First up is another sequel, "Ice Age 3: Dawn of the Dinosaurs," (ICEA3). I have a theory that, in any given trilogy, one of the three movies will be bad. Evidence for this includes the Matrix and Godfather movies. However, there is also evidence to the contrary, notably the original three Star Wars movies. So this might be a winner. The stock is at H$176, down H$5 for today, but right near the high, after a long and steady climb up. It's being released in digital 3-D, which is always helpful. It's opening over a five-day weekend, so the adjust will be [Previous Box Office + (2.7*Box Office Fri-Sun)]. The strike price is H$60, for Friday-Sunday. The call (IA3CA) is at H$6 and change. The put (IA3PU) is at $H1.35 and sinking. The call predicts weekend BO of $66 million, which translates into a stock price of H$178. But that's without the Wednesday and Thursday BO. If the options are right, then the stock is seriously undervalued. It's only at 33% on rottentomatoes.com, so maybe my theory of one of a trilogy being a bad movie applies here. But it's Fourth of July weekend, so $60 million for an animated feature is not unrealistic
Johnny Depp returns as an outlaw, but not a pirate this time. He's John Dillinger, one of the Public Enemies (PUBNM). Christian Bale plays one of the FBI agents in pursuit of him, although I haven't seen much of Bale in the marketing. The stock is at H$109, with the same formula as ICEA3. The strike price is H$35 for Friday-Sunday, again just like Ice Age. The call (PUBCA) is, again just like Ice Age, H$6 and change. The put (PUBPU) is at H$2.52, a high, so the signals are a little more mixed. But again, the prediction of the options is roughly in line for the BO for just the weekend, excluding Wednesday and Thursday. What is very different about this movie from ICEA3 is that the trend is not good - the high was H$141, a long ways from where it is today. It's at 56% on rottentomatoes.com, and that might actually matter for this movie; as an "adult drama," it's somewhat more important to pay attention to the critics. The positive reviews are decent but not stellar, but the negative reviews are fairly harsh.
This movie needs to do at least $15 million on Wednesday and Thursday, plus $35 million Friday-Sunday, to make its price. That's possible, although I am not optimistic that it will beat the $41 million predicted by the call. However, I have a policy of not shorting a call unless it's clear that the movie will not make the strike price, because of the danger of being caught by a major surprise on the upside. Johnny Depp is still a major star, and he's good for this role. Crucially, it's unlike anything out there - not much in the way of special effects, which is occasionally refreshing. Let's be optimistic.
Update Wednesday morning: PUBNM is tanking. It's down H$8 this morning, a very strong sign that it's not going to do very well. I am reversing my positions on the stock and the put. I'm keeping the call long, but I'm also going to short it. I have it long at the IPO price, H$2, but I'm shorting it at the current price H$5.64. I think it's a safe bet at this point that it won't make $40 million this weekend, or at least not a great deal more than that. We'll see how this works out.
Update Sunday night: Well, that hurts. I bet seriously wrong on ICEA3; it adjusted down H$30. I don't want to think about too much, but I should have paid attention to my theory that in a trilogy that is basically an excuse to make money, one of the three movies will be bad. Looks like that is the case here. It made $25 million in the first two days, then $42 million over the weekend. Pretty good, but nowhere near what the stock and options were predicting. I should also remember another rule: with a price like this, there is more potential on the downside than the up.
I did, however, bet right on PUBNM; it $14 million in the first two days, and then $36; it adjusted down H$14. At least I got that one right.