Playing & Trading Strategy

Or Let Me Explain the Bloodletting That Happened This Week

As I type this, [UNIVX] has slipped back down to $12.87.  Not an unforeseen event, as we were in long on the Everest derivates before they halted.  Everest itself ended up being a tricky stock, though the fund did make money off of it.  We went short on it on Friday and rode the opening weekend jitters downward, then jumped off around the low point, reversed position while it was even below the low estimates, and held it long over the weekend and for the adjust as it went back up.  Unfortunately, as detailed in last week's update, I suspect that the realistic, downbeat nature of the film didn't play as well as hoped to American audiences who currently want more unrealistic superheroism in their blockbusters.  And the early, limited 1-week IMAX release not only took a bite out of opening weekend, but poor word-of-mouth and middling reviews likely contributed as well.  Of course, all of this is easy to detail in hindsight.  As of a week ago, I wasn't sure whether this would be the case, or if the marketing and pre-release anticipation would carry it through.  There was no doubt in my mind the box office would eventually go soft, but I could have seen it holding up and performing better through opening weekend, and then dropping off.

Any profits we made on Everest itself were washed away by the derivates, with the OW halting at $19.  This means that we lost $600K on the OW, and another $100-$200K on the call and put.  Not enough to be saved by the $150K profit we picked up as the Minions blockbuster also delisted today.  I did toy with the idea of a forum post advising investors to short UNIVX this morning and come back and cover and rebuy after today's adjusts, but assumed that Antibody and the site mods would not take too kindly to it.

It was a volatile week all around for the upcoming Universal releases.  Our next big wide openers like Crimson Peak and Steve Jobs have also been doing their share of ping-ponging.  At times I've grown frustrated and picked them up for a day or two, but as any trader will tell you, fear-based or reactionary trades are the worst kind to make.  The Lifeboat had its IPO, and I went long on it, expecting it to initially go up as most IPOs do.  It initially dipped.  So I sold it and went short, assuming that we were already in the downslide that most films still in development or mid-production exist in, only to have the stock then experience a bump up.  Similarly, a couple of last week's news items didn't have an affect on their associated stocks when the news items hit last week, but they instead affected their respective stock prices today.  So let me take this moment to steer sideways into some advice for newer traders on the HSX.

Starbonds are your best friend.  Because they adjust off of box office figures, you already have a much better idea what way they will move, and except for opening weekend fluctuations, that number is almost set in stone.  It's money in the bank.  Unfortunately, studio funds can not invest in Starbonds.  The next best way to make money on the HSX is opening weekends, and most of the time the analysts are dead on.  As long as you play the general trends, you'll make money nine times out of ten, and the loss on the tenth can be folded into the rest of your profits.  You can grown your account very quickly playing opening weekends and starbonds.  With a studio fund though, you only have access to a very select number of releases, so one bad performer can really jolt the stock if you're on the wrong side of it.  At least temporarily.

Other general trends... an IPO usually goes up, as do stocks with news items.  However, productions a week or two out from their IPO, and those with no recent news items, generally gradually bleed downward until they finish production and receive a wide release date.  Limited releases can sometimes make money based on critical acclaim, but for the most part, your big movers will be your wide releases.

Personally, it doesn't make sense, in my opinion, to bet on penny stocks or productions in limbo.  These may go up and down based on trading, but without any advance in production and release, it's like playing the lottery.  That's why I tend not to respond to the movement of very low-priced stocks bouncing around without any tangible reason.  I don't like stocks without recent news items, or stocks trading below $5.  Currently the fund is holding The Forest long because of its trailer debut Wednesday, and The Lifeboat short in anticipation of some post-IPO decline.  We're holding Stephanie short based purely off of trends and because I sometimes like to contradict myself, but in this case we're not dealing with a penny stock.  We're talking about a stock that's trading around $10, and has not yet recevied a wide release date.  Until it does, it should continue to slowly decline, and right now it's doing so at a rate that makes it a favorable holding in comparison to our other currently volatile bouncers.

Let's take a quick look at the other stocks UNIVX has foremost in its sights.  Crimson Peak and Steve Jobs, I believe will be solid performers.  However, they're both several weeks out and still ping-ponging around, and I'm trying not to hold them while that's ongoing.  Today Steve Jobs jumped, and I'm hoping it's the beginning of the ride upward I expect to go to around $100.  Crimson Peak I'm less sure of, but I think it will benefit from it's October/Halloween release, as well as its being a Guillermo del Toro film.  I don't expect the stock price to drop much below where it currently sits, and I think the box office performance will exceed its current price, though I don't expect it to match my Steve Jobs projection.

There are several stocks where the fund is holding 11 shares instead of 1 simply because it makes it easier for me to sort them and quickly eyeball their movement.  I'll get to their individual stock profiles in later weeks, but you can tell how I'm predicting their eventual box office performance by whether I'm holding them long or short.  By the Sea and Sisters (TNEST) I expect to underperform, while Krampus and Race I think will outperform.  And Pacific Rim 2 I'm tracking because it's all but cancelled, though del Toro is still trying to remain positive about it.  It's sitting at over $35, so there's a lot of room for it to decline.  In the near future, UNIVX will continue to respond to stocks with relevant news items and IPOs, while coming back to SJOBS, CRMSP, PACR2, BYSEA, KRMPS, TNEST, FORST, and RACE when applicable.  Now let's take a closer look at the next 3 Universal releases.

Jem and the Holograms

I remember the Jem and the Holograms cartoon from back in the 80's, but never really watched it because it was so squarely aimed at girls.  This movie seems to be a total misfire.  The old fanbase (those that still care) are up in arms about the changes that have been made, while younger audience don't seem to care and nothing has been done to make them want to care.  It's currently trading at $18.21, and it's not a stock I feel I can predict in any way, so I'll just be following tracking on this one.  Apart from some kind of late-in-the-game genius marketing campaign or some previously unseen level of quality behind it, I expect this to bomb.  But a studio film can still bomb and gross $18 million, so it's not like it's currently trading at an unreachable level.

Suffragette

A solid cast led by Carey Mulligan in a film about the British Suffrage Movement.  I've seen so little marketing for this one, and don't believe it has the kind of appeal to really blow up.  And it's a limited release.  It's currently trading below $3, and that seems a fairly likely box office performance for this one.

By the Sea

This is the film of these three I have the strongest opinion about.  It looks to be Angelina's Jolie version of the Richard Linklater/Ethan Hawke/Julie Delpy Before trilogy.  And purely a vanity project, financed as a result of the performance of Jolie's previous directing projects.  The trailers show almost nothing, and my guess is that it's going to be 2 hours of insufferable conversations about relationship drama, in a minimal number of locations.  This kind of thing lives or dies based on the quality of the writing and acting, and Before Sunrise and Before Sunset were big art house hits because they were good.  And they were art house hits, not wide releases.  I don't think mainstream American audiences want to see Jolie and Pitt kvetch about their relationship drama in a thinly-veiled fictional piece, and my guess is that this one will alienate audience and bomb.  Though it's still trading fairly low, and, like Jem, the current trading price is not unreachable.

The fund's next release is Trash on October 9th, and the next wide release is Crimson Peak on October 16th.