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Tracking the Cantor Index SpreadBy Reagen SulewskiDecember 19, 2001
As by far the film with the biggest pre-release hype in December history, The Fellowship of the Rings will easily shatter the two-week old December opening record (hopefully putting to a final end the notion of glass ceilings in particular months). With the $60 million barrier no longer acting as much of one, the buzz that has built just in this past week leads me to make that $60 million mark my bare minimum call for the film. I do have a hard time seeing this film getting past $70 million, for several reasons. Probably the most important is the relative lack of screens. Whereas Harry Potter claimed upwards of 8,000 individual screens on its opening weekend, Fellowship will have to be content with around 5,000 in about 600 fewer locations. Its hefty three hour running time (add 15 minutes for trailers and commercials) will also serve to limit showings, although the running time is not a particularly large concern of mine (witness Potter's two and a half hour length). Another crucial element is its Wednesday open. Wednesday opens are not the gambler's friend, as they add additional elements of unpredictability into the mix. Will they draw the hardcore 'fanboy' audience away from the weekend? (Absolutely.) Will they go again on the weekend? (Only if it's good.) Will they allow the movie to build towards the weekend? (Only if it's really good.) In general, these tend to decrease the opening weekend much more than increase them. With sneaks happening as early as the last regular showtime on Tuesday night, expect a massive Wednesday number (upwards of $20 million) with a significantly smaller Thursday. The weekend numbers should again cross $20 million, at least on Saturday. The line on its opening weekend has dropped dramatically from last week's column, sitting now at $59-61 million. I think that short bettors have overcompensated for the above listed effects; the film still shows all signs of replicating the other successful openings of this kind, as a 'random' example, let's say Star Wars Episode I: The Phantom Menace. I am reversing my position on this line, pocketing a nice five point profit on my original short bet and switching to £50 long. The four-week bet has also dropped, but is not in a profit position for me, with the buy sitting at exactly the same amount as the price I shorted at, $262 million. For me, this is getting out cheap of a position I didn't really want to hold long-term anyway. I fully expect this one to clear four times its opening weekend in four weeks (that Christmas bonus again) with an additional $30 to 40 million from the two preview days, putting it over the high end of the current spread. Possibly a very risky move, if the opening weekend disappoints, but it's a position I feel will get back to at least break even, even if that happens. It's the time of year to get bold, so £100 goes long on Fellowship's four weeks. The four-week line on Ocean's 11 is in a similar position, where bettors are severely underestimating the potential for its Christmas week performance. Not only does the four week period cover Christmas week, but goes all the way into the new year; New Year's Day is as equally strong a day for the box office as (the surprising to some) Christmas Day. The long bet here is as sure a lock as you are ever likely to see. The holiday period every year is unique, but as I pointed out last column, nearly every film sees remarkable carryover through this week and into the following weekend. The film has to be absolutely terribly received (or perhaps a sequel) for it to not capitalize on this. Ocean's 11 is neither, so $150 million (or only four times opening weekend) is a very reasonable estimate. In addition to the £100 bet placed last week long, another £100 goes long at the (slightly higher, but still lucrative) new spread of $124-129 million. The UK line for Lord of the Rings has re-appeared at £7.5-7.8 million. Naturally, it faces most of the same obstacles and benefits there as with the US release. However, in opposition to my long position there, I choose short here, as I feel this is asking too much of Frodo and company. Harry Potter's actual opening weekend take came in at £9.6 million; comparing across to the US opening shows a rough ratio of 10:1. Using this on the Lord of the Rings line would make it a $75-78 line. As well, Harry Potter was a larger phenomenon in the UK than in the US. Additionally, some quick research shows that the pre-Christmas week is, in contrast to North America, terrible for movies, with most showing 50% drops on this weekend. Adding all these reasons together gets me to a short, and I'll place a £50 sell at £7.5 million. A couple of small changes this week; Cantor has changed the maximum bet placed at one time to £50 from £100, presumably because of the effect each bet has on the market. Since the bets here are not actually being placed and don't have that effect, I'm not going to bother changing the current bets although in the future I will make multiple bets. I may also try and figure out some sort of volatility effect to make it a little more realistic. I am also changing the way that unrealized profits and gains are calculated; instead of taking the cost of settling the bet right now, I will take the number right in the middle of the spread. It's the way Cantor handles it and it's a more accurate way of thinking about it.
Assets and Bets
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