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.