two things do you think will be corrected first?"

Lin Tao did not answer.

"Oil prices rose to $141 today, not because a million barrels of demand suddenly appeared in the world," Lu Ze said. "It's because of fear. It's because of the money that has fled the credit markets and has nowhere else to go, desperately squeezing into this pool."

"There is a fundamental difference between a price increase driven by money and a price increase driven by fundamentals."

He looked at Lin Tao.

"Fundamental-driven rallies are slow, steady, and supported. You can gradually exit the market."

"Fear-driven rallies are rapid, violent, and baseless. The faster they rise, the harder they will fall. And when they reverse course, they won't give you a chance to exit gracefully."

Lin Tao opened his mouth slightly, then closed it again.

Lu Ze stood up from his chair and walked over to him.

"We sold our first batch as planned yesterday. It went up by ten dollars today. Do you think we sold at a loss?"

Lin Tao did not deny it.

"If a second batch isn't released today, and the price rises by another ten dollars tomorrow, you'll think yesterday's decision was brilliant."

"But if a second batch comes out today, and the price goes up by another ten dollars the day after tomorrow—you'll feel like you sold at a loss today."

Lu Ze looked at him, his tone devoid of any harshness, only displaying an almost cold patience.

"Lin Tao, do you know what this kind of mentality is called?"

Lin Tao fell silent.

"That's called letting the market make the decisions for you."

"When the market goes up, you feel you shouldn't sell. When the market goes down, you feel you should sell. Your judgment is always a step behind the market; you're always chasing prices."

"The purpose of a plan is to make the decision for you when your emotions are hijacked by the market, a decision you couldn't make on your own."

Lu Ze shifted his gaze from Lin Tao and swept it over Matt and Isabella.

"As I said yesterday, I'll be clearing out my positions in batches as planned. That plan remains unchanged. It won't change just because the price went up by ten dollars, nor will it change just because it went down by ten dollars."

His voice became more concise, as if he were issuing orders on the battlefield.

"Matt, continue closing out long positions in futures. For the iceberg-like positions, close them in batches, following the same pace as yesterday."

"Isabella, a deep in-the-money option, contacted Goldman Sachs and Morgan Stanley's over-the-counter offices to request partial early settlement. Taking advantage of the current high market sentiment, their quotes will be better than usual."

"Lin Tao."

Lin Tao raised his head.

"Your job isn't to watch oil prices. Oil prices aren't your concern."

Lu Ze looked at him.

"Keep an eye on the S&P 500 and VIX futures put options. Exchange-traded ones. See what price levels offer liquidity and what depth you can absorb. Don't rush into placing an order; get a clear understanding of the situation first."

Lin Tao was taken aback.

S&P put options?

They were just discussing whether to continue holding their long positions in crude oil. Now their boss wants them to look at the short positions in the S&P 500?

"The cash we've extracted should be collected together first."

Lu Ze said to Isabella, "We'll need it soon."

He picked up his coffee cup and walked back to his office.

I paused at the door.

"It's precisely in times like these that we must adhere to the plan. A plan isn't for when things are calm. A plan is for days like today."

The door closed.

There was a silence in the trading room for about three seconds.

Then Matt was the first to act. He took a deep breath, his fingers returned to the keyboard, and he began to break down the day's sell-off orders.

Algorithm starts.

An iceberg hangs out alone.

Isabella picked up the intercom and dialed Goldman Sachs' over-the-counter trading desk.

"I am Isabella Chen from Farstar Capital. Yes, we need to settle a portion of our long option contracts ahead of schedule."

Lin Tao glanced one last time at the number on the big screen that was still jumping up—142.17—then shifted his gaze from the crude oil chart to the CBOE S&P 500 options chain interface.

The screen was filled with densely packed exercise prices and quotes.

He began scanning line by line, looking for the liquidity distribution of those deep out-of-the-money put options.

The picture on the television screen switched back.

He's not that energy analyst anymore.

It was another queue in another city. The line stretched from a glass door all the way to the street corner.

A notice was posted on the door that read "Unemployment Relief Application Office".

There was a young woman in the group, about twenty-five or twenty-six years old, wearing a faded blue overall. She was holding a child in her arms, who was crying from the heat in the June sun.

Her face was expressionless. Not numb, but the kind of dry calm that comes after all the tears have been shed.

Lin Tao's gaze lingered on that image for a second.

Then he lowered his head and continued scanning the S&P options chain.

On the large screen behind him, two worlds were still running simultaneously.

One is in a queue. The other is experiencing a surge in prices.

In this quiet trading room, a strategic retreat involving billions of dollars is quietly underway amidst the most frenzied surge in oil prices.