Thursday, February 18, 2010

February 19, 2010: Shutter Island

There's only one movie opening this weekend, but it's a doozy: Martin Scorsese' Shutter Island (SHISL). This movie has something of a tortured history already: it was supposed to be released last year, just in time for Oscar season, but the studio, Paramount, decided that it was a little short of cash, so they decided to wait.

That was probably a good call. In the meantime, the suspense has only built. The marketing has been relentless, to the point of overkill. But their is still some sense of excitement about this movie. It is, after all, Martin Scorsese. I'm not a huge Scorsese fan - I think he's made a few too many movies about brilliant but self-destructive white guys - but he is quite the craftsman. Apparently the story is quite a tough one to tell, but supposedly he pulled it off. Critics are very divided, with a 63% approval on This sounds like a love-it-or-hate-it experience. It's going out on almost 3,000 screens, which should be more than enough.

The stock is right around H$100. Strike price is H$40, which translates to a stock price of H$108. But the call (SHISCA) and the put (SHISPU) are above H$3, although the put is close to H$4. So signals are mixed. It's clearly going to have a good opening weekend, but the question is how good.

There isn't any competition this weekend, and not much competition among movies currently out. There aren't any intense psychological thrillers out there. The level of interest on IMDBPro is extremely high. Scorsese's last movie - which also starred Leonardo DiCaprio - was The Departed, which opened to $26 million. Mystic River, another psychological thriller from a Dennis Lehane novel, made $156 million worldwide. This film is pretty much a known quantity. You know what you're going to get with a Scorsese movie. The people who like it are going to love it. OTOH, there will be a fair number of people who don't like it, or who don't get it.

The key here is the level of interest. The buildup has been pretty intense. The stock is hitting its high on HSX, and the CX derivative is right around the same price. The pros are that it's a Martin Scorsese movie, the marketing has been very intense, and it's quite probably a very good movie. The cons are that it's a Martin Scorsese movie, and he doesn't make happy movies. Also, it sounds like it's a bit long. But there is no question that it will be very intense.

Last weekend, Valentine's Day blew away all expectations in part, I think, because many people wanted some kind of escapism. I think this will attract a number of people who just want to know that they are going to see a good movie.
Stock: Long
Call: Long
Put: Short
CX on HSX: Long
Cantor: Long

Update Friday morning: Well, the signs are a little different than they were yesterday. The call is down, to H$2 and change, while the put is about double that. So $42 million is not looking realistic. The stock was down as much as H$4, but rebounded, and halted down H$2, to H$92.25. That's a $34 million opening weekend, which is in line with the put. The CX derivative is down H$3, to about H$94, so it's sending the same signal. On Cantor, it's down $5, to $100. Dampening expectations all around. I reversed position on the call, so I am now short the call, but I kept my short on the put, because I think it will do somewhat better than $36 million. It's still doing quite well among critics and users, with an A- on Yahoo, and an 8.5 rating on IMDB. It feels like more people are getting it than are not, although the people who don't get it or don't like seem to have the stronger opinions. I'm only long 5 shares on Cantor, so I am prepared for some surprise on the upside, but not much. I don't think the movement either way is going to be very dramatic.

Update Sunday night: Well, I nailed it. Damn does that feel good. I got everything right. It cleared $40.20 million this weekend (that's before whatever the adjustment is tomorrow). Talking about hitting the sweet spot. Wow. The stock adjusted from H$92 to H$108, a nice adjustment upwards. The CX derivative is currently at H$96, so the market is already assuming that it will drop, and delist below the adjust. I disagree, I am staying long to delist. And, of course, I got the price right on Cantor.

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