HOLLYWOOD STOCK EXCHANGE
THE ENTERTAINMENT MARKET
THE ENTERTAINMENT MARKET
Here's what I often do
On a Wednesday, when the options IPO, I look at the strike price for said movie's options. Then I look at what the actual moviestock is trading for. If, based on the stock price, I see that the market believes the movie should open close to the strike number, then I go long on both the call and the put, knowing that there should be about the same amount of people betting against it as are betting for it. Both the call and put go up in value, and then I sell them off before the actual opening weekend.
On the other hand, based on stock price it looks like the market has no confindence in the movie reaching the strike, then I go long on the put, short on the call. If the price indicates faith in the movie going well above strike, then you do the reverse - long on the call, short the put.
Example:
MOVIE's options IPO on Wed., with strike of 10M. I look at MOVIE's current price and see it's 30/share, which means 11M opening is expected by traders. 11 is so close to the 10M strike, I go long on both call and put, knowing by the price that half the market is betting one way while the other half is betting the other way, then I sell after they rise in price and level off, always before they halt at opening.
FILM2 options have a strike of 15M. Price of related stock is 54/share. Traders are expecting a 20M opening, so there will be no interest in the put (so short it), but plenty of interest in the call (so go long on that option).
The only time I keep the options through the opening weekend is when I'm personally quite confident in a movie. Other than that, I just buy/short them based on stock price and then rid myself of them before they halt.
I hope that makes sense :-)
I have made money on deriatives, how do you know when to sell them incase they drop in price? {nm} Aug 10, 03:59
THAT'S the big question around here..... Aug 10, 08:00
Here's what I often do Aug 10, 10:28
I actually use options in a real market sense to hedge my holding although Aug 10, 15:03
Thanks for the feedback..its all about risk!! {nm} Aug 10, 15:51
Yep...everyone has their own style with regards to risk...you have to decide what YOURS is...good luck! {nm} Aug 11, 08:59
Flash makes a good point about finding your own style. IMO, that's where a lot of the fun comes in. {nm} Aug 12, 08:51