HSX Basics of Trading
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 
Click to zoom
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!
13 Comments
Seems relatively easy enough Castor (I think), I might have to enlist my hubby who’s much better in finance matters. Ha..ha.. too funny that you used a Tom Cruise movie as an example of ‘unwanted’ item, how true
I was laughing at the same thing Ruth. Even though I own plenty of Cruise movies.
I went to a super early viewing of The A-Team and chuckled to myself at the people wandering into Knight and Day. Goodbye lovely a.m. to them, not to mention money!!!
Ha..ha.. though I put the trailer up on my blog, I don’t think I’ll see it in the theater. Probably on Netflix.
Did you like A-Team, Heather?
GREAT summer blockbuster! Tons of fun!
Yeah… I’m still a little lost with derivitives but the rest is pretty clear… not sure if I can contribute a post with my work schedule (even on my site) but will do my best!
I’m not sure what warrants are yet but I’m familiar with futures and options. The options (put/call) allow you to bet on the opening weekend.
For example, in BENDPU http://www.hsx.com/security/view/BENDPU
This is a PUT option which allows you to bet that the movie The Last Airbender will make less than $50 million in its opening weekend. $50 is the strike price (= $50 mil). The current value is $3.56, it’s the price of the put option. Think of the $3.56 as money you put down to SELL The Last Airbender at $50. If the movie makes only $40 million on opening weekend ($40) then you pocket the $10 difference. If on the other hand, the movie makes $60 million ($60), then there is no reason for you to sell it $50 hence you lose only the $3.56 you put down.
I accidentally shorted a Fund, the Overexposed Fund. How do I get rid of it?
I wish I could say one of the _______ Movies are unwanted, but then eBay is getting some nice business from them. Damn.
Just go in your “My Portfolio” and sell all the shares you bought from that fund (BANAL)
If Riply “shorted” the BANAL fund, then to get rid of it, they can go to the BANAL fund stock page and “cover” max shares to get rid of it.
buy to sell
=
short to cover
I hope I don’t bring the league down. I made some purchases today. I’m really unsure of how much I’m supposed to invest. It seems daunting.
I like to get about $100K worth per position. If you are convinced that something is going to happen, then by all means, you should get a heavier amount.
I think one of the trickier things for me right now is getting used to the weekdays being included in this, especially since it’s summer. I’ve got a pretty good idea of what movies should do on the weekends, but the week could add a boatload the total. Grown-Ups made $5.3 million yesterday on a Monday. Let’s say the end up averaging 4.5 for the week. That’s an extra $18 million that you didn’t account for. Then maybe it averages $1 mil on weekdays for the other three weeks. That’s another $12 million.
$30 million added from weekdays that you maybe have shorted because you thought it was $20 million over what you thought it would make.
Hey! 2nd try! Just getting into HSX after years away. Anyone wanna start up a league? My tag is T23TGS
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