Our league is starting to fill up nicely so I expect it to start it on Thursday, July 1. What I have in mind is that we can make this a fun experience by having anyone willing post content about it. For example:
- We will have weekly updates of what’s going on in the league here on AM and post about our current holdings and transactions in the comments
- Posts such as “Star rating” and “movie picks” that rate actors and movies buy/sell/hold like in the real stock market. This could be done on your own blogs which I link to or as guest posts here on AM. I will post an example of each in the near future.
- Everyone can post weekly about their own portfolio on their own blog with reasons on what they picked etc… and those can be linked in our weekly update.
Let me know if you are interested in doing any of those or if you have any ideas that could make this a better experience. Now I’m going to give some basic explanation of how HSX works so we can get going on Wednesday!
Basics of Trading on HSX
The prices of a stock fluctuates based on supply and demand. For example, if everyone wants to buy stocks of Inception, its price will tend to rise. On the other hand, if no one wants it, the price will move lower. A simple analogy would be selling an item on Ebay: If you are selling something that a lot of people want (a Twilight t-shirt) there will be a lot of bidding and price will move up. On the other hand, if you are selling something that no one desires to own (a Tom Cruise movie), you will get zero bid and will be forced to either lower the price or keep the item.
What does the price of a movie stock mean?
In the case of movie stocks, the price reflects the expected box office intake for the first four weeks of release. In the case of Inception, it means that the market (the collective thoughts of everyone) expects the movie to gross $202.85 million in 4 weeks.
How do I trade?
If you think that Inception is going to make more than the current price reflects (in this case $202.85 million), you will want to BUY the stock. Simply enter the quantity in the box and click buy! Let’s say that after one week, the price has risen sufficiently and you want to take your profit, simply enter the quantity you want to sell, and click “Sell”.
On the other hand, if you think Inception is overrated and will flop at the box office (make less than $202.85 million in four weeks) then you will want to SHORT it: Enter the quantity and click on “Short” instead. Let’s say that the price declines over the next couple weeks because of negative buzz and you want to take your profit, simply enter the quantity and click “Cover”
What is a portfolio?
A portfolio is everything that you own. It is usually recommended that you have a nice variety of holdings instead of putting all your money into one single MovieStock/StarBond/Movie Fund. It’s called diversification in the financial world. Below is an example of my current portfolio. As you can see, I expected Knight & Day to flop so I shorted Tom Cruise and Cameron Diaz and now am getting some returns on those positions
You know now the basics of trading on the Hollywood Stock Exchange. If you have any questions about what I just wrote about or about more advanced trading (derivatives), please let me know in the comments!