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.

February 19, 2010: Shutter Island

There's only one movie opening this weekend, but it's a doozy: Martin Scorsese' Shutter Island (SHISL). This movie has something of a tortured history already: it was supposed to be released last year, just in time for Oscar season, but the studio, Paramount, decided that it was a little short of cash, so they decided to wait.

That was probably a good call. In the meantime, the suspense has only built. The marketing has been relentless, to the point of overkill. But their is still some sense of excitement about this movie. It is, after all, Martin Scorsese. I'm not a huge Scorsese fan - I think he's made a few too many movies about brilliant but self-destructive white guys - but he is quite the craftsman. Apparently the story is quite a tough one to tell, but supposedly he pulled it off. Critics are very divided, with a 63% approval on rottentomatoes.com. This sounds like a love-it-or-hate-it experience. It's going out on almost 3,000 screens, which should be more than enough.

The stock is right around H$100. Strike price is H$40, which translates to a stock price of H$108. But the call (SHISCA) and the put (SHISPU) are above H$3, although the put is close to H$4. So signals are mixed. It's clearly going to have a good opening weekend, but the question is how good.

There isn't any competition this weekend, and not much competition among movies currently out. There aren't any intense psychological thrillers out there. The level of interest on IMDBPro is extremely high. Scorsese's last movie - which also starred Leonardo DiCaprio - was The Departed, which opened to $26 million. Mystic River, another psychological thriller from a Dennis Lehane novel, made $156 million worldwide. This film is pretty much a known quantity. You know what you're going to get with a Scorsese movie. The people who like it are going to love it. OTOH, there will be a fair number of people who don't like it, or who don't get it.

The key here is the level of interest. The buildup has been pretty intense. The stock is hitting its high on HSX, and the CX derivative is right around the same price. The pros are that it's a Martin Scorsese movie, the marketing has been very intense, and it's quite probably a very good movie. The cons are that it's a Martin Scorsese movie, and he doesn't make happy movies. Also, it sounds like it's a bit long. But there is no question that it will be very intense.

Last weekend, Valentine's Day blew away all expectations in part, I think, because many people wanted some kind of escapism. I think this will attract a number of people who just want to know that they are going to see a good movie.
Stock: Long
Call: Long
Put: Short
CX on HSX: Long
Cantor: Long

Update Friday morning: Well, the signs are a little different than they were yesterday. The call is down, to H$2 and change, while the put is about double that. So $42 million is not looking realistic. The stock was down as much as H$4, but rebounded, and halted down H$2, to H$92.25. That's a $34 million opening weekend, which is in line with the put. The CX derivative is down H$3, to about H$94, so it's sending the same signal. On Cantor, it's down $5, to $100. Dampening expectations all around. I reversed position on the call, so I am now short the call, but I kept my short on the put, because I think it will do somewhat better than $36 million. It's still doing quite well among critics and users, with an A- on Yahoo, and an 8.5 rating on IMDB. It feels like more people are getting it than are not, although the people who don't get it or don't like seem to have the stronger opinions. I'm only long 5 shares on Cantor, so I am prepared for some surprise on the upside, but not much. I don't think the movement either way is going to be very dramatic.

Update Sunday night: Well, I nailed it. Damn does that feel good. I got everything right. It cleared $40.20 million this weekend (that's before whatever the adjustment is tomorrow). Talking about hitting the sweet spot. Wow. The stock adjusted from H$92 to H$108, a nice adjustment upwards. The CX derivative is currently at H$96, so the market is already assuming that it will drop, and delist below the adjust. I disagree, I am staying long to delist. And, of course, I got the price right on Cantor.