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
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
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
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.
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