Lender said, “You knew there were locusts in the Free Cities?”
“No,” answered Masterson. “I knew there was something that gave him an edge.” Again lowering his voice, he said, “There’s a type of insect called the twenty-year locust that breeds out there. They’re due next year, but sometimes they come a year early and sometimes they come a year late. Any news they are in fact on their way . . .” Masterson looked up and signaled to a waiter, who hurried over. Masterson said, “Would you see if Mr. Crowley and Mr. Hume are upstairs, please? If they are, ask them to please join us.”
Turning to Roo, Masterson said, “How reliable is your source?”
Roo was loath to tell him the news was from a fugitive sea trader dealing in stolen gems. “I’d say it’s fairly reliable.”
Masterson stroked his beard. “There are several ways to play this. Each matches risk to reward.”
Two men approached and Masterson indicated they should sit. He introduced everyone. Hume and Crowley were a pair of investors who had participated in several different syndicates with Masterson.
“Our young friend here”—he indicated Roo—“brings us word of a shortage of grain in the Free Cities. How do you react to that news?”
“How much of a shortage?” asked Crowley, a thin, suspicious-looking fellow.
Roo lowered his voice and once again said, “Locusts.”
“Who is your source?” asked Hume, a soft-looking man with a wheezing in his chest.
“A Quegan trader put in at Sarth two weeks ago and mentioned in passing to a business associate of mine that they had been found on a farm outside Margrave’s Port.”
Masterson said, “That would be the logical place for them to first show up.”
“If it’s as bad as when I was a boy,” said Hume, “they could spread up to Ylith and into Yabon. There would be serious shortages in the West.”
“And if they go over the mountains into the Far Coast region, even more,” said Crowley.
Masterson turned to face Roo. “There are three basic ways we can approach this news, my young friend.” He held up a finger. “We can attempt to buy grain now, storing it away in warehouses, and wait for the demand to increase.” He held up a second finger. “We can do as you suggest and underwrite the cost of shipping the grain to the Far Coast, making our profit irrespective of the profit potential in each shipment of grain.” He held up the third finger. “Or we can try to control the grain without purchasing it.”
“Options?” said Crowley.
Nodding, Masterson said to Roo. “Do you know about options?”
Roo decided trying to appear more clever than he was would work against him in this situation. “Not really.”
“We agree to buy grain at a price from a group of growers here in the area. But rather than buy it, we purchase the right to buy it, for a small part of the costs. If we fail to purchase it, we lose the option money.
“The benefit is that we can control a huge amount of grain for a relatively small amount of gold.”
“But the risk is you lose everything if the price goes down,” said Dash.
“Yes,” said Crowley. “You do understand.” Masterson said, “I propose we hedge our positions by buying some grain at market, options on the rest.”
“What about the underwriting?” said Roo.
Masterson said, “I’ve never been keen on underwriting. Ships sink. If what you say turns out to be true, we’ll be sending grain out on anything that floats, and some of the craft will likely sink. Let someone else assume the risk and we’ll pay a tiny premium.” Masterson was quiet a moment, then said, “I think we option the entire amount. What hedge we have with grain purchase is trivial if the price doesn’t rise. We diminish our risk by little, but we diminish our profit potential a great deal.”
Hume sighed. “You always win at cards, too.” He thought a moment. “But you make sense. If we are to gamble, then let us gamble.”
Crowley said, “Agreed.”
This was all going too quickly for Roo, and he said, “How much will this cost?”
“How much gold do you have?” asked Crowley. Roo tried to remain calm as he said, “I can put about twenty thousand sovereigns on the table this week.”
Masterson said, “A tidy sum. Between us we can raise a hundred thousand. That should prove sufficient for our needs.”
“What’s our potential gain?” asked Dash, ignoring the fact he was considered Roo’s assistant.
Hume laughed and coughed. “If there is a massive grain shortage in the Free Cities, a five-to-one return is not out of the question. If it spreads to Yabon and Crydee, ten-to-one is not outside possibility.”
Masterson added, “If all goes as we hope, young Mr. Avery, your twenty thousand golden sovereigns could be two hundred thousand within the next three months.”
Roo was almost speechless, but then Lender said, “Or it could be nothing.”