May 28, 2010: Prince of Persia

Here we are, in the beginning of blockbuster season, and we have our first Jerry Bruckheimer extravaganza! How exciting. Prince of Persia: The Sands of Time (PRSIA), is based on a video game. That would be grounds for groaning, were it not for the fact that Mr. Bruckheimer also produced Pirates of the Caribbean, a great movie based on a Disney theme park ride. Still, the history of movies inspired by video games is not a glorious one. I would review that history, except that I'm not actually all that aware of it, and I'm not all that interested in doing the research. This does not look like a difficult movie to figure out. Stock is at H$94, down from H$141. That's what we call "tanking." The strike price is H$60, which predicts a stock price of $162. Wow, I can't remember a strike price as far out of sync with the stock price as this one. H$94 predicts an opening weekend of about $35 million. The CX derivative has been on pretty much a nosedive of late, dropping from H$176 to H$108 today. Somebody lost some money on that one.

I liked reading this line on the stock page: "A young prince finds a powerful artifact that has the power to destroy mankind through a massive sandstorm."

That's three cliches - "young prince," "powerful artifact" and power to destroy mankind" - in one sentence. I'm bored with the CGI just watching the trailer. I have no idea what the plot is, beyond some hot guy battles lots of bad guys, Ben Kingsley looks worried, and some hot woman trades some cool dialogue with aforementioned hot guy. Oh, almost forgot: the blockbuster warrant has a strike price of $120, and it's sinking fast, too, from H$12 to H$4, presumably on its way to oblivion.

I'm sure it's going out on lots of screens, again, I don't even want to do the research. It's scoring better with critics than I was expecting, with a 46% rating on RT. That, I can just about bet, is because it manages to beat absurdly low expectations. In other words, some people felt that it wasn't a complete waste. I am not finding out either way.

Stock: Short

Call: Short

Put: Long

CX: Short

Blockbuster Warrant: Short

Update Friday morning: The stock is up H$3.50 this morning, at 9:30 am Pacific. It looks like it might beat those low expectations, and it is Memorial Day weekend. I am maintaining my positions, but buying 10,000 shares long, just in case.

Update Monday night: So hedging didn't work out, but otherwise I nailed this one. It opened with $37.7 million, not even within striking distance of the strike price. Adjusted down from H$101 to H$83.

May 27, 2010: Sex and the City 2

Sex and the City 2 (SATC2) is opening tomorrow, Thursday, so this post is just about that movie.

I'm actually not a bad person to be thinking about this movie, despite being a straight white male who doesn't have a girlfriend who desperately wants to see this. I did see the first movie, on opening night no less, with several friends. I liked it, and appreciated the franchise. I get it. I'm somewhat proud of the fact that I understand the appeal despite the fact that I do not find Sarah Jessica Parker all that appealing. I do have a lot respect for the fact that she's done wonders with this concept. And my sister absolutely loves SATC, and she's got very good taste.

For today, however, our concern is tomorrow. The stock is at H$146, down H$3 today, and down from a high of H$165. The adjust formula is complicated (previous B.O. + (2.2 x Fri-Mon)), both because of the Thursday opening, and the holiday weekend. Assuming a Thursday total of about $5 million, that stock price predicts a Friday-Monday total of $63 million. That's a chunk of change. The call (SEX2CA) is at H$4 and change, so there is a certain amount of optimism out there, while the put (SEX2PU) is above H$3. So there is a certain amount of pessimism, as well. The CX derivative is tanking, down from H$185 to H$155.

It's going out on about 3,500 screens, which translates to a PSA (per screen average) of $18,000. The original opened with $57 million, so the sequel would have to do better than the original. But the reviews are horrible - I would describe them as "savage," but I'm not sure that's harsh enough. It's at 15% on RT. I'm also deeply skeptical of the premise. Carrie and Big are married, and they're not that excited about it. And this is exciting why? The girls fly to Abu Dhabi for a good time. Is anyone besides me bothered by the fact that a movie called Sex and the City 2 takes place in the desert?

I know this is the female equivalent of an explosions-filled action adventure movie. But I also know that explosions-filled action adventure movies can totally bomb. This may be another milestone in the history of feminism: women can succeed as brilliantly as men. They can also fail as spectacularly as men.

Stock: Short

Call: Short

Put: Long

CX: Short

Update Thursday morning: SATC2 is down almost H$7 this morning. It may bounce back a buck or two by the time it halts (it's currently 7:45 AM Pacific), but that's a really bad sign. Maintaining all positions.

Update Monday night: I was right all the way around on this one. It cleared $37 million over the 4-day weekend, plus $14 million on Thursday. That's a solid $51 million, but the stock dropped from H$141 to H$95. Looks like the critics were right.

March 21, 2010: Shrek and MacGruber

There are two movies opening this weekend, both comedies. One is pretty much a guaranteed blockbuster, the other is a product of Saturday Night Live.

Shrek 4evah (SHRK4) is finally here, and our beloved green ogre is finally bidding his adieus. It's been fun, green man! I like the way DreamWorks is handling this - they seem to be bowing out gracefully. They've had a great run, now it's time to say goodbye. The stock is trading at H$247, down from a high of H$265, but up H$4 and change today. Strike price is H$90, right on target, with the call (SHR4CA) trading nice and high around H$5. The put (SHR4PU) isn't doing too badly, either, however, aiming at H$3. The stock price indicates an opening of H$91, so the split on the options is understandable. The CX derivative hit a high of H$331, and has been dropping ever since, currently around H$280. It's going out on a bazillion or so screens. It's in 3D, which I almost forgot about, because it's just not that exciting. But that may help the BO. Critics are not that impressed, with only about half reasonably impressed, giving it a 50% rating on RT. I remember not being that impressed with the third one, so that may diminish the appeal of this one. Shrek 2 opened with $108 million, and Shrek 3 opened with $121 million. However, Shrek 3 did not make as much as Shrek 2, $322 million domestically versus $441 million. So we're on a downward trend, but that is taken into account with the stock. The director raises some concerns for me: Mike Mitchell's big movie on his resume is Deuce Bigolo: Male Gigolo. The writers haven't done all that much, either. That suggests that DreamWorks wasn't willing to spend the money for the best people. That's not good. I have no interest in seeing this, but I think there's some lingering goodwill. I think it will beat the lowered expectations. But I will be watching it closely.

Stock: Long

Call: Long

Put: Short

CX: Short

The other opening this week is MacGruber (MGRUB), a spinoff of the Saturday Night Live sketch. Stock is not doing well, currently at H$38, down from a high of H$49. The strike price is H$15. So we have one of those situations where HSX made a good guess about the strike price a couple of weeks ago, but it's now ridiculous. Call (MGRUCA) is below H$2, while the put (MGRUPU) is above H$3. CX derivative is at H$38, down from H$47 -so it has been moving in line with the stock. It's going out on 2,400 screens, not a bad release, but not ultrawide. Critics are excited, with an 89% rating on RT, but that's only 9 critics. I think the trailer is terrible, and I have no interest whatsoever in seeing this movie, which looks like it will bomb.

Stock: Short

Call: Short

Put: Long

CX: Short

Update Friday morning: The Big Green Guy is still doing well, up H$1.50 today. MacGruber is still tanking, down H$2.25 to H$33. One of the questions that I am starting to ask is: If a movie is targeted at a specific audience, what are the chances that it will expand outside of that demographic? For example, last week, Letters to Juliet was targeted at women, with very little chance of attracting men, other than guys on dates. This week, SHRK4 is targeted at kids and families, but the appeal of the franchise is extremely broad. MacGruber, OTOH, is targeted at - well, I'm not sure, exactly, but it's probably teenage boys - and doesn't have much chance of expanding out of that. Maintaining all positions.

Update Sunday night: An almost perfectly split weekend, at least as far as my predictions. A rather terrible weekend, as far as actual results. I nailed MacGruber, which did in fact bomb - it made a grand total of $4 million. I never understood the appeal of this movie, and am very glad I made a good chunk of change shorting it. I needed that shot in the arm, cash-wise, because I was mostly wrong about Shrek 4. It opened with $71 million, not a bad haul, but way below expectations. I made a couple of mistakes: one, I didn't ask myself whether or not I wanted to see it, which is relevant for such a wide, mainstream release. The answer is no, I have no interest, I'm kind of bored with Shrek. Two, I put too much emphasis on the movement in the last two days. Three, I didn't go with the downward trend. Four, I was way too inside the bubble of Hollywood and the industry, and I didn't realize that. That's another question to ask: am I in the bubble? Shrek was getting a huge amount of publicity, but that's all a function of the bubble - lots of media groups want to do interviews etc. with the cast, because that's cheap and interesting for a couple of days. But it's also manufactured by the studio. Way too inside the bubble. That's the lesson for the weak.

May 14, 2010: Just Wright the Letters to Juliet, Robin Hood

Now that summer is here, we have a good mix of movies, the occasional drama and romantic comedy competing for attention with the blockbusters. Plucky little things, those dramas and romcoms. And, of course, we have the inevitable blockbuster that isn't, where the second part of "blockbuster" is the more apropos word. We may have one of those this weekend.

First up is a romcom with Queen Latifah and a rapper named Common, Just Wright (JUSTW). I'm not clear on why you would call yourself something that literally describes you are lacking in any kind of unique quality, unless it's a play on words - it's very uncommon, I suppose, to call yourself Common. Regardless, I am, as you might have guessed, not all that familiar with Mr. Common's work. I am more familiar with Queen Latifah's work onscreen, and just loved her in Stranger Than Fiction. It doesn't hurt that that is one of my all-time favorite movies. The stock had a very nice rise for a few weeks, going pretty much straight up, but it has been dropping precipitously for the last week or so. It's at H$27, down from a high of H$37. Strike price is H$10, a good price. The call (JUSTCA) is down to H$1 or so, roughly in line with the stock. The put (JUSTPU) is at H$3, which seems on the pessimistic side. It's only going out on 1,800 screens, not a great release. Critics are not impressed, with only a 33% rating on rottetomatoes.com. It sounds utterly predictable and safe, which is both a good and a bad thing. But it doesn't sound terrible, which counts for something. I'm looking for the sweet spot, around $10 million, right between the call and put. There are fairly moderate expectations, which, hopefully, will not be hard to beat. But this bears careful watching. Note: For some reason, there is not a CX derivative. Not sure why.

Stock: Long

Call: Short

Put: Short

Next up, with better prospects, is Letters to Juliet (LJULT), looking like something between a romantic comedy and a romantic drama. Doesn't look funny, but doesn't look like a tearjerker, either. Looks quite inspiring, just maybe. It's an intriguing idea: a woman vacationing in Verona, Italy, where Romeo met Juliet, finds a letter from 1957. She eventually reunites two long-lost lovers. Very sweet. The stock has been rising steadily, even this week. It's currently at H$48, a high. Hmmm. Looks like we might have us a sleeper hit on our hands. It's going out on 2,800 screens, and it doesn't have a lot of competition right now. Strike price is H$20, which is way optimistic. Call (LJULCA) is, whaddya know, barely treading water. If this makes the strike price, we will know we have a sleeper hit. Put (LJULPU) is also predicting sub-$20 numbers, currently around H$3 and a half. The CX derivative is actually behind the stock, at about H$45, which is an interesting sign. Really suggesting a sleeper hit with this one. Critics are not enthusiastic about this one, either, possibly given that it looks completely predictable and safe. But it also looks great, and the idea of a romantic movie with an older woman at the center of it (Vanessa Redgrave) is kind of nice. And I just love the shot of her long-lost love showing up riding a horse. Completely cliched, but utterly charming for the right people.

Stock: Long

Call: Short

Put: Long

CX: Long

Finally we have the blockbuster wannabe that looks like it might very well be a bust, Robin Hood (RBNHD). Russell Crowe and Ridley Scott team up in a movie that just about screams "Gladiator in Sherwood Forest." Although there are also shots in the trailer of a bunch of ships landing on a beach, and being met with fierce resistance. Which also suggests "Saving Private Ryan in Sherwood Forest." Regardless, this looks like an action-adventure movie that happens to take place in medieval England and happens to feature one of the iconic guerrilla warriors of history. It looks quite serious, with many sobering scenes of old men passing down wisdom to young men, and the young men avenging the old men, with most of it shot in shades of grey, green, khaki and drab. With the occasional orange when there is firelight present. I am not optimistic, and neither, apparently, is anyone else - the stock is down to H$91, from a high of H$156. That's a catastrophic drop. Strike price is H$40, a once-reasonable target that is looking increasingly untenable. The call (RBNHCA) is still above the IPO, at H$3, but it's dropping, and I expect it to continue on that trajectory. The put (RBNHPU) is rising, as expected, aiming at H$4. The CX derivative is still at H$117, but it had farther to drop, coming from a high of H$168. It's going out on more than enough screens, but critics are not excited, with only a 44% rating on RT. And the positive reviews are middling in their praise, struggling to find some justification for approval. Harry Knowles, in a superb review, just shreds it, calling it a "colossal failure," and justifying that description with a highly detailed outline of the actual history involved, and why this movie should have nothing to do with that actual history - it should just be a movie about Robin Hood, the idea, the legend, the myth. We're looking at a bomb of possibly historic dimensions here.

Stock: Short

Call: Short

Put: Long

CX: Short

Update Friday morning: Robin of the Hood is doing well this morning, up H$4. This is not surprising, given the beating the stock has taken over the last month. Just Wright is looking a little more right, up H$1.50, while Letters to Juliet is down from its high, down a buck and change. All of this feels like noise. The buzz on Robin Hood is just relentlessly negative; even the positive reviews are just barely that. Iron Man presents a strong contrast because its very stylized, and just plain fun. Robin Hood looks way too serious for the mood of the audience right now. Expectations for Just Wright are fairly low, and I expect they will be beat without much trouble. The one I am most nervous about it Letters. It might open a shade below where it is now, but my opinion on that is not strong enough to switch positions. OTOH, I am expecting it to build. This movie looks like a long-term bet. Some people are going to hate it, but some people are going to be thrilled that there is something for them in the theaters. Maintaining all positions.

Well this was sort of an interesting weekend for TEQP-HSX. I got all the stocks wrong, but I got all of the options right, and one of the two CX derivatives right. I wasn't far off on the stocks - RBNHD adjusted up by a little more than H$5, JUSTW was down by a little less than H$3, and LJULT (the big loser) was down by H$6. So RBNHD and LJULT each reversed the trend that they were on, while JUSTW maintained the trend, but also went against the movement on Friday. The lesson for this week is pay close attention to trends, but be clear on how much weight to give to them. The trend with RBNHD was right, and the market was basically right. JUSTW did not have much potential, and it was fairly predictable. LJULT had been surging, but didn't have a lot of momentum. Not a great weekend, but not bad. I'm just glad I shorted RBNHD at H$107.

Holding all short to delist.

May 7, 2010: Iron Man 2

Oooh, now we're talking. Summer blockbuster season is here! A time for the deep frivolity of ridiculously expensive toys, hundreds of millions of dollars spent on the ephemera of physically impossible images captured forever on whatever is being used to capture images these days. Sometimes I am deeply conflicted about the almost total triumph of commerce over art for the next three or four months, but then I remember that the commerce pays for the art. Then I stop thinking.

There's only one movie opening this weekend, because it's one of the most anticipated movies of the year. That would be Iron Man 2 (IRNM2), starring Gwyneth Paltrow, Scarlett Johansson, lots of seriously avant garde heavy metal couture, and a couple of guys who are really enjoying their respective comebacks, Robert Downey, Jr., and Mickey Rourke. The plot consists of some bad guys doing something bad, and Iron Man stopping them. At least that's what I am guessing. They had me at "Gwyneth Paltrow plays the ultra-competent . . ." For me, the rest is icing on the cake. The only question before us today is, how many bazillions will it make this weekend? The stock is trading just under H$400, currently H$391, down slightly from the high of H$396. Rather dizzying heights, these prices. That translates to an opening weekend of H$145. The original opened with $98 million, so the sequel would have to do significantly better than that. However, in a quirk of distribution, Iron Man 2 has already opened in other territories around the world (to beat the World Cup), and it's doing quite well. HSX set the strike price at H$155, which is actually quite a good guess. The call (IRN2CA) is aiming at H$7, so we're talking about a weekend box office gross of over $160 million. I remember the first Spider-man opening with $114 million. I remember seeing the first day's total of $40 million, and thinking that maybe it was a typo. Nope. Today's put (IRN2PU) is not too badly either, at just above H$3. This is not surprising, given the uncertainty at this level of hype, where a 10% difference equals $16 million. The CX derivative is above the stock price, also unsurprising, currently at H$413. Also unsurprising is that both the stock and the CX derivative have been on pretty much an upward march. Oh, yeah, it's going out on 4,000 screens, basically as many as possible. Many critics have seen it - this one sure ain't being withheld from the chattering classes - and they mostly like it, giving it a 70% approval rating on RT. That's nice, although I am hard pressed to imagine a movie less dependent on critical approval for success. As long as it works, I'm good. Personally, I can't wait. Go Tony! Knock 'em dead, Pepper Potts!

Stock: Long

Call: Long

Put: Short

CX: Long

Update Friday morning: Mr. Tony Stark's stock is down this morning. It was down H$9 at one point, but now it was only down H$5.25 at halt. It's too late to do anything different, but, for the record, I am maintaining all positions. Given the level of hype and uncertainty, I would be surprised if there weren't some profit-taking.

Update Sunday night: Well, the mistake this week - or two mistakes, really - was the same one I've made several times recently. I didn't use my questions, and, as a result, I didn't ask the question: "is there greater potential on the upside, or the downside?" I really should have asked that question, because there was a hell of a lot more potential on the downside than the upside. Iron Man 2 opened to a very respectable $133 million. That, however, was $22 million below the strike price for the options. The stock price adjusted down H$34. Really have to come up with that list of questions.