Friday, 11 January 2013

What's the deal with AwardOptions?

AwardOptions are derivatives based around the upcoming Oscar nominations.  You want to pick the films, actors, directors and writers who will win Oscars - and also, the ones who are left to say "it's just an honour to be nominated".

AwardOptions begin trading the day after the Oscar nominations are announced, and the NominOptions have cashed out.  While there is more money to be had in NominOptions, there is still a decent amount in the AwardOptions.

AwardOptions are available for the big eight Oscar categories - Best Picture, Best Director, Best Actress, Best Actor, Best Supporting Actress, Best Supporting Actor, Best Original Screenplay and Best Adapted Screenplay - and there are AwardOptions available for each nominee.  AwardOptions are availabe at IPO for $5 each, and the ones for those films/actors/directors who are nominated will cash out at $25.  The ones that do not, cash out at zero.

The Best Picture AwardOptions are the exception here, because of the new rules about how many nominees there can be.  The winning AwardOption will still cash out at $25, but the IPO price will be determined by dividing $25 by the number of nominated films.  10 nominees means an IPO price of $2.50, 9 nominees will IPO at $2.78, and so on.

The way to win ultimate success and bragging rights is to pick the films/actors/directors/writers that win Oscars, and short the rest.  You will need about H$4 million to invest in every AwardOption.

The main strategies - play the players and play the favourites - are similar to those for NominOptions, and are discussed in this column.  Howver, it's important to keep in mind the main difference between AwardOptions and NominOptions - with AwardOptions, there can only be one winner.

With NominOptions, you have the luxury of several safe investments that you can basically set and forget until they cash out.  There are far fewer of these opportunities with AwardOptions.

Instead, you'll have one, two or maybe three favourites in each category.  All of these are likely to go up in price after IPO.  But as only one of them is going to cash out at $25, eventually you'll have to pick which ones to stay long with, and which ones to flip.

Trading AwardOptions successfully depends on keeping an eye on news and award ceremonies and whether any pre-Oscar consensus emerges about who the eventual winner is going to be.  And where the result is less clear, it involves taking risks and trusting to luck that the Oscar winners will come out the way you want them to.

Good luck in making the right picks.

1 comment:

  1. Thanks Roger. I see a small correction needed to be made, in the 3rd paragraph "and the ones for those films/actors/directors who are nominated will cash out at $25." should be "win" instead of "are nominated".