Thursday, May 6, 2010

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.

1 comment:

  1. Can you please email me the list of questions and maybe give me some hints? My email is My name on hsx is
    the-noble. I really want to learn.