September 10, 2010: Resident Evil

There's only one movie opening wide this weekend, and I don't have a lot of interest in it. Milla Jovovich continues her run of battling zombies etc. in Resident Evil: Afterlife, in 3D. Stock (RESE4) is doing well, up to H$64, just off the high of H$65. Strike price is H$25, or a stock price of about H$67. Call is doing particularly well, at H$4 and a half. That suggests an opening weekend of about $30 million, or a price of about H$80. That's a bit of a disjunction with the stock. Put is tanking, as expected, down to H$1 and change. I'm sure it's going out on a ridiculously wide release for a B movie, since it has the field to itself. It's also that rarest of creatures, an action-adventure franchise with a female heroine. There are only 3 reviews on rottentomatoes.com, which usually means that it was not screened for critics, which would be utterly unsurprising. I think the call is overpriced, but it looks like this franchise is not running out of steam. The fact that there are no other movies being released this weekend suggests that the other studios want to give this movie some leeway.

Stock: Long

Call: Short

Put: Short

Update Sunday night: Nailed it, which wasn't hard, but it feels good. It opened at $27.7 million, which was very close to the stock price. Not really much of a surprise, since this was a very known quantity. I was betting on it hitting the sweet spot between the call and put, and I was right about that. 3 for 3. Let the holiday/Oscar season begin!

September 3, 2010: Machete, Going the Distance

I missed predicting the opening for The American, because I was out of town. Oops! But there are still two movies left on which to opine. It's Labor Day weekend, but this doesn't feel like a great weekend for movies. Note: Because of the holiday, the adjusts will happen on Monday, and the multiplier will be 2.2, instead of 2.7. Doesn't change much, but always good to note that.

First up is Machete (MCHTE), from Robert Rodriguez, based on a trailer from that movie he did with Quentin Tarantino. Stock isn't doing that well, the price has dropped off a cliff, dropping from H$64 in late July to H$41 today. That is up from the low, but still, not a great sign. This is certainly Robriguez's bailiwick, cartoonish violence with a Mexican hero. Strike price was unfortunately set at H$20, which now looks somewhat on the wrong side of realistic. Call is, as expected, below the IPO price, while the put is way above the IPO. Critics are surprisingly positive, with a 69% rating on RT. The trailer is pretty much one long series of gunfights and explosions, but the ending is very funny. It's going out on 2,600 screens, not the widest release, but not a bad one either. Looks like the hype has been wrung out of the stock, and it looks like fun. Utterly formulaic, but fun. Rodriguez knows a thing or two about this kind of movie.

Stock: Long

Call: Short

Put: Long

Justin Long and Drew Barrymore star in Going the Distance (GDIST), a romcom about two people in a long distance relationship. I like both of them, I generally like romantic comedies, and I've even tried a long distance relationship (although it didn't work out), but this isn't grabbing me. Apparently many people are feeling the same - it has also dropped off a cliff, falling from H$45 to H$30. This one, however, doesn't seem to be recovering. Strike price was, again, optimistically set at H$15, and, again, that doesn't like it's going to happen. Call is sinking fast, while the put is, again, above H$3. Critics aren't very enthusiastic, with only a 38% rating on RT. It is going out on 3,000 screens, but that just provides a slight cushion.

Stock: Short

Call: Short

Put: Long

Update Monday night: A pretty good weekend. I was off on Machete, it only brought in $14 million, and adjusted down, to H$30, from H$37. Got the options right on that one, tho, although that wasn't hard. I did nail GDIST, only cleared $8 million - on a four-day weekend! - and adjusted down, from H$32 to H$18. I like Drew Barrymore, but I have the feeling she might need to do something a little riskier or at least more interesting than a romantic comedy with a thin premise. Overall, I got 5 out of 6 right.

August 27, 2010: The Last Exorcism, Takers

It's the dog days of August, and that means slump time. Dumping time. Get rid of all your trash before the fall starts. So we're not real excited about the movies coming out tomorrow. But we're going to do our best to evaluate them.

The first shall be last, and the last shall be first. Thus the first movie up this week is The Last Exorcism (LXORC). It's a horror movie about a priest and an exorcism. Always good for some scares. The stars - such as they are - are total unknowns, as is the director. At least they are all total unknowns to me. Of course, this may be because I have zero interest in horror movies. I do have an interest in this stock, which has been climbing quite nicely and steadily. It's at H$40, down just a bit from the high of H$44. Strike price is H$10, which is absurdly low, given the stock price. So we have a situation once again where the options are not hard to predict. The call is at H$6 and change. Haven't seen that for a while! The put is at H$0.57. Haven't seen that in a while, either! It's going out on 2,800 screens, which is a good solid release. Critics are pleasantly surprised, with a 65% rating on rottentomatoes.com. All signs point to some good potential on the upside, like $14-$16 million.

Stock: Long

Call: Long

Put: Short

Not quite as many people are taken by Takers (TAKER) the other big opening this weekend. This does have a cast of recognizable stars, but not really anyone who can open a movie. Didn't we just see Matt Dillon in a heist movie? Didn't we just see Zoe Saldana in a cheesy action movie? Stock is at H$28, and the strike price is, again, H$10, although this time that is dead-on. The call is slightly outpacing the stock - it's closing in on H$3. The put is closer to the stock, just below H$2. It's going out on 2,200 screens, so the studio is playing it a little safe. Critics are not enthused, with just a 29% approval on RT. Not expecting any surprises here, in either the movie itself, or the box office. I'm guessing it has some marginal room to move on the top, but I'm looking for the sweet spot on the options, right around the strike price, at $10 million.

Stock: Long

Call: Short

Put: Short

Both stocks are up this morning a shade over H$3. Looking good for the last week of August. Maintaining all positions.

Two nice surprises this weekend. Both movies opened at aboout $21 million, way above the strike prices, and, for Takers, way above the price predicted by the stock, although the momentum was clearly up. The only prediction that I missed was the call on Takers, but it's always very risky predicting the sweet spot. Otherwise a very good weekend.

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 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.

June 22, 2010: Knight and Day

Knight and Day (KNDAY) is opening today, a little unusually for a standard blockbuster, but we're going to go with it. I almost forgot about it, so I don't have a lot of time for analysis, but I don't think it needs or deserves much, easier.

I've been looking forward to this, because Tom Cruise seems to be having a good time, and he seems to be funny. That's kind of a nice change of pace, although he always seems to be having a good time, and he was very funny in Tropic of Thunder. Stock, however, has been tanking, down to H$82, from a high of H$136. The strike price is H$35, with the call at H$2. Yeah, that ain't gonna happen. The put is above H$5. There's some residual optimism in that call. The CX derivative also has some residual optimism, still above H$90. The Blockbuster Warrant IPOs tomorrow. Reviews on RT are middling at best, with 54% fresh, and the positive reviews lukewarm. I like Tom Cruise. He's one of the movie stars that I put in the "decent actor but amazing performer" category. I always feel like I am watching Tom Cruise - he doesn't disappear into the character. But he's usually at least interesting to watch. And I like Cameron Diaz. I'll probably see this in the theater. But in a summer where audiences are quickly getting tired of formulaic action movies, I don't see a lot of reason for optimism.

Stock: Short

Call: Short

Put: Long

CX: Short

Blockbuster Warrant: Short, when it IPOs tomorrow.

Update Sunday night: Yep, it bombed.$20 million over the weekend, plus $7 million on Wednesday and Thursday. Not looking good for Mr. Cruise. Good thing he took a pay cut - supposedly he was paid $11 million upfront, rather than his usual $20 million. Doesn't look like he is going to get much of a percentage of the gross, either. Oh well. I'll probably still see it in the theaters.