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"If the distributor shorts a $100 contract and the movie grosses $50 million, the distributor will make $50, thereby limiting the company’s total losses from a
by chasingsparks 17y ago
"If the distributor shorts a $100 contract and the movie grosses $50 million, the distributor will make $50, thereby limiting the company’s total losses from a film."
From what they have said, this does not sound like a viable hedging strategy for those in production. There is unlikely to be enough contracts traded. Instead, it seems more like a gambling operation with a CFTC gambling shield. I'm surprised they did this, given how much general anger there still is regarding derivatives and speculation.
- mhb 17y ago...it seems more like a gambling operation with a CFTC gambling shield Yes. What's next - futures contracts for the next six Powerball numbers?
- dminor 17y agoNo no, in the legal markets we call them "speculators", not gamblers. Seriously though, whether or not a movie does well isn't a completely random process, so it's entirely possible for people outside of Hollywood to have insight into it.
- steveplace 17y agoThe two differences between financial speculation and gambling are your odds and whether you wear a fancy tie. The odds are the more important one. If you can make statistical methods that show the risk of loss, you can then assign a premium to that risk and put it on the market. Whether it will get enough liquidity to get past the smalltime remains to be seen.
- ericwaller 17y agoAt least in NY state, the exact odds and payouts are published. So you can certainly assign a premium to the risk involved, and you can do so exactly. But since everyone knows the odds, the lotto market is perfectly efficient and no one can win in the long run -- this is what makes it gambling.