March 26, 2010: How to Train Your Hot Tub Time Machine

We only have two movies opening wide this weekend, both comedies, and both potential blockbusters. As of Thursday night, however, they are moving strongly in opposite directions.

How To Train Your Dragon (HTRYD) is the latest animated effort from DreamWorks. Other than the original Shrek, I haven't been in love with DreamWorks animated movies. They're generally decent, but not great. This looks funny and charming, but I can sense a cliche or two in the trailer. Stock climbed very steadily for a while, then dropped, but is up dramatically today, to H$127. Strike price is H$50, just about dead-on, with the call (HTYDCA) up to H$4 and change. The put (HTYDPU) is barely above the IPO. Cantor isn't practicing anymore, but the CX derivative is showing healthy signs, at H$137. Good signs there. It's going out on 4,000 screens, and I am sure many of them are 3D. Critics are wildly enthusiastic, with a 95% approval rating on rottentomatoes.com. Not much doubt about how to play this one.
Stock: Long
Call: Long
Put: Short
CX: Long

The other movie this weekend is a little more uncertain. Hot Tub Time Machine (HOTUB) has one of the best titles ever, but there are some questions. It stars John Cusack, one of my favorite actors, and Rob Corddry, an excellent comic. But the other two guys are largely unknown, and it's being released by MGM, a dying studio. The stock has been climbing steadily, but dropped H$8 today, not a good sign. Strike price is H$30, which is very optimistic, and the call (HOTUCA) is below IPO, at about a buck and a half. The put (HOTUPU) is above H$4, not surprisingly. It's going out on 2,700 screens, a good wide release. Critics are mostly positive, with a barely-fresh 63% rating on RT. The CX derivative is at roughly the same place as the stock, and has had roughly the same trajectory, although it's not bombing today. I have a feeling there's a lot of profit taking happening in the stock, not terribly surprising. This is a movie that could very easily bomb, because it's such a classic high-concept movie. John Cusack in a movie about traveling back to 1986 is brilliant. There is a large built-in audience for this movie, and it includes me.
Stock: Long
Call: Short
Put: Long
CX: Long

Update Friday morning: HTRYD is up H$6 and change this morning, so staying long on that one. HOTUB, on the other hand, is moving in the opposite direction rather dramatically, down almost as much as the dragons are up. Looks like it might bomb. Reversing positions there, although I am also maintaining a long position of 25,000, to hedge it. Completely reversing position on the CX derivative, since it's a shade higher.

Update Monday morning: HOTUB did, in fact, bomb, so reversing position was a good move there. I overestimated the appeal of a boy and his dragon, and should remember that DreamWorks just doesn't have the magical touch of Pixar.