HOLLYWOOD STOCK EXCHANGE
THE ENTERTAINMENT MARKET
THE ENTERTAINMENT MARKET
ok
using your example:
if a films call is $10 and the call is at $2, and you short the call, then the max you can make is $2 (not talking commission) in a scenario where film opens to less than 10. the call would cash out at 0.
so yes there is limited gain to be made, but the thing is, if you're right, there is gain to be made ;) which some players love any amount no matter how small.
but in your scenario. if the film does well, then you risk losing a great deal. say that film did 20, then the call cashes out at 10, and youve lost 8 per share!
and of course flip this around for shorting puts
now the key to shorting a call or put is when traders have massively over/underestimated a film. say that film with the 10 call, and the traders run the call up to $8. if you are *sure* the movie will fail to hit that, then short away, because, as in this scenario, if the film does anything less than 18, youve made money.
Question about shorting Calls/Puts Aug 24, 11:45
ok Aug 24, 12:08
Thanks for the explanation Aug 24, 21:25