Thursday, July 1, 2010

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 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.

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