The Duke brothers tried to steal the crop report. But Billy-Ray and Lewis, after having been quite ill used by the Dukes, get the real report and give the Dukes a fake.
The Dukes send their trad...
The Duke brothers tried to steal the crop report. But Billy-Ray and Lewis, after having been quite ill used by the Dukes, get the real report and give the Dukes a fake.
The Dukes send their trader to the commodities floor with instructions to buy like crazy. Their fake report shows a tough winter, and so they're betting the price will go way up after the "official" release of the report. The trader starts buying and others see the Dukes trying to corner the market, so they start buying. This drives the price up.
At just the right time, Billy-Ray and Lewis "sell" futures contracts for orange juice. They sell like crazy. They're selling contracts for orange juice they don't even own and can't deliver. (Basically short selling - in commodities all you have to do is be able to deliver at the date in the contract). Their selling drives the price down a bit. It also pads their trading account with a ton of cash.
The secretary of agriculture announces that the winter did not affect the crop, so the pit full of traders freaks out! There's not going to be price pressure, so they're all holding OJ contracts that are seriously overpriced. A mad selling frenzy ensues, driving the price way down.
Again at a point timed for maximum effect, Lewis and Billy-Ray Valentine announce that they'll "buy em" -- they buy back the OJ contracts at a much lower price than they sold them for earlier, netting them a huge profit. They also refuse to sell to the Duke's trader, freezing him out.
The Duke's get a margin call and go bust and our heroes make a lot of scratch. Of course, in real life, trading curbs and circuit breakers would prevent either side of this play, but it is educational and funny to watch.
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Am I right in thinking that they sold shares that they did not actually own for a high price, then bought them back for a low price, thus making a huge profit, but in the end they have not actually sold or bought any shares at all?
Right- this whole thing was to maniuplate the price.
The Dukes drove it up by having their man buy as much as possible, getting everyone else to buy. Our heros drove it down by selling imaginary contracts they buying them back when everyone realised how overpriced they were and started selling to cut their losses.
Since they bought back all they sold they didnt have to deliver their imaginary oranges but since the transactions still took place they made a huge profit.
And now that I think about it, it's conceavable that they bought more than they sold, leaving them with potentially valuable futures for a rock bottom price
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The Dukes drove it up by having their man buy as much as possible, getting everyone else to buy. Our heros drove it down by selling imaginary contracts they buying them back when everyone realised how overpriced they were and started selling to cut their losses.
Since they bought back all they sold they didnt have to deliver their imaginary oranges but since the transactions still took place they made a huge profit.