Playing & Trading Strategy

Before I start, I thought I'd link to the first episode since I neglected to tag it when I posted and it consequently doesn't appear in the fund post column.  For anyone catching up on these late in the game, instead of searching through a backlog of posts you can read it here:

http://www.hsx.com/forum/forum/php?id=2&pid=347431

It's been a rather uneventful week for the fund with no new wide releases.  In my personal portfolio, the lion's share of my profit is probably made off of wide openings and starbonds.  The world of trading news items is a little new to me, but it's not difficult to pick up.  However, I've found that the fund can really get punished off of trading fees.  A 1% fee doesn't seem like much, and it's something I don't even pay attention to in my personal portfolio, but when you're dealing with a portfolio of $13 million, they quickly add up.  If I catch a news item late, and sell off a stock trading at $40 ($4 million) and invest fully in a similarly priced stock, we're going to get hit with a $.40 fee on the sale and another $.40 fee on the buy.  Suddenly UNIVX has dropped 80 cents before the new stock has had a chance to move.  That means the new stock needs to net the fund $80,000 before we've recovered the loss from the fees.  Some of these trades haven't paid off, and have even lost the fund more money, which means that some of the better trades we've made, like the $1.3 million netted on The Forest around news of the trailer, have been virtually swallowed up by trading costs of other items over the course of the week.

So ultimately this becomes a trading lesson for all traders, and a piece of advice.  Trading on news items can be very profitable, but time your trades accordingly, and resist the urge to trade on stocks that are moving for no reason.  If there's no good reason a stock is moving in one direction, it can just as easily change direction at any moment based on trader whim.  So resist the urge to jump on a stock with a large % daily move with no foundation behind the change.  And if you catch a news item late in the day, you may jump onto it just in time for everyone else to jump off and/or short the stock.  If you're not jumping onto a stock close to a news item announcement, you may want to not jump at all.  And even with a well-timed jump, be prepared to jump back off when the move runs its course, sometimes the very same day.   I'll be taking a more conservative approach towards trading off of news items in the future, resisting the urge to make the fund at least $1 a day while trying to catch the likes of FOXX.  Those trades will still happen, and they will still be profitable, and likely more so when made selectively.  Then the $1.30 profit we made off of The Forest doesn't need to cover the costs of less profitable trades and fees.

As for our upcoming wide releases, I still believe in the box office potential of both Crimson Peak and Steve Jobs.  We're now a little over a week out from the wide release of Peak, and a little over two out from Jobs, and I anticipate sitting and holding both of these stocks, at least until weekend projections.  Previously, I've been holding them, selling them to fund the purchase news items, and rebuying them later, but all of the fees in doing so, coupled with the wavering volatility of both of their stock prices, has been chipping away at the fund's stock price a bit.  So I'm going to play a longer game with both instead of worrying over smaller movements leading up to release.  We will also be playing their derivates, with cash currently set aside for tomorrow's Crimson Peak offerings.  Right now the remaining funds are in FAST8, which has solid news behind it, and should be a smart place to keep that cash until another solid, timely news item comes along.  With the plan for the coming week in place, let's take a look at three more Universal releases.

The Danish Girl

This is one of those limited releases that should do very well for itself.  It's running alongside awards-hype with another likely nomination for Eddie Redmayne, and it's a timely release paired with the success of Transparent and the Caitlyn Jenner reveal.  The problem-- it's already trading at $12.44, which is a very solid figure for a limited, and would have been a great buy back in June when it was still trading in the $2-3 range.  But right now it's probably sitting close to max unless it platforms wide.  It certainly won't go above $20 without playing wider, and if it gets anywhere near that it will happen without any guarantees and likely in slow trickles.

Krampus

I like director Michael Dougherty's previous movie Trick 'r Treat, but its rough around the edges and not a great film by any means.  In places it has the spotty look of a film school project whose talented director is perfecting his craft and making mistakes along the way.  My main question is whether Dougherty has stepped up his game and delivered something that looks like a studio blockbuster, even a smaller-scaled one.  The trailer, while gaining points for looking like an audience pleaser, still has me on the fence in regards to overall quality.  On the plus side, Dougherty has a very solid cast that includes Toni Collette and Adam Scott (though they aren't exactly box office gold), he's beating Kevin Smith's Krampus-themed movie to release, and the concept of Krampus seems to be catching on lately with audiences... all of which could time very well and very positively affect the film's box office potential.  And as we saw recently with The Visit, horror audiences are relatively forgiving and willing to take more chances.  Krampus also looks to be hitting a similar dark-edged-Christmas-themed-family-horror note as 1984's Gremlins, and that movie made $148 million back in its day.  I certainly don't expect Krampus to do those kinds of numbers in today's glutted marketplace, but it seems like smart counter-programming amidtst the December Oscar fare.  Movies hitting similar notes include Victor Frankenstein opening the previous weekend, which I expect to disappoint with an unsuccessful balance of horror and comedy; and the weekend before that the Seth Rogen Christmas-themed comedy, The Night Before.  Krampus has a couple of weekends before the new Star Wars opens, and even then I think it can exist along side that juggernaut while feeding off of its audiences.  Other genre films and mainstream blockbusters may have vacated December because of Star Wars, and that will likely play to Krampus' favor.  In the end it's going to depend on the quality of Krampus and the reviews, but if it's a good movie, it could do very well for itself and double or triple its current trading price.

Sisters

As 30 Rock often quoted comic strip character Cathy, "Ack!!!"  Does anyone remember Baby Mama?  Or is it a dark, repressed memory for all that bore witness?  Look, I like Amy Poehler, and I really like Tiny Fey.  But Fey is smart, and her comedy works best when it's smart as well.  If I'm going to go see a Tina Fey movie, I want something that's going to engage my brain, make me think, and make me laugh... because that's when she makes me laugh the loudest.  I don't need to see Tina Fey playing stupid and doing her version of an Adam Sandler or a Will Ferrell movie, and this movie looks like the female version of Step Brothers.  I expect this to be terrible, and to make me further wonder what Tina Fey is doing to her career when she could be making her version of something more along the lines of Albert Brooks' Defending Your Life.  But Baby Mama managed to gross $57 million domestically, and Sisters has only recently sunk a few bucks below that target price.  So I'll be watching the estimates and analysts one this one before I lose money shorting something that could do okay for itself even if it is terrible.

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