The market continues to move against Nick, and the losses are now in the hundreds of millions of dollars. In a desperate and futile attempt, he tries to buy enough futures contracts to actually move the market in his favour by himself.
This, by the way, was the exact same thing that happened to stocks in the United States during the 1904 San Francisco earthquake.Īnyway, as Nick's losses mount, he keeps betting that he will be able to trade out of them. There was a sort of time delay, a sort of calm before the storm, before the Nikkei really started to plunge. However, to Nick's chagrin, Tokyo experiences a major earthquake the next day, and the volatility on the Nikkei explodes, which means that the losses on his short straddle would have been immense.Īfter the earthquake, stocks did not fall that much right away. He sets up a short straddle, which means that he is betting that the market will not experience much volatility in the near term. Nick then begins selling options on the Nikkei, hoping to generate enough premium to conceal his losses. Unfortunately for Nick, the trades he makes only exacerbates the problem, and the losses only mount.
As the movie progresses, Nick accrues a relatively small loss from a trading error, and tries to rectify it by trading futures basically under his own account. The contracts that he and his team are trading are based on the Nikkei, the stock exchange of Tokyo.