Defending Derivatives and Responsible Financial Innovation

I'm a big fan of making bets on opening weekend box office grosses - that's the raison d'etre of my other blog, TEQP-HSX. I've used real money on Intrade, although not for a while. So I was very excited about Cantor Exchange, the real-money spin-off of the Hollywood Stock Exchange. Cantor works just like HSX, except that the stocks have a shorter lifespan, and there is real money involved. The securities on Cantor are technically derivatives, and, as such, trading them has to be approved by the Commodities and Futures Trading Commission. A great explanation of the potential benefits from Richard Jaycobs, president of Cantor, can be found here.

Most of the debate around trading in futures based on box-office receipts has revolved around technical questions, such as whether or not such contracts could be manipulated, how they would work, etc. There hasn't been much examination of the philosophical issues. That's what I am going to look into.

The core issue is innovation. Trading in box office receipts represents financial innovation. I'm not surprised that the major studios are opposed to it; this is the same industry that fought the VCR all the way to the Supreme Court. They were worried that machines that gave people the ability to watch movies at home would cut into their revenue; those machines are now a major source of that revenue. I can understand their initial opposition to VCRs - at the time, the idea that videotapes would generate lots of money for the studios seemed absurd. The lesson is that we don't know what the future holds, but that it's a usually a good idea to err on the side of more innovation, rather than less.

There's a saying in the movie business that movies are a great art form, but a terrible business. Consider: every movie is effectively a completely new product, almost a new company. Studios invest millions of dollars in products that can technically last forever, but really have a shelf life of a couple of months. Every product has to be completely different from, and yet very similar to, every other iteration of the product that has come before it.

Movie studios and movie theaters have come up with many different ways to control the chaos and hedge against the uncertainty of this wonderful and maddening business. Studios take out insurance against various kinds of calamity. They look for franchises, so they can make several movies that are fairly similar, and therefore likely to generate predictable returns. They use famous stars and directors who can dependably "open" a movie. They follow trends and jump on bandwagons. They test-market potential audiences. They scour film festivals for undiscovered gems that they can buy cheap, hoping for a hit. Theater chains build multiplexes, so that if one movie is not successful on a given weekend, they have others that are. They charge astronomical amounts for junk food.

All of these trends and business practices represent different instances of innovation, except sequels, which have been around since the Iliad and Odyssey. Each of these also has its downside; stars can be expensive, and many eventually lose their allure for audiences. Many sequels are not as good as the original. Many movies based on books or TV shows are not as good as the property they were based on. Trends burn out. Failure is inevitable with any widespread innovation. But learning from failure is part of what fosters further innovation.

I've read the statement by the MPAA before the CFTC on why they think these derivatives are a bad idea. I don't know whether or not all of the terrible consequences that they predict from trading in box office futures will come true. Nobody knows. That's the beauty of democracy: we experiment, and, if we're wrong, we change.

There is one aspect of this debate of which I am confident: this represents - and I realize that, given the current economic environment, this may sound almost like a contradiction in terms - responsible financial innovation. Our current economic crisis was brought about in large part because of irresponsible financial innovation. But box office derivatives are very different from exotic financial instruments like CDO's. First, CDO's are extremely opaque and obscure - most people had never heard of them before 2008, and even many sophisticated financial professionals have no idea how they work. Box office numbers, on the other hand, are public information; there are few pieces of financial information more widely available to the public. It's also very simple: that's why there are hundreds of thousands of players on HSX. There are some risks, but there are regulatory structures in place to deal with those risks that raise ethical or legal issues. Again, I don't know whether or not those structures will be adequate to address the risks and contain bad behavior. No one knows. What we do know is that those regulations, rules, and institutions can be adjusted and changed. Given the public nature of the information and the simplicity of the securities, I am confident the US government can handle the challenges of regulating these securities. The total value of the market will be a fraction of the market value of a single large company. It will not necessarily be easy to police this market, but it certainly won't be impossible.

At the end of the day, there is only one reliable way to make money in the movie business: make good movies. The problem, of course, is that no one - other than Pixar - has really figured out how to do that on a consistent basis. Some people are better at it than others - those are the ones that get to do it again. The market rewards those who make good movies. A market in box office futures will have the same effect: it will reward people who make and invest in good movies, and it will punish people who make and invest in bad movies. It will also have the opposite effect: it will punish people who bet against good movies, and it will punish people who invest in bad movies.

The movie studios have legitimate concerns, particularly about piracy and market manipulation. But the best defense against both of those is the same: make good movies. Seeing a movie at a movie theater is still a great entertainment value. Actually, I'd like to qualify that: seeing a good movie at a movie theater still is, and always will be, a great entertainment value. Markets in box office derivatives will be vulnerable to rumors. But so are all securities markets. The best defense against rumors is, once again, the same thing. Many, many very successful movies - from Jaws to Titanic and even the remake of The Karate Kid - have suffered from rumor, innuendo, and just bad analysis. The Karate Kid was a remake of an 80's movie at a time when the audience was supposed to be hungry for originality and tiring of remakes. It opened on the same weekend as The A-Team, which was also a remake of an 80's entertainment property. Both movies were predicted to open between $30 and $35 million. The A-Team opened at $26 million. The Karate Kid opened at $56 million. No one - not even the studio - had any idea it was going to do that well. But the optimists (I, unfortunately, was not among them) made a killing. The best way to manipulate this market is to make a good movie.

Trading in box office futures represents responsible financial innovation that rewards people who make and invest in good movies. For that reason, I think they should be approved.

HSX: Week of July 24, 2009

It's a slow weekend this week, with no summer blockbusters! We do, however, have a Jerry Bruckheimer movie. Let's start with that one.

G-Force (GFORC) is a family action-adventure movie, insofar as that hybrid exists. The "G" stands for "guinea," as in pigs. The stars are some guinea pigs who are also secret agents. My guess is that the government experimented on these guinea pigs (get it?) to make them into these superheroes. It looks funny, and Disney has a good track record with these kinds of things. The stock was moving up quite well for a while, but then crashed, as movies in the summer are wont to do. It's been moving back up since then, and is currently around H$70, or an opening weekend of about $26 million. By almost no coincidence, that is also very close to the strike price, which is H$25. The call (GFOCA) is trading high, up almost H$5, way above the prediction of the stock. The put (GFOPU) is not doing too badly, at about H$2.50. So we have slightly mixed signals here. Fortunately, we have another HSX indicator. The strike price for the Blockbuster Warrant (BWGFO) is H$70, and is currently at H$9 and change. The BW's will cash out on September 7, roughly six weeks from now, or two weeks after this delists. It's going out on almost 3,700 screens, and it's being released in "Disney Digital 3-D," a good marketing ploy. However, it's at only 21% on rottentomatoes.com. There are only 14 reviews, but that's pretty bad. Thinking of the demographics, those are actually pretty limited. Kids older than about 10 will probably be turned off. That narrows the range considerably. Variety, however, is optimistic about its potential, and the folks at Variety are very good at this kind of prediction. Let's go long, but look at it more closely tomorrow morning.

Stock: Short

Call: Long

Put: Long

Blockbuster Warrant: Long

Note: Positions were reversed Friday morning (see below)

Next we have Orphan (ORPHA), a horror movie about a little girl who is not quite what she seems. Of course, she is probably exactly what she seems on the poster, which is a standard evil-child horror movie character/plot device. It's at H$28, just off its high, after a steep recent climb up. The well-chosen strike price is H$10, right on target. The call (ORPCA) is H$3.56 as I write, while the put (ORPPU) is at H$2.39, down for the day. Again, mixed signals. It's a nice wide release at 2,750 screens. That generally means the studio has some confidence in it. The reviews are not great, but not bad, at 45% on RT. This doesn't sound like it has great buzz, but expectations and the prices are quite low to begin with, so let's stay long, but, again, watch it tomorrow morning.

Stock: Long

Call: Long

Put: Short

Now we come to the fun part: Katherine Heigl in a romantic comedy, The Ugly Truth (UGLYT). As far as I am concerned, that phrase, "Katherine Heigl in a romantic comedy," is a major selling point. Based on the trailer, I'm not completely sold on her acting in this movie, but that's only one of the features. Gerard Butler is the guy, and he could be good, although I haven't seen him in much. The stock, however, is not doing well, down to H$66 today, from a high of H$78. Things that make you go "hmmmm." Strike price is H$25, which, again, is a good price. Call (UGLCA) is doing well, almost H$4, with very little downward movement. The put (UGLPU) is, as expected by the price of the call, below H$2. It's on almost 2,900 screens, so the studio is feeling good. The reviews, however, are brutal, and it's at only 11% on RT, and Variety is not impressed. I like romantic comedies, but I like romantic comedies with at least one character who is living life on their own terms. It looks like Butler is fulfilling that role here, but I also like romcoms with a huge obstacle separating the characters, some basic fact of their respective lives keeping them apart. Romantic comedies with a main character as a criminal (Out of Sight, Grosse Pointe Blank, Thomas Crown Affair) work well because of this. That's a gimmicky gimmicky plot device, but those movies work. The wall-separating-lovers motif is also why Romeo and Juliet is still around. Love means that much more when its tested by a harsh reality. It looks like all that is separating these two is the fact that they start out not liking each other. Keep working on it, Katherine. I'm keeping the call long because of the possible upside, but going long on the put as well.

Stock: Short

Call: Long

Put: Long

Update Friday morning: GFORC is down H$4.50 this morning. I'm reversing my position on the stock and shorting it. ORPHA is up, and UGLYT is down, confirming those positions.

Update Monday morning: Looks like I was a shade too pessimistic. GFORC had a solid $32 million opening weekend, adjusting up H$15, while UGLYT also did well, adjusting up H$9 on a $27 million opening weekend, and ORPHA adjusted up H$4, on $12 million. I guess I shouldn't have doubted either Katherine Heigl in a romantic comedy, or Disney's ability to work magic with animated rodents.

HSX: Week of July 15, 2009

There's a big movie opening up today; Harry Potter and the Half-Blood Prince. Maybe you've heard of it? Unfortunately, my post will be short and bereft of links and HSX analysis, because I forgot to post last night (damn these Wednesday openings!), and I am having problems logging on to HSX this morning. But I do remember that the strike price is H$80 for the weekend (Fri-Sun). Be very optimistic - this is going to be a big deal.
Stock: Long
Call: Long
Put: Short

Update Sunday night: I was a little too optimistic - the Friday-Sunday take was just under $80 million, almost exactly at the strike price. The five-day total was $159 million. And that's just domestic. It only adjust up H$8, but it's still close to H$300. Go Harry!

HSX: Week of July 10, 2009

Only two movies opening this weekend, both comedies. Let's get the easy one out of the way first: "I Love You, Beth Cooper" (ILUBC) is opening with the least amount of buzz for a wide release that I can remember. I have not seen any publicity whatsoever, which is strange in Los Angeles. I barely knew it was opening. The stock is at H$21, which is off of the high of H$27, but it's been climbing quite steadily. It's directed by Chris Columbus, who is NOT one of my favorite directors (he directed Bicentennial Man, which is one movie I am sure Robin Williams wishes was erased from the planet Earth). The strike price is H$10, which may have made sense a couple of weeks ago, but is now officially absurd. The call (IBCCA) is at H$1.74, surprising only in that it is above H$1. The put (IBCPU) is at H$3.30, which is a very bad sign. It's at 13% on rottentomatoes.com, a really, really bad sign. Nary a positive sign in sight, really.

Stock: Short

Call: Short

Put: Long

Next up is Bruno (BRUNO), Sacha Baron Cohen's second alter ego to hit the big screen, after Borat. This could be either a huge hit or not so huge a hit. It will make a lot of money, the only question is whether it will make massive amounts, or just lots. The subject matter is stirring up strong reactions and controversy, which is not necessarily a bad thing. It's at 70% on rottentomatoes.com, and we love that. I've laughed quite a bit at some of the trailers, so I am planning to see it, although I am not quite sure what to think of how politically incorrect it is. At least one gay friend is seriously bothered by it. I am reserving judgment, but I do plan to see it. The stock is at H$108, down from H$124, but holding up. The strike price is H$40, which is exactly in line with the stock price. The call (BRUCA) is at H$5+, but the put (BRUPU) is at H$3.30. I am not surprised at these split signals, given how controversial the movie is. The stock is predicting an opening of $40 million, the call $46 million or higher, and the put about $36 million or lower. I think the call might be on the high side, but I'm going to keep it long, because of the danger of too much upside. I have one reason for optimism in particular: Borat opened on only 837 screens, but did $26 million. With a lot more screens, and much more publicity, I think Bruno could do much, much better than that.

Stock: Long

Call: Long

Put: Short

Update Sunday night: Looks like I picked the wrong week to believe in outrageous British satire. BRUNO had a solid opening on Friday, $14 million. It looked like it would meet the strike price, if not much more, but then it plunged on Saturday, and only would up doing $30 million for the weekend. So I got burned on all three securities. ILUBC, however, tanked as expected, so that made up for it a little bit.

HSX: Week of June 30, 2009

Continuing and expanding the tradition that was apparently started last week, we have two movies opening on Wednesday this week. Neither of them is as big as Transformers 2: Revenge of Michael Bay, but then again, not much could possibly be.

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

Stock: Long

Call: Long

Put: Short

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.

Stock: Long

Call: Long

Put: Short

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.

HSX: June 24, 2009

I'm posting on a Tuesday because there is a big movie opening tomorrow, Wednesday, and it's going to get a fair amount of attention. That would be Transformers 2 (TFMR2). HSX is having technical problems, so I can't link to the stock (correction: HSX was having technical problems, they have been solved). This is not surprising, since they are launching v4 tomorrow. Supposedly they are going to be down for only a day or so. I think it's kind of a weird decision to launch a new version on the day one of the biggest blockbusters of the year opens. You would think that they would choose a slow kind of day to make this transition. But no! I know the strike price is H$100, but I'm not sure how they are calculating that, over three or five days. I also seem to recall that the price of the stock was around H$340. Last time I checked, a day or two ago, both of the options were around H$2. I'm just going to go way long.

Update Wednesday morning: the call is at H$5 plus change and rising, the put is at H$2 or so and falling. Why the put managed to get above the IPO price is beyond me. Screen counts? We don't need to stinking screen counts. Critics? I cannot imagine a movie less immune to critical consensus. I'm not even going to bother with either screen counts or critics. There are action adventure blockbusters with artistic merit. This is not one of them. This is the ultimate guilty pleasure.

Stock: Long

Call: Long

Put: Short

Update Monday morning: Well, the movie gods smiled on Michael Bay and the Transformers, even if the critics didn't. It cleared $201 million over five days, a rather spectacular opening. It adjusted up H$54, also rather spectacular, considering the stock was already in the stratosphere. I didn't blog about My Sister's Keeper, because of the upgrade on Wednesday and Thursday, and because I was traveling on Friday. But it did fairly well, opening with $12 million, and adjusting up H$5. I had the call short and was long the put, with a strike price of H$10. So I got burned on the options, but I was long on the stock, so that mostly worked out.

HSX: Week of June 19, 2009

Summer has been here for a while in the movies, but it's still technically not quite here. Just around the corner, tho! Just a couple of days!

This weekend is actually a bit of a lull in the summer movie season, by which I mean that there aren't any blockbusters opening. Two comedies, no action adventure. No explosions, at least none that I have seen in the trailers.

It's been a while since we've had a good romantic comedy, and one of the reigning queens of the genre, Sandra Bullock, is in the role of a demanding boss in The Proposal (PROSL). Good romantic comedies put their characters in two diametrically opposed roles. This is one reason I like romantic comedies that have one of the characters playing a criminal; that's a good obstacle to overcome. Trying to get along with a horrible boss is a problem that most people can identify with. The stock is at H$71, just slightly off its high, but the trend has been very steadily upwards. Strike price is H$25, with the call at H$4 and change, and the put below a buck. It's at 53% on rottentomatoes.com, which is a little disappointing but not surprising. Unless it bombs, I am interested. It also has basically no competition. $25 million sounds about right. $30 million may be optimistic, but I'm going to go long on the call because of the danger of shorting with lots of upside potential.

Stock: Long

Call: Long

Put: Short

Jack Black is usually good for a few laughs, if you like his sense of humor. He's playing the mentor - of sorts - to Michael Cera in Year One (YEAR1). But his schtick also seems to be wearing thin. Maybe it's me. I like him, but I thot he was horribly miscast as Kate Winslet's love interest in The Holiday (particularly when the opposite pairing was Cameron Diaz and Jude Law). This is clearly his kind of vehicle, but it also looks like it could be basically a string of one-liners. The director, Harold Ramis, has a rather good track record (Groundhog Day), but he's also not a young man anymore, so I'm not sure how well he's going to do making a movie for guys who have clear and recent memories of puberty. Stock is at H$52, and has been dropping steadily for a while. That's down from a high of H$77. So much for the hype. The trailer has some laughs, but there's always a danger that those are the only laughs in the movie. The strike price is H$25, which is just flat-out absurd. The call is H$1.09, but that's down from a high of H$3.95. Which means that, in the last week, someone thot that this was going to do $30 million this weekend, while the stock was predicting a $20 million opening weekend. Somebody is going to lose money there. The put is H$4.73, and even that might be a bargain. Rottentomatoes.com has it at 36%, and the positive reviews read like they are straining not to be too harsh. I think this movie will be lucky to do $15 million, let alone $20 million. I am shorting the call, because there is basically zero potential for any surprises on the upside.

Stock: Short

Call: Short

Put: Long

Update Monday night: $30 million wasn't optimistic for PROSL, it was on the wasn't optimistic enough. A $34 million opening weekend will win any girl's heart, and any guy's. Way to go, Ms. Bullock, and welcome to the A list, Mr. Reynolds. Or at least the B+ list!

I was a little too pessimistic for Jack Black and Michael Cera, who managed to open just slightly above the halted price, so YEAR1 moved up a bit on the adjust. It cleared $20 million. So I was a little wrong on that one, but right about everything else. 5 out of 6 ain't bad.

Technical note: HSX launches v4 on Wednesday, which should be exciting. Hopefully this time they will get it right.

HSX: Week of June 12, 2009

This week, we've got two movies featuring stars who may or may not be past their prime, and who have each had to make a comeback or two.

First up is Eddie Murphy, he of the once-raunchy comedies, starring in Imagine That (IMGTH), about an executive who discovers that his daughter has a magical blanket that helps him turn his life around. Or something wholesome and heartwarming like that. The LA Times analyzed its prospects in an article that is fairly harsh. However, I did discover a good new Website, www.moviereviewintelligence.com, which aggregates movie reviews, but does so in a much more analytical and comprehensive way than Rotten Tomatoes. So that was good.

The stock is at H$38, up H$2 today, but that's down from H$50. Strike price is H$15, which now sounds way too optimistic. The call is below a buck, and the put is at H$4. So the market is thinking somewhere around $10 million for the weekend. Little girls is a fairly narrow demographic, even if you include their parents. The First Parents might be tempted to see it, since they are in the target demographic, insofar as they are still in any demographic but their own, but I doubt Barack and Michelle will be tempted to make this a date night. It's at 31% on rottentomatoes.com, and the positive reviews are just barely that. It's on 2,800 screens, a good wide release, but I don't think that's going to matter. Eddie Murphy's career is running on fumes at this point. I'm going with $9 million.

Stock: Short

Call: Short

Put: Long

Next up is The Taking of Pelham 123 (TP123), starring Denzel Washington, who has never been less than a star, and John Travolta, who has had his ups and downs in terms of movie-stardom. I have to say that I am impressed by the trailer, the casting, and the concept. The fact that it takes place in a subway car gives it a nice claustrophobic feel. That also means that there isn't much room for action, which means that the tension will, hopefully, be between our two leads. The stock is at H$73, down H$3 today, and down from a high of H$82. In other words, the stock has stayed high, but hasn't been moving up dramatically. Strike price is H$30, which looks right. The call is floating near H$4, while the put is - this is a little odd - in basically the same territory. Hmmmm. Mixed signals there. It's at 41% on rottentomatoes.com, with the positive reviews fairly tepid, and the negative reviews scorching. More hmmm. I'm getting a little nervous about this one. Denzel Washington and John Travolta are both stars, but stars haven't been selling movies this year. I'm thinking $25 million would be a good bet.

Stock: Short

Call: Short

Put: Long

Well, I got everything right. That's a nice feeling. IMGTH is clearly a bomb, only pulling in $5.7 million. TP123 looks solid, but not a breakout hit; I nailed the prediction exactly. At least according to the numbers as of now. We'll see what the final numbers are tomorrow, but right now, it feels good to have my numbers match so close to what is being reported.

And, of course, the Lakers won the NBA Championship tonight!

HSX: Week of May 29, 2009

Have you been wondering lately whatever happened to Alison Lohman? For a while there, she was the hot new thing, then she disappeared for several years. Or at least she seemed to. I've been thinking about her lately. I liked her in Matchstick Men, although I wasn't a fan of the movie itself, because the ending was terrible. Now she's back, in a horror movie - sorry, "supernatural thriller," "Drag Me To Hell" (DRAGM). Not much subtlety with that title! Sam Raimi, director of Spider-Man and The Evil Dead, returns to his roots. I'm sure as heck scared of the trailer, but then again I have all kinds of trouble suspending disbelief when I watch one of these, so scaring me with just the trailer is actually not that hard. The stock is doing quite well today, up more than H$2, to H$57, its high. The strike price is H$20, and the call is up solidly, to H$4, which predicts a stock price of around H$65. The put is not doing too badly, either, which is a shade surprising. It's at H$2, up 3/8 today. That sounds like noise and feels like normal trading. It's at 94% on rottentomatoes.com. We're in Star Trek territory here. It's on 2,508 screens. Unless there are very different signals tomorrow, I think we can afford to be optimistic, and toss out $25 million as a prediction. Possibly higher. The man has been developing a cult following for roughly as long as Alison Lohman has been alive.
Stock: Long
Call: Long
Put: Short

Counterprogramming against Sam Raimi is Disney/Pixar with "Up" (UP), the latest of their animated movies. They are also, as usual, counterprogramming against Hollywood in general with a movie that doesn't seem to have many cliches or obvious plot twists or even a normal premise. It's about a guy who attaches a bunch of balloons to his house and floats away, with a little boy who has sort of stowed away. The stock is at H$168, down about a half today, and off from a high of H$175. Not surprising; every Pixar brings with it a huge amount of hype, becase, well, of Pixar's rather amazing track record. So I think that's normal noise. The strike price is H$60, with the call at H$5 and change, down 3/4 today. Again, I think that's noise. The put, "UPPU," possibly the only palindromic stock symbol in the history of HSX, is floating above H$2, marginally up today. Again, noise, I think. The stock predicts an opening weekend of $62 million. It's at 98% on rottentomatoes.com. It's on 3,766 screens, including about 1,500 3D screens, which rake in even more money. Last weekend, Night At The Museum raked in $70 million (albeit over 4 days) and it's not even a particularly good movie. This should make $60 million easily. Do I hear $65? Sure, why not.
Stock: Long
Call: Long
Put: Short

UPdate Friday morning: Both stocks are strongly up this morning, and the options are moving in the expected directions. I'm sticking with my forecast.

Looks like my enthusiasm for UP had a little too much influence on my enthusiasm for DRAGM. UP did, in fact, adjust up. It cleared $68 million for the weekend, beating the strike price handily. DRAGM, however, did $16.6 million, well below the strike price. I called everything on UP right, and everything on DRAGM wrong. Hmmm. Not quite sure what went wrong there. Maybe Sam Raimi does not have quite the fan base among horror aficianadoes that I thot. Stuff to think about. But looking forward to seeing UP!

HSX: Memorial Day Weekend, 2009

We have a slightly odd weekend for HSX coming up. First, Terminator: Salvation For A Franchise is hoping on Thursday, a day early. Stocks won't adjust until Monday, Memorial Day. That's why I am posting about it now. Also, the formula is different than what it normally is. It's [Previous Box Office + (2.2*Box Office Fri-Mon)]. That makes figuring out the value of the stock a shade more complicated.

The stock is currently H$182, down $H10 today, which is really not a good sign. That's down from a high of H$215. Quite a drop. If it drops a couple more points tomorrow, it will halt around $180. If it makes $8 million on Thursday, then it has to make $172 million/2.2 over the next four days to make the price, over roughly $78 million. Add that to our assumed $8 million on Thursday, and you have a five-day total of $86 million, or roughly what Wolverine made over its opening weekend. Except that it is competing with Wolverine and Star Trek.

Don't believe the hype! I don't buy it. This movie is not being made because there's an interesting story, although that's not impossible. It's being made because the studio wants to suck some more money out of the franchise. That's not surprising, but it's also not inspiring. It's also obvious. The first two Terminator movies are great movies in and of themselves, apart from being great action movies. I didn't see the third one, and I am reasonably certain that I never will.

The director is McG, current boy wonder of Hollywood. This is only his fourth movie. Two of his first three were the Charlie's Angels movies. I've read several articles about him recently, but they all fail to mention one thing: Charlie's Angels 2 really sucks. It's just a terrible movie. I like all of the actresses who played the Angels, but the script is just awful, even by the standards of movies that are remakes of cheesy TV shows. That's an incredibly low bar, and that movie didn't manage to cross it.

It's at 37% on rottentomatoes.com, and the positive reviews are damning with faint praise. It stars Christian Bale, some guy named Sam Worthington, and, of course, a couple of actresses, none of whom have received any attention whatsoever in the marketing. And this is a franchise which featured one of the all-time great female action heroes, Linda Hamilton as Sarah Connor in T2. Damn was she hot. Her performance was one of the things that made that movie great. Don't these studio executives ever learn anything?

The strike price is H$90. This is one of those moments when you realize very quickly that the strike price was set back when the price of the stock was higher, and the hype was hotter. The call is at H$3, and sinking fast. The put is at H$5 and rising almost as fast. I think this movie is going to be lucky to crack $80 million over these five days.

Stock: Short

Call: Short

Put: Long

Update Thursday night: There are two other movies opening this weekend, but on the more-traditional Friday. Dance Flick (DANCF) is from a couple of the Wayans brothers. It's a spoof of dance movies, of which I have seen none recently. The trailer has a couple of good moments, but I'm not that intrigued. The stock is at H$27, down from H$34. Hmmm. The strike price is H$15. Because it's a three-day holiday weekend, the adjust multiplier is 2.2, which means that a $15 million opening weekend would suggest a stock price of about H$33. Way off. The call reflects that: it's at H$0.70. Ooooh, that's not good. The put, of course, is at the other end of the scale. There isn't very far the put can go, but it's going there, at H$3 and change. I don't have a lot to say about this movie, and the numbers seem to be saying it all. Expectations are low and sinking. Stock: Short
Call: Short
Put: Long

In the wanna-be blockbuster category is Night at the Museum: Battle at the Smithsonian (NMUS2), also in contention for longest and and clumsiest title of the year. I wasn't a big fan of the original; it felt a little too cliched for me. But I do like Ben Stiller, and so do many other people. He is funny in the right context. It is a humorous concept, with lots of potential. The stock is up today by H$2.50, to almost H$173, just barely off the high. The adjust multiplier is 2.2 for the three-day holiday weekend, just like it is for Dance Flick. The strike price is H$80; if it makes that, the stock will adjust to H$176. So it's close. It's at 41% on rottentomatoes.com, almost exactly the same as Dance Flick (40%). There's not much competition for comedies, but there is a lot of competition, period, in the multiplexes. Strike price is H$80, with the call below H$2, and the put above H$5. Looks like an $80 million opening weekend is optimistic. As I think about that last sentence, it's almost obviously true. $80 million for an opening weekend is almost always optimistic. This could do $60 million and probably still be very successful. Let's guess around $70 million.
Stock: Short
Call: Short
Put: Long

I was right about the hype surrounding T4: It did not, in fact, crack $80 million, only about $65 million over the five days. It adjusted down H$49. Whoa! Dance Flick actually came in slightly at the high end of expectations, at $13 million. It adjusted up about H$1.50. NMUS2 came in exactly at my prediction, $70 million (although that's only an estimate, and might be adjusted by final numbers tomorrow). It adjusted down H$16. I was slightly off on DANCF, but dead on for the other two. A good weekend for me, not so good for Mr. McG. Remember, when someone makes a movie with a barely coherent plot, with scenes obviously from several different versions of the script, it means that they probably not a very good director.

HSX: Week of May 15, 2009

Only one movie opening this weekend, but it's a doozie. We're getting metaphysical with Tom Hanks and Ron Howard as they struggle with Angels & Demons (ANDEM). That's a nice big title. It's the sequel to The Da Vinci Code, which made a bazillion dollars a couple of years ago. Anticipation for this one has been quite high. Maybe too high: the stock is at H$150, down from the high of H$175, and down more than H$8 today. The strike price is H$60, which is a good price, given the history of the stock, but I think it's a little high. The call is above H$5, but down more than a buck today, while the put is at H$2.78, up H$1 today. All three securities are sending signals that the movie is going to open below the strike price. I have the same gut instinct. It's opening on 3,527 screens, which is actually less than both Wolverine and Star Trek will have out there this week. It's getting crowded out there. It needs a PSA of about $15,700 to make the stock price. Eminently possible, I suppose, but I'm not that excited about it. Neither are the critics; it's at 40% on rottentomatoes.com, with the critics writing what I could have predicted; it's solidly professional, but highly convoluted, and not that interesting. About what you expect from Tom Hanks and Ron Howard; the high end of middlebrow. What the critics think might actually matter a bit this time, because this is very much a movie aimed at adults. I don't think it's going to bomb, but I don't think it's going to set the world on fire. I also notice that Audrey Tautou is missing, replaced by an Israeli actress. I'm sure Ayelet Zurer (AZURE - great bond symbol) is good, but I'm equally sure she was not that expensive to hire for this production. Sigh. Yet another blown chance to give a great part to an actress as famous as the men. I'm thinking somewhere around $55 million for this opening.

Stock: Short

Call: Short

Put: Long

Update Monday morning: Tom Hanks and Ron Howard don't have quite the magic they did the first time around, snagging $48 million, way below the strike price. So I got it right on all counts. Good feeling. Helped me move up one spot in the rankings. On the other hand, it did quite well internationally, bringing in $104 million. $152 million in one weekend. Pretty good for an adult drama.

HSX: Week of May 8, 2009

Just two movies this week. First up is an "urban," i.e. African-American, comedy, "Next Day Air" (NDAIR), about a shipment of cocaine that ends up delivered to the wrong apartment. That has all kinds of possibilities. I don't know some of the actors involved, but Mos Def is one of them, and I like him. Not much to go on, I realize. The stock is at H$17.17, slightly off the high of about H$19. Trend has been mostly upwards. Strike price is H$5, utterly realistic, with the call at H$2 and change, and the put between H$1 and H$2. It's at 18% at rottentomatoes.com, which doesn't really matter. It's only going out to 1,138 screens, but it only needs a PSA of about $5,600 to make the price of the stock. I've seriously underestimated the last two black movies I wrote about, Madea Goes to Jail and Obssessed, so I am going to try to avoid making that mistake this time around. Let's go with $7-$8 million.
Stock: Long
Call: Long
Put: Short

Counterprogramming against this (or maybe it's the other way around) is Star Trek (TRK11). Nothing fancy about the title, no references to the fact that this is a restart, just the name of the original TV show. The buzz is great, possibly bigger than that for Wolverine, although a Trekker (Trekkie?) friend of mine is somewhat conflicted. She's hopeful, but wasn't impressed with the trailer. I just watched it again, and realized that Star Trek has never been macho, but this trailer makes it look like this will be more of a manly movie than any previous incarnation. But that's the impression that I get from a hyper-edited, very fast-paced clip, so I could be wrong. The reviews are almost uniformly good; it's at 93% on rottentomatoes.com, which is almost unheard of. Wow. Current price is H$185, down slightly from the high, which it apparently hit yesterday. Strike price is H$65, which is in line with the price of the stock, but I think both are low. The call is at almost H$11, which predicts an opening weekend north of $75 million, and a stock above H$200. Put, of course, is about as low as can go, below half a buck. I find it odd that the price of the stock is lagging expectations of the call so dramatically, but the buzz has been great. It's on 3,849 screens, so it needs to make about $17,800 to make the stock price, and $19,400 to make the call. That's a nice chunk of change, particularly since it is still in competition with Wolverine. But by no means impossible. The one problem could be that this movie might appeal more to older audiences than young ones, and that those older folks, i.e. the one who have been watching for 40 years, might not come on opening weekend. Possible, but I doubt it. Everyone knows Star Trek. Not everybody loves it, but everybody knows it. I'm going to go with somewhere between $75 and $80 million.
Stock: Long
Call: Long
Put: As short as you possibly can.

Update Friday morning: NDAIR is down H$1.30 this morning, not a good sign. I'm sticking with it. I did some research yesterday on where this movie is playing. I checked out some Magic Johnson theaters to see how many screens it's on. I checked out theaters in Harlem, Maryland, and Atlanta. In all three, it's on two screens. I assume that Magic Johnson knows a lot more about the tastes of the urban market than I do, or just about anyone else in the country, so I am going to trust his judgment on this one. TRK11 is up H$5, boldly going into the stratosphere. This one sure looks like it is going to live long and prosper.

Update Monday morning: Looks like I learned the wrong lessons about urban films - NDAIR did, in fact, tank, as the price Friday morning indicated. Not a great loss, tho. TRK11 did about as well as expected, $76.5 million. Very close to the prediction of the stock price and the call. Can't wait to see it, myself.

HSX: Week of May 1, 2009

Summer is here! At least in the movies. Blockbuster season is about to start! Get your Summer 2009 Blockbuster Warrants!

But first, the weekend. Let's get the small stuff out of the way first, shall we? An indie animated movie called Battle for Terra (TERRA) is being released, and someone's going to lose money. Probably the people who financed it: "indie" and "animation" is usually not a good combination. It's about cute aliens facing evil humans, who are trying to take over their planet. How low are the expectations? HSX didn't even float options. It reached a high this year of H$8.83, and is down today to H$6.49. Oh that's not good. There are some recognizable names in the voice cast, which is not surprising. This is a no-lose deal for someone like Brian Cox or Amanda Peet. They can do the work in just a couple of days, get paid maybe $100,000, and then walk away. Since you can't see them, no one will associate them with it if it's a flop. Not a bad deal. For whoever is making the movie, you can get a decent number of names for a fraction of what Brad Pitt's agent would make on a live action movie. Critics are actually somewhat favorable, with a 58% rating on rottentomatoes.com. So maybe there's hope. But maybe not. It is coming out on 3-D, but even kids can see through a gimmick.
Stock: Short

Matthew McConaughney in a romantic comedy - sound familiar? Yes, but: toss in the classic Dickens tale about three ghosts haunting someone to get them to change their ways, and you have "Ghosts of Girlfriends Past" (GHOGP), about one of those guys who loves and leaves 'em and his inability to commit. Quite the high concept we have going here. Maybe not. Stock is at H$48.34. about a buck and a half off the high. Movement has been moderately upward. Jennifer Garner brings some adult sensibility and a touch of class. But she is - quite literally - in the "girlfriend" role. Of course, so are several other actresses, all of whom get to wreak some havoc on Mr. McConaughney. For this movie to work, it has to attract a fair share of women. I'm not so sure on that score. The reviews are not bad - they're terrible. 10% on rottentomatoes? Haven't seen that in a while. The strike price is H$15, which it could crack easily if the stock price is accurate. It needs to make about $18 million to hit the stock. Call is H$4.47, but down. Put is around H$1, also down. The options are clearly following the stock. For this movie to work, it has to attract a certain percentage of professional women, who tend to have a certain degree of sophistication. I think this is the moment when Matthew McConaughney becomes a parody of himself. My guess is that he has jumped the shark.
Stock: Short
Call: Short
Put: Long

And then, of course, we have the movie millions have been waiting for, the chance for so many people to have fun with the X-Men movies again, after the disaster that was X-Men 3. Shudder. Wolverine (WOLVE) tells the story of how the guy with the funky fingers got the way he is. Woo hoo! Sign me up! The stock is trading at $H225, mostly up in recent weeks. Strike price is $H80, right about where it should be. Call is actually down today, but that's because it was above H$9. The put, interestingly enough, is not underwater, but is at H$2.52. Someone's taking some risks. The strike price predicts a stock price of $H216, so they're fairly close. The call predicts a price of about $H240. So, let's see, what does this movie have going for it? A huge fan base from the first movie, a wildly popular movie star, and the first big action blockbuster of the summer. Other than that, not much. One of the main villains is Liev Schreiber, who used to be cast as the sensitive Jewish guy. We're a long way from the days of Woody Allen meeting cute with Diane Keaton. Of course, we're also a long way from the days of Moshe Dayan, so maybe the movies are catching up with the reality of the Middle East. As for the details of this movie: it's at 42% on rottentomatoes.com (as if that matters). How wide is it being released? How wide can you get? Try 4,000+ screens.
Stock: Long
Call: Long
Put: Short

Update Sunday night: It was a good weekend for predictions here at TEQP. I just about nailed everything, except the Put on GHOGP. TERRA was, in fact, a bomb, Matthew McConaughey survived, but not by much, and WOLVE did, in fact, bust wide open. WOLVE dropped by about H$8 on Friday morning, which I usually take as a sign that the stock is going to adjust downwards. This time I stuck with it, and boy am I glad I did - it adjusted up by H$17. Feels good.

And for your viewing pleasure, ladies and gentlemen, the mascot of the University of Michigan:

X-MEN ORIGINS: WOLVERINE HD

HSX: Week of April 24, 2009

We are currently in a lull before summer and its attendant blockbusters arrive. It's not exactly a great time for cinema. This week we have three movies with low to middling expectations.

First up is "Fighting," (FGHTN) Channing Tatum and Terence Howard starring in a movie that violates about the ninth or tenth rule of Fight Club: thou shalt not make a bad imitation of Fight Club. It's trading at H$25, just slightly off its high, and up more than H$4 today. That's an interesting sign. The strike price is H$10, which feels on the low side, although not totally unrealistic. The call is at H$1.61, but up 5/8 today. The put is at H$2.91, but down 5/8 today. So we are definitely seeing movement towards the high side of expectations. Critics, no surprise, are not enthralled; it's at 34% on rottentomatoes.com, not that that matters much in a movie like this. It's opening on 2,310 screens, not a bad launch. Mixed signals all the way around, although trending positive today. My bet is that it will come close to the bullseye of the strike price, right around a $10 million opening. Which means I am shorting both options.
Stock: Long
Call: Short
Put: Short
Note: Stock changed to Short on Friday morning.

Next up is a movie about another kind of fighting, this one between women, over a man. No topless fighting here! Beyonce and some other people star in Obsessed (OBSES). Ms. Knowles is a beautiful woman and a fine singer, and, I guess, a decent actress. Not really sure about that last part, but I'm sure she has great screen presence. This one is in roughly the same position as FGHTN; it's up today, to H$51 and change, just barely off its high. It has a solid upward trend. The strike price is H$20, double that for Terence and Channing, but the price issues are similar: the call is under a buck, but slightly up today, while the put is at almost H$5. So we're not feeling quite the same kind of optimism. There are no reviews posted on rottentomatoes.com, which is NOT A GOOD SIGN, because it means that it was not screened for critics. Which means that the studio does not have a lot of faith in it. This is not all that uncommon with cheesy horror movies, but you would expect the studio to show a little more respect and love to Beyonce. It's opening on 2,500 screens, just a few more than FGHTN. The prediction at boxofficemojo's Derby is that Beyonce and Co. will clear $15 million. Movies with African-American stars are often underestimated, but not always. Let's go with $15 million.
Stock: Short
Call: Short
Put: Long

Last, and also with low expectations, is The Soloist (SOLOS), a serious drama (!) about a true story. I know the story, because I read about it while it was happening. It's based a on series of columns by an LA Times columnist named Steve Lopez. He's not my favorite LA Times columnist - I think he can get a little sentimental - but he's good, and he keeps in touch with the city. He's sort of the local color commentary guy. He met a homeless man named Nathaniel Ayers, who turned out to be a former musician at Julliard, rendered destitute and dysfunctional by schizophrenia. It's a semi-inspiring story (I don't know the ending), all the more so because it's cliches come to life. The stock has been dropping like a rock, from a high of H$41 to its current price of H$27. The strike price is H$15, which it very likely will not make. The call is H$1 and something, not terribly surprising, while the put is, also understandably, around H$4. I am actually somewhat optimistic about this movie, mostly because it has a great cast. I think Robert Downey Jr. is an inspired choice to play Lopez, and I think Jamie Foxx is perfect for Ayers. There has been a lot of talk recently about the sorry state of adult dramas, especially since State of Play - featuring three Oscar winners - was handily beaten by 17 Again last weekend. I think the problem with that and Duplicity and The International before it was that they all sounded terribly cliched - thrillers revolving around corporate malfeasance. Who hasn't heard enough about that recently? This, on the other hand, is a very human story. I don't think it will make its strike price, but I think it will surprise. It's at 54% on rottentomatoes.com, with reviews all over the place - some love it, some hate it. It's opening on just 2,000 screens. I think audiences are starved for something like this. I'm going to aim high, at $13 million.
Stock: Long
Call: Short
Put: Short

Lots of uncertainty tonight, so I am going to be sure and check in tomorrow morning.

Update Friday morning: FGHTN and SOLOS are both fairly stable, FGHTN is unchanged, SOLOS is down a half. OBSES, on the other hand, is down more than H$2. I changed my mind on FGHTN, partially because the prediction on boxofficemojo.com' The Derby is $8.5 million. Also, the score on rottentomatoes.com is down to 27%. I just don't see any hook for the audience. OBSES' downward drift confirms my Short. Any movement beyond about H$1 on Friday morning is an indication one way or the other (less than that is just normal trading).

Update Monday night: Boy, have I got to stop underestimating movies I am not interested in. OBSES blew out all predictions, particularly mine, opening at $28 million. I also have to start doing better research. FGHTN, on the other hand, came in pretty much right on target, opening at $11 million, although my short of the stock was slightly off. I aimed too high for SOLOS; it came on the low end of expectations, at $9 million. I got the stock and the put wrong, but at least I got the call right. Amazingly enough, I actually went up one in the rankings, despite losing H$1 million plus on Beyonce.

HSX: Week of April 17, 2009

Opening this weekend is Zac Efron's attempt to transcend High School Musical, "17 Again," Jason Statham's latest attempt to keep his career going, "Crank 2," and the latest attempt by Hollywood to keep adults coming to serious movies by making movies about nefarious corporate conspiracies "State of Play."

17 Again (SVNTN) sounds like it could be fun, for the right crowd. The stock has moved up nicely of late, hovering in the low 50's, up almost H$5 today. The strike price is H$10 - huh? - absurdly low, if the stock is even remotely accurate. Call is way up, above H$7. Put of course is down about as far as possible, currently at H$0.31. This one looks easy to call.
Stock: Long
Call: Long
Put: Short

"He was dead. But he got better." Not bad for a tagline. In Crank 2: High Voltage (CRAN2), Jason Statham loses his heart - literally. Some Chinese mobsters steal it, and replace it with a battery-powered one, that needs to be jump-started every so often. This movie certainly earns points for creativity of plot. The stock has been floating around in the mid-30's for a while, currently H$35.48, just barely off its high. You know what you're getting with a Jason Statham movie. A B movie with good production values. HSX set the strike price the same as 17 Again, H$10, but the market is not quite as optimistic. Still, the call is at H$4, although it's down today. The put is up today, to just barely above a buck, so the signals suggest about a $13 million opening weekend. Which would be slightly more than the first movie. That's reasonable.
Stock: Long
Call: Long
Put: Short

The most interesting play this weekend is State of Play (STPLY), yet another movie about corporate/political malfeasance and the beautiful people who get tangled in the webs thereof. This stock is dropping like a rock. It's at H$30 as of this writing, down from a high of H$57. Oh boy. HSX was originally optimistic about the strike price, setting it at H$15, back when that made a certain amount of sense. Not anymore. The call is underwater and under a buck, while the put is rising fast, almost at H$4. With this cast (Russell Crowe, Ben Affleck, Rachel McAdams, Helen Mirren), I think it should make $10 million on its opening weekend, but probably not much more than that.
Stock: Short
Call: Short
Put: Long

Update Sunday night: Well, I got 17 Again right, but almost everything else wrong. State of Play looks like it might be a moderate hit, although it didn't make its strike price. Crank 2, on the other hand, crashed. It will probably still make money, because its production budget was probably quite low, but I sure didn't make money on it.

The one good thing to come out of Crank 2 for me was the review in the LA Times, which had some great lines:

"Balanced at the point where conceptual brilliance and pure stupidity meet,"

"But plausibility is not the point. It's more like the enemy."

"Characters like Bai Ling's manic, pidgin-spouting prostitute and Clifton Collins Jr.'s Elvis-obsessed gangster don't flirt with caricature so much as they ravish it, overloading stock stereotypes until they explode"

Great review, by a critic I've never heard of (at least in terms of movie reviews), Sam Adams. Looking forward to more from this guy.

HSX: Week of April 10

Three movies coming out this weekend, but not a lot in the way of quality, or at least seriousness. First up Dragonball Evolution (DRGNB), based on the animated series of the same name. I've only seen a couple of scenes from the series, but I was seriously underwhelmed. The animation is very quality, about as cheap as possible. Scenes largely consist of a character or characters not in some action pose but not actually moving. Only their mouths are moving as they are talking. This is an incredibly easy way to produce animation - copy one cel multiple times, only changing the characters' mouths. Not particularly interesting, in my opinion, but also not that unusual - watch The Flintstones, and you will see something similar. Speed Racer uses the same approach. It works for Saturday mornings. The stock is about as cheap as the animation in the predecessor series, trading at H$20, down from a high of H$58. That's a pretty serious evaporation of hype. It's down H$2 today. The strike price is H$10, which at this point is laughable. The call is sinking fast, as it should. The put is at H$4, a rarity, particularly for a strike price this low. Say goodbye to this Japanese import.
Stock: Short
Call: Short
Put: Long

Next up is Hannah Montana: The Movie (HANNA). I know two things about this movie: Miley Cyrus seems to be a cultural phenomenon with few equals, and I am not going to see it. The stock is trading at H$76, which seems really high, but is right around where it's been for a while. The screencount is 3,118, about what I expect. It would need to make $9,000 per screen to make the price. That's entirely possible. Strike price is H$25, with the call fairly high, above H$6, and the put below H$2 and sinking fast. The call is down almost a buck today, and the stock is down H$3. The Jonas Bros. movie was a major disappointment. I'm not sure Miley is going to live up to the hype. There is much more room on the downside than the upside.
Stock: Short
Call: Short
Put: Long

Last and probably not least is Observe and Report (OBSRV), the second of the year's "mall cop" movies, after Kevin James' "Paul Blart: Mall Cop." That one did extremely well, pulling in well over $100 million. I'm not so optimistic about Seth Rogen's chances. It seems a little dark, and I'm not quite sure where the humor is. Stock is at H$44, down H$2 today, and down from a high of H$60. The strike price is H$15. Call is at H$5, but down. There's a serious imbalance between the price of the stock and the call. It would have to clear $20 million to justify the price of the call, which would mean the price of the stock would be H$54. The put, meanwhile, is only about a buck and a half, but it's up today. My observations lead me to report that this is not looking great.
Stock: Short
Call: Short
Put: Long

Update Sunday night: Well, two out of three ain't bad. This was an unusual week for me: I shorted all the openers. One of those was a mistake: Miley Cyrus is all that, as she opened with $34 million. I was betting against a very high call, which was not a good idea. On the other hand, I also bet against a high call on OBSRV, and that worked out quite well; it only cleared $11 million, well below the strike price. Dragonball Evolution was, as I predicted, a bomb, with a rather disappointing take of just $4 million. I shorted it way back when it was H$48, so I made a bundle off this stinker. The lesson of the week would seem to be that it's a bad idea to bet against Miley Cyrus, but not to worry about betting against a high call. I made H$15 on OBSRV, but lost H$16 on HANNA, and then made H$6 on DRGNB, so it was a positive week overall.

HSX: Week of April 3, 2009

Only two movies opening this weekend. First and foremost is Fast and Furious (FFUR4), number 4 in the franchise. The original cast members from the first movie return, presumably older and wiser and, for some reason, with less use for the definite article in the title of their movie. Originally, it was "The Fast and The Furious," now it's just "Fast and Furious." I'm not sure what precipitated the change from nouns to adjectives. I sort of preferred the original. Not that I've seen any of the movies.

The stock is bumping the roof, hitting H$121 today, up H$7.50. I can't remember the last time I saw that kind of an increase the day before a movie's release. It's also a new high. Strike price is H$40, with the call at H$5.77, and the put at H$1.04, right where it should be. I shorted the stock of the original movie, and was seriously burned when it adjusted upwards by something like H$50. Never going to forget that one. Not doing that again. The stock predicts an opening of about $45 million, as does the call. The critics are not liking the retread thing; it's at 18% at rottentomatoes.com. But somehow I am not worried about what critics think about this movie. It's on 3,400 screens, a nice wide release. Needs to gross about $13,000 per screen to make $45 million. I'm going to go there.
Stock: Long
Call: Long
Put: Short

Next up is Adventureland (ADVNL), also staring young people and, one would assume, adventure, but, as is to be expected, rather on the opposite end of the cultural spectrum from Vin Diesel and friends. This one looks like an indie comedy coming-of-age thing. Might be funny, although the trailer didn't grab me. Stock is floating in the low H$20's, with no real trend in evidence. Floating. Strike price is H$5, fairly minimal, with the call at H$4 and the put below H$1. Also at the opposite end of the spectrum from the cars-and-chicks crowd are the critics, who are practically swooning, giving it an 86% approval rating at rottentomatoes.com. That can't hurt. The plot revolves around a guy who has a summer job at an amusement park and learns important lessons in life. Every generation needs to learn those lessons. I was at an amusement part exactly a week ago (Disneyland), with my cousin, who happened to have a summer job once at an amusement park (Cedar Point). He mentioned that the hot girls tended to have the cool jobs at the great rides, because that's where the teenage boys congregated. A smidgen of synchonicity in my life. Let's be optimistic, and think in terms of a $7-$8 million opening weekend.
Stock: Long
Call: Long
Put: Short

Update Sunday night: Wow, that was interesting. I don't think I have seen a movie this badly underestimated since Mel Gibson's Passion of the Christ. Did I say a $45 million opening weekend? Did I say that? Bump that up by about 60%, a nice round extra $27 million, so we're at $72 million. It adjusted up by H$69. That's very nice. If I were Vin Diesel, I would announce my retirement tomorrow. Dude, it's all downhill from here.

Adventureland was not quite so adventurous, posting good numbers for an indie comedy, $6 million, but that was at the low end of expectations. It adjusted down by H$7. Not a major loss, but a loss. It will probably still be successful.

One nice aspect of a major adjustment upwards is that it acts almost like a mini-stimulus package. As people start dumping the stock, they take all the money that they made, and start buying other stocks. Since I own every stock on the exchange, that's generally good for me.

HSX: Week of March 27, 2009

Once upon a time there was an organization called the World Wrestling Federation, which used the acronym WWF. But there was also an organization called the World Wildlife Fund, which also used the acronym WWF. The advocates for warm and fuzzy animals sued the hyper-aggressive bizarre guys in spandex for the rights to the acronym, and won. So the WWF in spandex became the WWE, which stands for World Wrestling Entertainment or something. Whatever it is, it's releasing a movie this week called - appropriately enough - 12 rounds, starring some guy named John Cena (12RDS). I've heard the name, couldn't attach it to a face. As for the movie, it is what it is. The stock is trending up nicely, currently at H$19, just barely off its high. The strike price is H$5, about what I expect. The call is trading at H$4, while the put is below a single dollar. All signs point to an opening weekend between $7 and $9 million.
Stock: Long
Call: Long
Put: Short

Moving just slightly up the scale of artistic credibilty, we encounter The Haunting In Connecticut (HAUCT). No, it's not about Chris Dodd's too-cozy relationships with investment bankers, it's about a house with issues. The stock doesn't seem to have too many, moving steadily up to perch at H$35. Strike price is H$10, very expected, with the call at H$4 and the put headed down to where it's expected, to the nether regions, but not quite there yet, hanging in at a buck and a half. Not a great week for the Nutmeg State, although I think the potential recruiting mini-scandal at UCONN doesn't sound serious. Go Huskies!
Stock: Long
Call: Long
Put: Short

Saving the best, hopefully, for last, we have Monsters vs. Aliens, the latest in animated absurdity from DreamWorks. They ain't Pixar, yet, but they're trying really hard to get there. I like the trailer, and I, for one, could really use some comic relief right about now. I have a feeling the rest of the country probably feels the same. One lesson they seemed to have learned: with animation, sell the movie, not the stars. This one features the voices of Seth Rogen, Reese Witherspoon, and Paul Rudd, three hot names, but they are nowhere in the advertising. Good call, Mr. Katzenberg. People don't go to see animated movies because of the voices.
The stock (MVSA)is suffering from overripe overhyping; it's been drifting down from a high of H$161 to H$142. The strike price is H$55, which looks a tad optimistic, but the call is floating nice and high above H$5. The put, however, is also looking up, at H$3+. Mixed signals all the way around. One positive is that's it's being released in 3D, which should drive some traffic, and boost the BO; 3D ticket prices tend to be higher. This is one to keep an eye on. I'm going mostly on faith and a need for comic relief.
Stock: Long
Call: Long:
Put: Short

Note: I am posting this on Wednesday afternoon, because I am going to Disneyland tomorrow, and might not be able to update this tomorrow night. I'm not sure that screencounts and critics' ratings would be accurate tonight, but I will try to check those tomorrow and post whatever I can.

Update Sunday afternoon: I didn't have a chance to check the screencounts or critics' ratings, but I don't think it mattered. I was mostly right. 12 Rounds came in slightly below expectations at $5.3 million, which beat the strike price, but was way below the call. So I got the stock and the call wrong, but the put right. The Haunting in Connecticut was a nice surprise, hauling in $23 million, WAY above predictions, and adjusting up by H$26. Nailed that one. Looks like Monsters v. Aliens will be a hit, possibly a monster one, as it brought in $58 million, and adjusted up H$8. That was slightly below what the call was predicting, but that's pretty close, and if you bought the call at the IPO price of H$2, you made money. So I am going to give myself credit for 7 of 9 this weekend (the wrong ones being the stock and the call for 12RDS).

HSX: Week of March 20, 2009

She's back! Julia Roberts, that is. After taking a break to raise her kids, America's Sweetheart is back with some intrigue on her mind. She stars in Duplicity (DUPLC) with Clive Owen, who recently starred in a similar movie, The International, with Naomi Watts. Hopefully Mr. Owen will have better luck with a more famous star; I can't even remember Naomi Watts in the trailer for The International, and it was not a smash. The signs are not great. The stock is at H$43, up H$2, but that's down from a high of H$51, and the trend is downward. The strike price for the options is H$15, just about dead on. The call is at H$3, but that's down more than H$1 today, really not a good sign. The put, meanwhile is just below H$2, marginally up today. The screen count is 2,575. So the stock, the call, and the put are all suggesting about $15 million. It needs a per screen average (PSA) of about $5,800 to make the stock price. One very good sign is that the critics are giving it props, with a 65% score on rottentomatoes.com. That makes me a little more optimistic. Let's put the prediction in the high teens, around $18 million. There's a reason Julia Roberts is one of the most actresses in the world.
Stock: Long
Call: Long
Put: Short

In the "bromance comedy" category, a new genre, is "I Love You, Man," (ILVUM), a comedy about a guy who needs to find a new best friend for his wedding. One thing bothers me about the trailer: he apparently works in LA, and he wears a tie. That's a true sign of a geek. I don't have much interest in it, but I can see the appeal. The stock is at H$54, down almost H$5 for the day, and down from a high of H$61. We certainly don't like that sign. Strike price is H$20, on target. Call is down more than a buck today to H$3.56. The put is up H$0.75, to H$2. Something similar to Duplicity seems to be happening here: the market is having second thots. Better keep a close eye on this one tomorrow morning. Screen count is 2,711. The stock price is predicting almost exactly a H$20 million opening. Needs a PSA of about $7,400 for that, very possible. Critics are heaping praise on this; it's scoring 77% at rottentomatoes.com. It could be a great excuse for a date movie. I'm going to go with the market and call it at $20-$22 million. Hitting the sweet spot between the call and put means shorting both.
Stock: Long
Call: Short
Put: Short

Next up is "Knowing" (KNOWI) about Nicholas Cage staring - what do you know - in some kind of supernatural thriller. Yawn. I can barely muster the energy to watch the trailer. How many movies like this has Nicholas Cage made? Too many for me to count, that's for damn sure. Just like our other two releases, the stock is down from its high. It's H$46, down from $H51, although it's trending slightly upwards. Strike price is H$15, and the call is, once again, down, to H$4. Quite a little trend we've got going here this weekend. Put is unchanged at H$1.22. It's going out of 3,332 screens, so the studio is optimistic. Critics are not; it's down in the basement at 21% on rottentomatoes.com. Time for a bad pun; I think this will be a "disaster" movie in more ways than one.
Stock: Short
Call: Short
Put: Long

Update Friday morning: All three stocks are down this morning, not a good sign. My gut is telling me that Duplicity is down to about where it will open, so I'm staying long. The reviews have just been too good. I Love You, Man, is down H$1.50, which feels like normal noise. Knowing, on the other hand, looks like a bomb in the making.

Update Sunday night: I was mostly right about DUPLI and ILVUM, slightly too optmistic on both. The market nailed DUPLI, off by a grand total of 42 cents, with a take of $14 million. Predictions were off for ILVUM by about H$4; the take was $18 million. But we all sold Nicholas Cage way too short. KNOWI adjusted north by H$22, with a healthy $24 million for the weekend. Why do I always need reminders that the market can be tragically wrong? I also need to be constantly reminded that the danger in shorting is that there is usually more upside potential than downside. Particularly with an A-list star. My bad.

HSX: Week of March 13, 2009

We've got three movies opening this weekend, a family movie/action movie (always a popular genre), a remake of a movie from the 70's: Race to Witch Mountain (WCMTN). I remember liking the movie way back when I was knee high to Variety. The trailer is funny. It stars Dwayne "The Rock" Johnson, who is becoming a decent movie star; he looks like he might be the next Arnold. The movie is at H$76, down H$4 for today, with a moderately upward trend. The call is just below H$4, but it's down H$1.25 for the day, which is not a good sign. It would have to clear $34 million to make the strike price (H$30), which would mean that it would adjust up to H$102. That's highly unlikely. Meanwhile, the put is moving up. It's on 3,187 screens, a good wide release. It needs to make almost $8,800 per screen (PSA - per screen average) to make the strike price. Last week a movie with nostalgia as its major marketing hook did not do as well as expected. I would like to see this movie, but I'm not rushing out to see it this weekend. It's at 43% on rottentomatoes.com. Finally, the Derby on boxofficemojo.com is predicting an opening of $28 million. Things are not looking good. I'm more comfortable with an opening in the low 20's.
Stock: Short
Call: Short
Put: Long

Then we have another horror movie remake - pretty much required, I suppose, for the second Friday the 13th in two months - The Last House on the Left (LHLFT). I know nothing about it, except that the original is from Wes Craven, who has a great track record in horror. Also, the stock is trading at its high, H$37, and the trend is solidly upward. The call is above H$4, right where it should be for a strike price of H$10. And, as expected, the put is sinking, to below H$1. Boxofficemojo is predicting $14 million, roughly the same as HSX. Not hard to call this one.
Stock: Long
Call: Long
Put: Short

The latest effort to convince the world that young American men are crude, horny beasts takes the form of Miss March (MSMAR), about a guy who wakes up after four years in a coma to find out that his former girlfriend is now a good personal friend of Hugh Hefner, and is the Miss March of the title. Fortunately for all of us with some semblance of taste, it looks like it's bombing, just like Fired Up. The stock is tanking. The strike price is about as low as possible, H$5, but even at that price, the call is not looking good. The put isn't in great shape either - I think it's going to come close to the strike price, so shorting both options is the option I'm going to go with. I'm guessing that it's going to hit about $5-$6 million, then hopefully disappear. Not that I am entirely opposed to Playboy, but this just looks stupid.
Stock: Short
Call: Short
Put: Short

Update Monday morning: My predictions, and those of the market, were very good this weekend. Race to Witch Mountain came in at $25 million, and The Last House on the Left came in at $14 million. The stocks for both adjusted by about H$2, so the market's predictions were very close. I was a little low for WCMTN, right on for LHLFT. Miss March came in below its ridiculously low expectations, at just $2.35 million. Someone's embarrassed.