HOLLYWOOD STOCK EXCHANGE
THE ENTERTAINMENT MARKET
THE ENTERTAINMENT MARKET
Ok, bear with me...
The Call for The Smurfs is for $20M. If the movie makes more than that during its opening weekend, the call will cash out at the difference between the actual gross and the strike price (i.e. if $22M, it will cash out at $2 per share, etc). Also, that is the same way the Put works. If it doesn't make its strike price (i.e. $15M instead of $20M), then the Put cashes out at the difference between the actual gross and strike price (using the above example, the Put would cash out at $5 per share). It depends on how you think a movie will go during its opening weekend as to what you invest in with regards to Calls & Puts. If you think that a movie will gross more than $2M more than the strike price of the Call, then it would be advisable to buy the Call and short the Put, because the Put will cash out at $0, meaning you make money both ways. If you think that a movie will gross almost exactly at the strike price of the Call & Put, then you short both, because the value of either the Call or Put will be fairly small and/or cash out at $0 (the Put for No Strings Attached earlier this year cashed out somewhere around $0.50 per share and the Call cashed out at $0, just to use an example). If you think that a movie will gross less than (strike price - $2M), then you long the Put and short the Call, because the Put will cash out at more than you purchased it for, and the Call will cash out at $0.
Hopefully that's made some sense for you.
call / put theory help Jul 28, 19:51
Ok, bear with me... Jul 28, 20:13
Correction, the Call for The Smurfs is for $25M, not $20M. {nm} Jul 28, 20:14
The math isn't that hard Jul 28, 22:04
I'm a little surprised to hear a seasoned player say that 'because it is trading at $60, so it will probably adjust near that' Jul 28, 22:26
Yeah, I was pretty spectacularly wrong on this one Aug 01, 12:17
