Thursday, June 17, 2010

June 18, 2010: Toy Story 3, Jonah Hex, Cyrus

We're settling in to summer, with a genuine blockbuster, a wannabe blockbuster that looks like it will be anything but, and a sort-of arthouse funky comedy.

First up, the blockbuster, Toy Story 3 (TOYS3). This is the franchise that started other trends - great movies from Pixar, computer animation, animated movies that look like they're for kids, but are really for adults. The anticipation is reflected in the stock price; it's $288, or about a $106 million opening. It's gone mostly up, quite steadily, although not quickly. There was buzz on this one for a long time. This isn't a holiday weekend, so there's no funky adjusting. It's not opening on a Thursday, although I am sure there will be midnight screenings tonight. The strike price is H$110, which is just about right, although just slightly higher than the stock price would indicate. The call (TOY3CA) is doing quite well, thank you very much, at H$5 and a half. The put, however, is also doing rather well, aiming at H$4. The CX derivative is at H$324, although it went through a very different trajectory, hitting H$358 before coming back down. Strike price for the blockbuster warrant (BWTOY3) is H$350. That's at $8 and change, so it's not busting out. The feeling I get is there is a lot of enthusiasm, and potential excitement, but also some caution. We've seen some bubbles burst of late. But we've also seen some surprises, notably last weekend, with The Karate Kid blowing away expectations. One of the cautionary tales was Shrek 4, although that should not have been that surprising, since the franchise was clearly wearing out its welcome, and the third movie was not that well received. Pixar hasn't really had a bad movie, or even a movie that was less than very well-received. This already has a 9.4 rating on IMDb, which is great. It has a virtually unheard-of 100% ratings on Unheard of, of course, except for the first two, which also have 100% ratings. So the two big questions of late: am I in a bubble? and Is there more potential on the upside or downside? would seem to be answered thusly: I seriously doubt I am in a bubble. The reputation of Pixar and these particular movies is very well-known. Extremely well-known. There isn't much downside. Shrek made $70 million, with mediocre reviews. About the only potential downside is that many members of the audience have severe sequelitis, but this is still a franchise with a reputation for originality. It's opening on 4,000+ screens. The studio is going wide, I'm going long.
Stock: Long
Call: Long
Put: Short
CX: Long
Blockbuster Warrant: Long

Next up is Jonah Hex (JOHEX). There are lots of reasons for uncertainty with this movie. It's based on a comic book that I have never heard of. I'm not clear on what, if any, superpowers the title character has. He is intentionally unattractive. The actor playing him is well-known and respected (Josh Brolin), but not in the opening-a-blockbuster-by-himself league. The hot actress (Megan Fox) may have already outlived her 15 minutes. The director, Jimmy Hayward, doesn't have much relevant experience, but he does have some good movies on his resume, ironically at Pixar. I find it strange that he was chosen to direct this, but I could be missing something. The stock is tanking, down to H$36 from H$103. That's really not good. The strike price is H$20, which, tragically, absurd by now. Call (JOHECA) is below H$1, while the put (JOHEPU) is above H$5. There are only 9 reviews on RT, but with that, it's at only 11%. CX derivative is at H$51, and I think it's that high only because it hasn't had enough time to drop. The strike price for the BW is H$80, which is just sad. It's at 19 cents, down 13 cents today. Almost makes you feel sorry for whoever still has it long. I can't find a single reason to be optimistic about this movie.
Stock: Short
Call: Short
Put: Long
CX: Short
BW: Short

Finally, we have the most intriguing movie of the weekend, at least from a box-office-potential perspective. Cyrus (CYRUS) is sort of a romantic comedy about a single woman, whose son interferes with her dating life. Sounds interesting. The trailer isn't the greatest - John C. Reilly plays a guy who seems a little socially awkward, but who ends up with Marisa Tomei. Jonah Hill plays her son, who proceeds to make life even more awkward. Could be brilliant, could be one of those movies that polarizes audiences. Stock is H$12, down from a high of H$22. Looks like the buzz has worn off a bit. There are no derivatives. It's doing quite well on RT, with an 82% rating. It's only opening on 4 screens this weekend, so it's obviously not adjusting. I'm going to call it anyways.
Stock: Short

Update Friday morning: Both stocks opening wide are moving in the direction I predicted: TOYS3 is up, while JOHEX is down, to H$30. If it wasn't so completely devoid of interesting qualities, I would suspect that would be a buy. But it's still an $11 million opening weekend, and there is some room between that number and zero. Maintaining all positions.

Update Sunday night: Mostly a positive weekend. Toy Story 3 came in at $109 million, almost exactly at the strike price. The stock technically adjusted down, but only H$5. Considering that it was at almost H$300, that's not a great variation. It's an obvious hold long to delist, Also technically, I was wrong on the options, although since it is so close to the strike price, I am going to wait for the final numbers tomorrow. I was right about the CX derivative, which adjusted down quite a bit. The BW is maintaining about the same price, so that's tough to call at this point.
I did nail JOHEX, which is apparently a God-awful piece of garbage. Hard to believe a movie with a strike price of H$20 came in at $5 million. I shorted it at H$79. It's currently at H$13, and I would bet it will delist around H$10. Made a fortune on that one.
Cyrus had a great weekend at its four theaters, so I am reversing position and going long on that one.

Update Monday night: Wow, that was close. Looks like it was a good call for me to wait until today to determine whether or not I was right about the TOYS3 calls. I was, in fact, right about both: it officially cleared $110.3 million, just barely above the strike price, right on the sweet spot. Ideally, it would have been perfect if I had shorted the call, but it cashed out on the plus side, so I'm all good.

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