October 28: Michael Jackson's This Is It

There's only one movie opening this week, and it opened on Wednesday: Michael Jackson's This Is It (JACKO). So I missed it, since today is Thursday. C'est la vie. It closed at H$123, which seems very high, since it is only going to be showing for two weeks (although that could be extended). Strike price is H$35, and the call (TIICA) was through the roof at close, at H$7.85, while the put (TIIPU) was sinking, down to H$1.22. I hope everyone had this long!

Note, however, that it has been dropping on Cantor Exchange. It was around $150 a few days ago, now it's back down to the HSX price. It's down $14 today, so reality may be setting in. Then again, it may be incredibly cheap.

Here's the trailer.

Update Tuesday morning: I had technical problems with my Internet connection over the weekend, so I couldn't update. I was decidedly undecided about This Is It. I had a feeling the stock was way overpriced, because of the hype surrounding him, but I wasn't sure, because this is such an unusual situation. Should have been a little more skeptical: it only did $21 million this weekend, nowhere near $35. I should have remembered the question I ask about movies with high prices: what are the odds that it will go up from here? The odds of it adjusting up were not as good as the odds of it adjusting down. Yet another lesson learned.

October 23, 2009: Astro Boy, Amelia, Saw 6, and Cirque du Freak

A nice broad range of movies this weekend, although nothing I am all that excited about for myself.

First up is Astro Boy, (ASBOY) based on a Japanese cartoon. I know next to nothing about this cartoon. I'd never heard about it before. I haven't seen any marketing besides the trailer, but since I am several steps removed from the target demo, that is not surprising. What I do know is that the stock is tanking. It reached a high of H$57 earlier this year, was at H$57 earlier this month, and is currently down to H$32. That's a precipitous drop. So this boy can fly - and that's special because . . . ? I also just noticed that the IPO date was Oct. 11, 1999. So this stock has been around for ten years. Talk about development hell. Strike price is H$15, very high for this stock price. Call (ASBCA) is at H$2.65 and dropping, while the put (ASBPU) is going the opposite direction, and is at H$2.52 . It's going out of 3,000 screens, but I don't think that's going to do much good. It's well with critics, with a 70% rating on rottentomatoes.com, so that is something to consider. So it might surprise on the upside, but I doubt it. It is trading very differently on cantorexchange.com, and that is a strong counterindicator. But I would be surprised if it does more than $12 million.

Stock: Short

Call: Short

Put: Long

'Astro Boy' Trailer

Cirque du Freak is another movie based on a popular children's movie, and, like Astro Boy, I've never heard of it. Also like Astro Boy, the stock (VAMPA) is tanking, down from a recent high of H$41 to H$22. The strike price is H$10, which is a little more reasonable, and the call (VAMCA) is trading high, almost at H$3. The put (VAMPU), however is also above H$2, although only about a quarter above. It's going out on 2,700+ screens, but the critics are savaging it, with only 25% on RT. It's marginally higher on Cantor, but only about $30. That sounds realistic. Vampire fans have lots of material to choose from these days. I think $9-10 million is about right.

Stock: Long, but only because it's down so far already

Call: Short

Put: Short

Saw 6 (SAW6) is the latest entry in this particular horror franchise. Every other studio must have a lot of respect for Lionsgate, because most of them released their other horror movies well before this one. Stock is at H$71, near its high. Strike price is at H$30, which is about right for this franchise - that's where several of the last of these movies have debuted. But the call (SA6CA) is above H$3. That doesn't sound right, because franchises like this eventually wear out their welcome. The put (SA6PU) is also going up, aiming at H$3. I'm sure it's going out on lots of screens. Yep, 3,000+. But it also has competition; Paranormal Activity is still at the beginning of its hot streak, and that could take lots of business from this movie. I have no idea what critics think of it, because there are no reviews on RT. That would be because it hasn't been screened for critics. Never a good sign, although it probably doesn't matter much this time around. This is a twist: the price on Cantor is way below the price on HSX. That's different. It's around $60 on Cantor. So HSX is predicting $26 million, Cantor around $22 million. I'm thinking somewhere around $22-25 million.

Stock: Short

Call: Short

Put: Long

To round out the weekend, there's the heartwarming tale of Amelia Earhart, "Amelia" (AMELA). The stock is tanking, it's down to H$18, from a high of $42, and the critics are not impressed (30% on RT). Strike price is H$10, with the call (AMECA) barely over a buck, and the put (AMEPU) is soaring, like the legendary aviator herself. It's only going out on 800 screens. It's at roughly the same price on Cantor, in the low $20's. But I think all those signs are wrong. This is one time I am betting strongly against the market. This is the second biopic of a famous 20th century woman, played by a multiple-Oscar winning actress, this year. The other was Meryl Streep in Julia & Julia. That was a solid movie, although I didn't care for the part with Julie Powell; I though it was very badly written. That did quite well, and it may be a better movie than this one. But for all her charm and sense of adventure, Julia Child was still playing around in the kitchen. Amelia Earhart took risks that no other woman had ever taken. In terms of an inspiring story, she has few equals. I think Hillary Swank is perfectly cast. There are people out there who will see this movie, and not another movie for months. It doesn't really matter how good it is; it just has to be decent. It may very well be a maudlin tearjerker. But it is also a one-of-a-kind movie. It's the only movie about her that I know of. So I am going all in.

Stock: Long

Call: Long

Put: Short

'Amelia' Theatrical Trailer @ Yahoo! Video

Another interesting weekend at the box office. I got a couple of things right: I nailed ASBOY ($7 million) and SAW6 ($14 million), getting all three right. Both of those adjusted down. I was wrong about VAMPA ($6 million) and AMELA ($4 million), because both of those adjusted down, as well. I was right about VAMPA's call, and that put me above .500 for the weekend - I got 7 out of the 12. Most fortunately, I got the big one right - SAW6 only pulled in $14 million, and adjusted down by H$30.

There were a couple of great lessons learned this weekend. First, the quality of a film really does matter - AMELA got bad reviews, and that was reflected in the box office. I'm not a big fan of Mira Nair, and I should have taken that into account. Second, this whole business of "branding" movies, i.e., making movies either as part of a franchise or based on other works, is not going so well. Three of the four movies this weekend fit that definition. SAW6 is, obviously a sequel. ASBOY is based on a decades-old cartoon. VAMPA is based on a series of kids' books. The fourth movie, meanwhile, is based on a famous person's life. In other words, there is not an original idea among the four. The one movie that was based on an original idea - PNACT - swamped them all, taking $22 million. I've said it before, and I will say it again: the best way to make money in the movie business is to make a good movie. Period. End of story.

Another lesson, more of a reminder, really, for me, was that each movie has to be considered mostly on its own merits. I have to put myself in the shoes of a hypothetical moviegoer - would I pay $10 to see this movie?

The very last lesson from this weekend is that screen counts count - AMELA only opened on 800 screens, which I am sure depressed the box office. It was also not a strong sign from the studio.

October 16, 2009: Law Abiding Paranormal Stepfather Goes Where The Wild Things Are

We've got a solid diversity of movies this week. An action thriller, a couple of horrors/thrillers, and one kid's movie with monsters. So no comedies.

Law Abiding Citizen (LATCZ) stars Jamie Foxx as an assistant DA and Gerard Butler as a man bent on vengeance after the justice system lets him down. Nice to see the white guy as the bad one. Foxx and Butler have both been in good and bad movies, and both are nominally good box office draws. It's directed by F. Gary Gray, a solid guy. Trailer looks good. Stock has been mostly up, but is retreating. It's at H$36, off from a high of H$47. The strike price is H$15, which looks a smidgen unrealistic, but the call (LACCA) is up H$3, so there's a chunk of optimism there. The put (LACPU) is below H$2, so the signals are in sync there. It's in the high $40's on the Cantor Exchange, which is a good sign. It's going to be interesting to see which is right - HSX or Cantor. It's going out on about 2,700 screens, not the widest release, but not bad. It's too early to get a good critical read. The signs are mostly positive.

Stock: Long

Call: Long

Put: Short

'Law Abiding Citizen' Theatrical Trailer @ Yahoo! Video

The first horror movie of the week is the more "normal" one, at least in terms of production and distribution. Stepfather (STPFT) looks like a decent proposition, a new addition to the family who isn't really Mr. Nice Guy. I find it scary, but I'm not a good judge of these things. The stock has never been very high, and has been drifting lower, topping out at H$22 and currently about H$17. That strikes me as very low. Strike price is H$10, which may have been a shade high, but H$5 would have been ridiculously low. Call (SPFCA) has been plummeting, and is barely above a buck. That makes sense, because this does not look like a $10 million opening weekend movie. Put (SPFPU) is rising, and may hit H$3. It should also be going out on about 2,700 screens. No reviews yet. Traders on Cantor are, again, a little more optimistic; it's above $20 there. I think this is underestimated by the market, and I'm not sure why. I think there's more potential on the upside than the downside.

Stock: Long

Call: Short

Put: Short

'Stepfather' Theatrical Trailer @ Yahoo! Video

The next movie is already the most profitable movie of the year, and will easily be one of the most profitable ever made, measured by return on investment. It was made for $11,000. Yes, for the cost of a decent used car. Paranormal Activity (PNACT) is taking the country by storm. Stock is at H$44, and has been going straight up. There are no derivatives, and it is not listed on Cantor. Which is a bummer, because I think it would be a great opportunity to make some serious cash. We're not really quite sure how many theaters it's expanding to, because the studio, Paramount, is asking fans to ask for it. My guess is that it will have an IPO (or ICO) on Cantor when it hits 650 screens, and they don't know if it will hit that many. It's at 85% on rottentomatoes.com. One note: it will adjust at previous box office + 3.0 x this weekend. Previous box office is about $9 million. Subtract that from H$44, you get H$35, which means that it has to do about $10 million. Guess what my call is.

Stock: Long

@ Yahoo! Video

And there's Where The Wild Things Are, one of the most highly anticipated movies of the year, based on the Maurice Sendak book. The stock (WILD) has exhibited the classic signs of hype and backlash; it marched steadily up to almost H$130, but has crashed badly in the last couple of weeks, down to the mid-H$90's. That's a bit of a recovery from H$89. The strike price is H$35, with the call (WILCA) above H$4. H$96 predicts a $35 million opening, so the call is a shade more optimistic than the stock, but not by much. The put (WILPU) is behaving as expected, dropping to below H$2. Traders on Cantor are much more optimistic, and it is at $115. It's the widest release of this week, on 3,500+ screens. Critics are mostly happy, with 67% approval on rottentomatoes.com, and many are absolutely in love with it. I'm not captivated - I'm not feeling the love from the trailer. But I don't want to bet against this kind of hype.

Stock: Long

Call: Long

Put: Short

@ Yahoo! Video

Update Sunday night: I had a moderately good weekend; I got three out of four stocks right but I only got 3 out of the 6 options right. My thinking on WILD could have been better - there was more potential on the downside than the upside. It did $32 million, which was very good, but still sort of what the market was predicting. $30 million was much more possible than $40 million.

The contrast between HSX and Cantor Exchange was interesting this weekend. HSX was closer on WILD, even though it was off. WILD had been dropping, and that trend was right. On Cantor, however, WILD exploded upwards; I shorted it at $115.25. Feeling really good about that right now. However, HSX was wrong STPFT and LACTZ; both had been drifting steadily down, but adjusted dramatically up, LACTZ by H$25, and STPFT by H$18. But both were trending up on Cantor by Friday, and the difference between HSX and Cantor was dramatic; LACTZ was trading in the $40's on Friday, while it halted at H$32. That's a 30% difference. STPFT also never dropped very low on Cantor, and was nowhere nearly as low as it was on HSX. PNACT

So Cantor was better on the stocks that went up (LACTZ, STPFT), but HSX was better on the one stock that went down (WILD). Interesting to note that. That was certainly true last week, when Couples Retreat adjusted up strongly, which HSX missed completely (as did I).

October 9, 2009: Couples Retreat

There is only one movie opening wide this weekend, and I have no idea why it has no competition, because if I were a studio execuctive, I would sure as heck counterprogram against this. It's "Couples Retreat," (CPLRT), starring Vince Vaughn, a couple of his buddies, and some cute women who look good in bikinis. I do not understand the appeal of this movie, and I understand the price of the stock even less. It's been floating above H$80 for a couple of weeks. That's a $30 million opening weekend. I just don't buy that. The price has been dropping; it's at H$75, down from H$86. The strike price is right on the money, at least given the recent price of the stock, at H$30. The call (CPLCA) is at H$2 and change, although it is dropping. Makes sense given the stock price, but I have no idea why anyone would go long on the call. This does not look like a $35 million movie. The put (CPLPU) is rising, coming close to H$3, which makes more sense.

I just don't sense anything original about this movie. It looks like a frat boy comedy for adults. Which strikes me as a contradiction. It's opening on 3,000 screens - not surprising, particularly given the lack of competition. Boxofficemojo.com's Derby predicts $26 million, and I think that's a little high. It's at 8% on rottentomatoes.com, so apparently critics agree with me.
Stock: Short
Call: Short
Put: Long

'Couples Retreat' Theatrical Trailer @ Yahoo! Video

Update Monday morning: OK, I found out why there was no counterprogramming against this movie: it was much more popular than I was expecting. I mentioned this to a friend, with a perplexed expression on my face, and he had a two-word answer: "date movie." Which suddenly explained it: couples could go see this. The men were attracted by the women in bikinis, and the women were attracted by the idea of going to see a movie about relationships. So it opened with more than $35 million, and adjusted up. Weekly opportunities for more humility, that's what HSX offers.

I did learn something very interesting this weekend: the price of this movie on cantorexchange.com was very different than it was on HSX. It halted at H$69 on HSX on Friday, but it was trading about 20 points higher, in the high 80's, on Cantor Exchange. I shorted it on Cantor, thinking that I was taking advantage of a great opportunity for arbitrage. But the price on Cantor, even though it was much more thinly traded, was actually much more accurate. I guess people playing with semi-real money do better research, and have a better idea of what they are doing, than people playing a game. At least that was the case this weekend.

October 2, 2009: The Invention of Lying, Whip It, Zombieland

We have three comedies this weekend, three rather different comedies, and not a family film among them.

First up is The Invention of Lying (INVLY), in which Ricky Gervais plays a man who lives in a world where everyone always tells the truth. He, however, learns how to lie, which makes his life quite interesting. I like Gervais, and I like Jennifer Garner, the romantic object of his affection, but boy is this stock not doing well. It's down from a high of H$48 to H$29 today. HSX set the strike price at H$15, which was reasonable a couple of weeks ago. Now it's just depressing. But this is also a great opportunity to make some easy money off the options. The call (ILYCA) is below a buck, and down it will continue to go - the stock is predicting somewhere around $10 million this weekend, nowhere near $15 million. The put (ILYPU) is at H$3, and even that might be cheap. It's going out on 1,700 screens, which is not bad, but not a very wide release. That means the studio doesn't have blowout expectations. Critics like it; it's at 61% on rottentomatoes.com. I have a feeling the stock drop was the result of serious overhyping. This price feels much more realistic. What I like about it is that it's a very original idea. One problem I have is that it feels very much like our world, except that everybody always tells the truth. But if it was always that way, everyone would have adapted appropriately, and a large part of the comedy seems to come from Gervais' character surprise at some of the truths that he is being told. I am cautiously optimistic that it will be a pleasant surprise on the upside. But even at $10-12 million, the strike price is still ridiculous.

Stock: Long

Call: Short

Put: Long

'Invention of Lying' Theatrical Trailer @ Yahoo! Video

Drew Barrymore is putting all of her Hollywood experience to use in her directing debut, "Whip It" (WHIPT), about a teenage girl who joins a roller derby team. She's also co-starring, which is gutsy, but possibly a smart move. Stock price climbed quite nicely for a while, dropped for a few days, but is picking up today. High was H$34, and it's currently H$26. So not a terrible drop. It feels like a somewhat generic "rebellious-teenager-coming-of-age" movie, but every generation needs movies like this, and Drew Barrymore directing certainly fits well with the message. Of course, it might look generic to me because it doesn't really resonate with me. It's fairly narrowly targeted, but it's also very precisely targeted, and I ain't in this demographic. Strike price is a little more reasonably priced at H$10. Even so, the call (WHPCA) is sinking, down to H$1.35, while the put (WHPPU) is rising, within range of two and a half bucks. We have a disconnect here between the put and the stock price. The put suggests an opening of around $7.5 million, while the stock suggests an opening closer to $10 million. It's going out on 2,100 screens, a good release for a movie that is somewhere between a good indie and a studio movie. It's being released by Fox Searchlight, so this makes sense. It's at 80% on rottentomatoes.com, so it's probably actually a good movie. Drew Barrymore could have chosen just about any script for her directing debut. The fact that she chose this one is a healthy sign.

Stock: Long

Call: Long

Put: Short

'Whip It' Theatrical Trailer @ Yahoo! Video

Now we come to the movie with the big guns this weekend, and I do mean big guns. Zombieland (ZMBLN) is about zombies taking over the world, and the few remaining normal people who have to somehow survive. Not the most original plot, but the buzz is great, and the stock is doing quite well. It's currently at H$59, just barely down from a high of H$62. The strike price is H$20, which, in contrast to INVLY, feels rather on the low side. Call (ZMBCA) is solidly above H$3, while the put (ZMBPU) has floated down to the IPO price, H$2. I'm surprised the put is that high, but apparently some people don't like zombies. It's going out on 2,900 screens, a good wide release. Critics are enthusiastic, with an 84% rating on RT. It's an R-rated comedy, but so is The Hangover, and that made $45 million on its opening weekend, on the way to a worldwide gross of 10 times that. The stock and call are predicting $22-$24 million, but I think $30 million is not out of the question.

Stock: Long

Call: Long

Put: Short

'Zombieland' Theatrical Trailer @ Yahoo! Video

Well this is a little embarrassing. I was right about Zombieland, if a shade optimstic; it grossed $25 million and adjusted up H$11, to H$67. On INVLY and WHIPT, however, I was totally off. Each adjusted down, although INVLY by H$4. It grossed $7.3 million. Drew Barrymore apparently does not have the star power I thot she did; WHIPT only picked up $4.8 million. Both were cheap productions, but both of those are disappointments.

I did learn a couple of valuable lessons this week. First, I checked out The Derby at boxofficemojo.com, to see what the predictions were there. I've played The Derby once or twice, but I haven't been that impressed with the box office predictions there in the past. But it would have been a good reality check this time around. The prediction for Zombieland was way off, at $16 million, but the prediction for Invention of Lying was almost perfect, and the number for Whip It, $8.9, was off, but still closer than what I was thinking. So I will have to check that on a routine basis.

The second, even more important lesson that I learned this week, was that I have a tendency to stick with whatever position I am holding, particularly if I am long a stock. I want to prove that I have been right all along. I didn't short INVLY when I should have, which was a couple of weeks ago. I also should have shorted WHIPT back then. I will have to be more aggressive about changing positions well ahead of opening weekend.