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Posted by: bdiz on Feb 23, 17:25 in response to Antibody's post Soliciting Feedback: What if MovieStocks no longer halt...

Short Answer: I've got an open mind about it, and I'm enthusiastic to give it a shot.

Long Answer: I understand the fundamental differences between HSX and a market like the NYST, and the resulting need for mechanisms like halts/adjusts. I'm more of a lassiez-faire kind of guy so the halts/adjusts have always seemed the most "artificial" part of the game to me anyways.

I like that his change would mean that a movie stock would more closely fit and follow the "value" of a movie throughout it's development and theater life. It seems to me that at present, one would want to trade on a movie in development based on it's expected opening weekend performance alone. After the opening weekend, one would want to trade based on how closely you expect it's remaining theater life will match a given multiple of it's opening gross (2.7, 2.2, 3.0). It's those multiples in particular that to me seem to be the most artificial part of the HSX model. While many movies come suprisingly close to those opening multiples by the time of their delist, there same multiple is used for movies like Avatar and Dear John.

The proposed changes would eschew this multiples game, and instead trade on the expected delist price. The stock price is then driven by information and speculation which evolve along with the movie itself; in my opinion this makes for a more realistic model.

I can imagine some heat coming from the people who have become dependent on playing the nuances of the weekend halt/adjusts to grow their portfolio (myself included), but I've been at least a little successful playing the CX derivitaves on opening weekends lately, and if I threw my opening adjusts money into that instead, then I'm sure I could see similar (if not greater) profits. And, as players discover and learn new strategies to profit in this new model, there's the .OW derivitaves which behave more like the present stocks to ease that transition.

I'd been a little intimidated by the CXs on opening weekends due to their volatility. I'm guessing that's because the relative volume of a particular movie's CX derivitave is much smaller than the parent stock's, and so any given amount of money invested has a larger impact on the trading price. I'd expect the proposed changes to mitigate a lot of that volatility due to the increased volume.

I would imagine that players in this new model would pay more attention to the latest box office figures throughout the course of weekend, and probably bring more traffic on HSX over the weekend as people check to see how the latest box office projections are affecting the stock.

Finally, I'd be curious to see if this could open the door to a relaxation of the "4 weeks in theaters for wide releases, 12 weeks for limited releases" practice. The strict application of this policy is a result of the opening adjustment multiplier, which won't be needed in the new system. I see a lot of limited release films hit a theater count of 0 after just 3-5 weeks and are just dead in the water for another 2 months until delist. Conversely, blockbusters like Avatar delist far before their domestic box office life dies out. Perhaps you could create theater count threshold, for instance "200 theaters wide, 0 theaters limited" or "5% of the opening weekend theater count", and after a weekend where the movie is shown on fewer screens than that threshold, the movie delists.

Your team has been building an incredible market model for 10+ years now and I'm sure that you've spent countless hours analysing its workings and seeking refinements. As I mentioned earlier, I respect your logic behind implementing many of the model's mechanisms (such as the weekend multipliers), and am excited to see that this model is still continually scrutinized and improved.

Soliciting Feedback: What if MovieStocks no longer halt and adjust during the opening weekend of a wide release? Antibody Feb 23, 15:44

ok... eyescovered Feb 23, 15:59

OP says that .OW's would halt like current moviestocks do. {nm} lukesed Feb 23, 16:01

I know. I never said otherwise. {nm} eyescovered Feb 23, 16:09

So the price wouldn't change with estimates. {nm} lukesed Feb 23, 16:29

yes they would, due to trading {nm} RogerMore Feb 23, 16:32

OK, gotcha, I was refferring to predictions. {nm} eyescovered Feb 23, 16:34

i no like it. i enjoy the artificial instant adjust up and the free cash from obvious shorts. {nm} adrenalin112 Feb 23, 16:16

i love this idea {nm} Smallville944 Feb 23, 23:21

You'd also get rid of the calls and puts, right? If you do, there won't be any more OW arbitrages. {nm} lukesed Feb 23, 16:00

I like it. {nm} BuenaOnda Feb 23, 16:07

Does the Cantor exhange just trade securites during the hours that the North American stock exchanges are open? {nm} Vashta Nerada Feb 23, 16:09