July 30, 2010: Dinner for Cats & Dogs and Charlie St. Cloud

Three moderately interesting movies are opening this weekend, two comedies and one drama.

First up, let's go the family route. "Family" meaning, "for kids," because I can't see a lot people going on dates to Cats & Dogs: The Revenge of Kitty Galore (CTND2). Just not seeing it. I imagine the CGI is good, and I'm sure it has a few laughs. But this smells formula. Stock is at H$45, down from a high of H$64. Looks like it's sinking. Strike price is H$20, which is not quite ridiculous (although I'm sure it made sense when it was set), but doesn't make a lot of sense. Call (CND2CA) is still above IPO, which is somewhat surprising. What is not surprising is that the put (CND2PU) is above H$3 and rising. What is also unsurprising is that critics are savaging it, with a 17% rating on RT. It's going out on 3,700 screens, the widest release of the weekend. That's better than I was expecting, but not terribly meaningful. Not hard to guess where this one is going. No Blockbuster Warrant, which is both unsurprising and kind of a relief.

Stock: Short

Call: Short

Put: Short

Next up is a tearjerker that I have even less interest in, although it looks reasonably well-done. Charlie St. Cloud (DLCSC) is based on the book The Death and Life of Charlie St. Cloud. Not terribly surprising that they took out the first part of that title for the movie. Zac Efron stars as a guy who feels guilty for the death of his little brother. Zac Efron has a strong appeal for a certain demographic, and he seems to be choosing good roles, but I'm not in that demographic. The stock is at H$34, down from a high of H$47. So, modest expectations that might be met, but I'm not optimistic. Strike price is H$20, which is ridiculous, because the price of the stock never came near justifying that kind of price. It was headed there, tho, so maybe that's understandable. We're seeing more rationality in the option prices here: Call (CSTCCA) is way below IPO, currently at 70 cents, while the put (CSTCPU) is at H$4 and rising. It's going out on 2,700 screens, a good release, but not quite blockbuster territory. Critics are heartfelt in their near-universal disparagement, with only 9% approving. Any reasons for optimism? Any at all? None as far as I can see.

Stock: Short

Call: Short

Put: Long

Finally we have a movie for the above-15 set. Dinner for Schmucks (SHMUC) stars Paul Rudd as a corporate climber, and Steve Carell as a total dweeb who becomes his friend. And dinner companion. And potential victim. Certainly an interesting idea for a movie. Stock price is H$66, which sounds reasonable, but is down from H$94. Clearly a victim of its own hype. It bottomed out at H$55, so it's rebounding nicely. We have another H$20 strike price, but this one is realistic, and may even be low. Call (SHMUCA), of course, is doing well, above H$4. Put (SHMUPU), of course, is sinking, below IPO. Looks like a great role for Steve Carell. Almost 3,000 screens, nice and wide. Critics are somewhat lukewarm, with only a 54% rating on RT, and not a lot of love in the positive ones. That prompts a second look. The stock price suggests an opening weekend of $24 million, which I think is possible even if it's not a great movie. At the very least it's unlike any other movie currently out there. There's a good reason for optimism.

Stock: Long

Call: Long

Put: Short

Update Friday morning: All three are moving in the direction I expected: Cats and Dogs continues to drop, down H$2.66 this morning, Zac Efron and his soulful eyes are down a little less than a buck, and the Schmuckfest is up H$3.50. Maintaining all positions.

Update Sunday night: Just about everything came in as predicted. Dinner for Schmucks came in at $23 million, which was a shade under the prediction of the stock price. It adjusted down H$5, from H$67 to H$62, which is trivial. Cats & Dogs and Charlie both came in at about $12 million, way, way below their strike prices. Both adjusted down. So, out of 9 predictions, I got 8 right. That's a good weekend at TEQP-HSX.

July 23, 2010: Salt and Ramona

We have two movies with female protagonists this weekend, but very different demographics.

First up, a kid's movie. Ramona and Beezus is based on the popular books, which I remember when I was knee-high to a blockbuster. I don't think I ever read them, but I remember the name. This is presumably an attempt to start a franchise. Not looking good, tho: the stock (RMONA) is tanking, down to H$27 or so, down from a high of H$44. Quite a precipitous drop, too, in just the last few days. Strike price was set at H$15, which is just a bit too optimistic, so the call (RMONCA) is dropping through the floor, below 50 cents. The put, of course, is well above the IPO, at H$4. Won't be hard to call those. Full disclosure: the director, Liz Allen, graduated from USC, and I've met her a couple of times. So I'm a smidgen biased. Critics are mostly enthusiastic, with a 59% rating on RT. One more positive review, and it's certified fresh! It's going out on a good number of screens, about 2,700. It needs $10 million to make the strike price. That's a PSA of $3,600. It's a very narrowly targeted demographic, but it's also a somewhat underserved demographic. There are always a certain number of family movies, but not a lot just for little girls. The challenge will be getting little boys to see it as well. My guess is that the stock has bottomed out, and that there is more potential on the upside than the downside. There isn't a Blockbuster Warrant.
Stock: Long
Call: Short
Put: Long

Angelina Jolie is back, in the kind of role that she does very well: action adventure. Yeah, baby! Salt (ESALT) looks good to me, although I am a big Angelina fan. Stock has been drifting lower, to H$92 today, down $3 today, and down from a high of H$110. Strike price was set at H$4o, which is now slightly out of whack with the stock price, which predicts an opening of $34. Call (SALTCA) is, predictably, dropping, below IPO. Put is doing really well, up to $4. All the signs so far are pointing in roughly the same direction. Strike price for the Blockbuster Warrant (BWSALT) is at H$100, a very reasonable price. This has not been dropping, and is at H$10. So that sign indicates marginally better prospects than the other securities. Critics are not particularly impressed, but they're not hating it, either, with a 56% rating on RT. Normal people seem to like it, with an A- so far on Yahoo! I'm more optimisitc than the market, I think there is more potential on the upside than the downside. I'm going out on a limb and betting that it will make the strike price, although not by much. I'm aiming for the sweet spot, between the call and put, right around H$40.
Stock: Long
Call: Short
Put: Shot
BW: Long

Update Sunday night: I was slightly off on the stock for Ramona et al., but otherwise I nailed it. Ramona and her sister and friends came in at $8 million, slightly below my expectation, but otherwise a decent showing. The options were a no-brainer. Salt did hit the sweet spot between the call and the put, right at $36.5 million. I would not be surprised if it adjusted up. The stock also adjusted up slightly, to H$98, from H$93. The Blockbuster Warrant for Salt is down by a hair, to H$9, but that's largely meaningless. Mostly a good weekend.

July 16, 2010: Inception, Standing Ovation

There are two movies opening tomorrow. One of them is one of the most highly anticipated movies of the year, featuring an A-list star, and an A-list director. The other is a movie that few people have ever heard of, starring total unknowns.

Let's get the wannabe out of the way first. Standing Ovation (STNOV) is about some tween girls who just want to sing and dance, and live their dream. I can't begin to imagine that the plot is remotely interesting, but I'm also years away from being remotely in touch with the target demographic, so what do I know? The trailer seems well-done, which is a plus. I researched the team on IMDb, and it's not a particularly impressive group, but the director and producer have worked together before, always a plus. Stock is at H$4.47, which might be a tad optimistic. There isn't much to go on here. No options, not a surprise. There are only two reviews on RT, both negative. Again, not much to go on. It is going out on 623 screens, which counts as a wide release (600 is the threshold for a wide release). Strike price indicates an opening weekend of $1.65 million. It would need a per screen average of about $2,600 to hit that. It needs about 330 people per screen. Assuming 15 screenings per theater over the course of this weekend (5 per day for 3 days), that means they need at least 22 people per screening. That doesn't sound impossible. I'm sure there are a few hundred thousand screaming teenage girls who can convince their parents to take them to see this.

Stock: Long

Now we come to the blockbuster, Inception (INCPT). Boy does this look interesting. Starring Leonardo DiCaprio, and directed by Christopher Nolan, who should have a much bigger reputation than that M. Night guy. A movie based on an original idea! How cool is that?!? A movie with CGI that is actually justified by the plot. Wow. Stock has been rising pretty steadily, to a current H$191. That's down from a high of H$215, but that's not much of a drop. It's been incredibly volatile of late, down H$8 yesterday, up H$11 today. The price suggests an opening weekend of at least $70 million. Critics are very enthusiastic, with an 87% rating on RT. Strike price is H$75, with the call (INCPCA) not much above the IPO, at H$2.52 and sinking. The put (INCPPU) is doing quite well, almost at H$5. Strike price for the Blockbuster Warrant is H$200, and the warrant is well above IPO, at H$13. I am very optimistic about this movie, and I don't see much reason not to be. It may be a difficult concept to understand, but I think there are a fair number of people who will be thrilled to see a movie with an original plot. It's long, 2 1/2 hours, which might cut into the number of screenings, but it's also going out on 3,700+ screens.

Stock: Long

Call: Long

Put: Short

BW: Long

Update Friday morning: Inception is down H$5 this morning, but, considering how volatile it has been, that's not surprising. This seems to be one of those very polarizing movies - if you get it, you'll love it, but if you don't, you'll hate it. I'm guessing more people will get it, and they will really love it. Still going long. Standing Ovation is down H$0.39 today, which is about a 10% drop. That's not a great sign. The stock has had an interesting ride - it's spiked on several occasions, obviously on significant news - for example, actually getting a release date. But then it invariably drops. Not sure what that means, but it's interesting to note. But it still has minimal expectations. I'm not real confident, but still going long.

Update Sunday night: I don't know why I stayed long with a movie that obviously was drivel at best, but I did, and therefore got burned by Standing Ovation. I also was a little too optimistic about Inception - it cleared $60 million, below the strike price, and below the stock price. But the response has been so great that I don't mind losing money on it. Sorcerer's Apprentice basically bombed, coming in at only $17 million for the weekend, plus $7 million previous, so it adjusted down, from H$85 to H$54. A good weekend to be pessimistic, not a great weekend for me. But a good weekend for movies in general, apparently - a great movie made money, a bad movie bombed, and a piece of garbage was toasted. That works for me.

July 14: Sorcerer's Apprentice

One movie opening today, midweek, The Sorcerer's Apprentice (SORAP), hoping to beat "Inception" by at least a couple of days. Stock is at H$79, down from a high of H$127 - we've got another classic bell curve. Not looking good. Strike price for the options is H$35, with the call (SORACA) dropping, although still above IPO, and the put (SORAPU) at H$3 and a half and change. Not much optimism about that $35 million opening. Critics are not enthused, it's at 33% on RT. Ain't It Cool News gives what is probably a consensus view, that it's not bad, but not great. I think the stock has bottomed out, but it's only predicting a $29 million opening weekend. That feels about right. Blockbuster Warrant strike price is H$120, which is feeling unlikely.

Stock: Long

Call: Short

Put: Long

BW: Short

July 9, 2010: Despicable Predators

We only have two movies going wide this weekend, Despicable Me (DESME) and a reboot of Predators (PRED3), the action movie from the 80's.

Despicable Me looks like fun. Great title. Great trailer. Stock is at H$100, near the high of H$109. Strike price for the options is H$35, right on target. Call (DESMCA) is at H$4 and a half and rising, a good sign. Put (DESMPU) is below IPO and sinking, another good sign. It's going out on 3,400 screens, a good wide release. Critics are nicely positive, with an 87% rating on rottentomatoes.com. There isn't a CX derivative, since those are being cashed out. The strike price for the Blockbuster Warrant is H$120, with the price currently at H$11 and rising. All the signs are looking good, except for the fact that it's down today. But that could be just noise. I'm intrigued enough by the story to want to see it myself.
Stock: Long
Call: Long
Put: Short
BW: Long

Predator, OTOH, is not looking so good. Stock is at H$70. It's up H$2.50 as of this writing, but down from a high of H$114. That's not good. This also has a strike price of H$35, which is not terribly realistic. The call (PREDCA) is tanking, below H$1.50. The put (PREDPU), meanwhile, is soaring, aiming at H$5. Exactly the opposite of DESME. It's going out on 2,600 screens, not quite as many, but a decent release. Critics, somewhat surprisingly, are positive, with a 73% rating on RT. I know next to nothing about this, since I didn't see the original, and have no intention of ever doing so. But it sounds like the hype has been washed out of the stock price, and we are back in somewhat reasonable territory. Blockbuster Warrant strike price is H$100, and it's about H$2 and change. Which makes a fair amount of sense. So we're looking at about a $30 million opening weekend with this stock price. That would put it just ahead of The A-Team, and it sounds like this is a better movie.
Stock: Long
Call: Short
Put: Long
BW: Short

Update Friday morning: Despicable Me is doing well, up H$3 today, so I am maintaining those positions. However, Predators is down H$8.50, which prompts a rethink of holding the stock long. In a situation like this, I ask myself if there is any reason to bet against the market, and I can't think of one. Sequels and remakes and reboots are not doing well this summer. The biggest name in the cast is Adrien Brody. He's a fine actor, and he's probably fine in this movie, but he's not Arnold and I don't see him as a great lead in an action movie. Reversing position on the stock, shorting it.

Update Sunday afternoon: Despicable Me proved to be a solid performer, with $60 million this weekend, while Predators came in at $25 million. This is very similar to what happened with A-Team and Karate Kid: the family film outperformed expectations by a huge margin, while the action adventure movie came in either below expectations, or just barely above seriously diminished expectations.

I was wrong on the stock for PRED3, which technically adjusted up, but only by H$5. Otherwise I got all of the predictions right this weekend. Anyways, PRED3 is certainly a short to delist.

July 2, 2010: The Last Airbender

I missed out on something earlier this week - yet another Wednesday opening, this time one of the biggest movies of the year, Twilight: Eclipse. Maybe I missed it because I'm not in touch with the teenage girl demographic. Not that there's anything wrong with movies targeted at the teenage girl demographic! I'm just not that in touch with it. Fortunately, I am long on the stock, and it looks like it will be doing quite well. And supposedly it's a very good movie. That's nice.

Opening today (good thing I caught it!) is a movie that doesn't sound like it's very good: The Last Airbender (BENDR), from M. Night Shyamalan. Wow, is this thing tanking. Stock is currently at H$76, already down H$7 today, and down from a high of H$133. The strike price for Friday-Monday (since Monday is the officially-recognized 4th of July holiday for purposes of taking work off) is H$50. That's possible, particularly since it's for four days, but looking increasingly unlikely. The formula for the adjust is funky, Prev. BO + (Fri-Mon x 2.2). Still, the price of the stock and the strike price are completely out of whack. If it does make $50 million from Friday-Monday, plus, say, $5 million today, Thursday, it will adjust to $115 million (5 + (50 x 2.2)). That's H$50 above the current price of the stock. I don't think I have ever seen such a complete disconnect between the strike price and the price of the stock. Other traders have, of course, made similar calculations: the call (BENDCA) is at H$0.83, while the put (BENDPU) is at H$5 and climbing. Even at H$5, the put is a bargain - that puts the four-day weekend total at $45, which, with $5 million today, would put the adjust at H$95. Also seriously out of whack. The CX derivative, as usual, has farther to fall than the stock: it's at H$94. The strike price for the Blockbuster Warrant is H$120, which, I'm sure, sounded reasonable a couple of months ago. Not so much today. It's at H$4 and dropping.

The reason for all this negativity is not hard to figure out. It is, apparently, just an atrociously bad movie: it has a 5% rating on rottentomatoes.com. This is one of those movies whose entertainment value will primarily be derived from reading the bad reviews.

Stock: Short

Call: Short

Put: Long

CX: Short

BW: Short

Well, I was completely wrong on that one. It did slightly more than $50 million over the weekend, so it did make the strike price. I don't think I gave myself enough time, since I didn't realize until it was almost too late that it was opening on Thursday. Always a good idea to let my predictions simmer for a day or two. This time, I was a little rushed. I should have realized that the stock price was too low, and that there was more potential on the upside than the downside.

One other detail, that I have been thinking of, but not always conscious of: there are two kinds of moviegoers. There are people who are primarily attracted to the substance, i.e. plot, story, character, etc., and then there are people who are primarily attracted by the visuals. Critics are invariably in the former category, so they are particularly harsh on movies that don't work in terms of plot. But there will almost always be people in the audience who are more interested in the visuals, and who will experience the movie that way, overlooking plot holes or thin characterizations. This doesn't mean that they're superficial - it just means that their brains are wired that way. This sounds like it's great on the visuals part. So I ended up giving the critics too much weight. I usually take that into account, but the reviews were so savage I figured it would have more of an impact. I'm still short to delist - the user reviews on Yahoo! have been brutal.