Movie futures: place your bets on Hollywood films

Almost everyone thinks they know a good movie when they see one. But how many can predict what will be good and what will be successful at the box office? Next month, Cantor Futures Exchange, a subsidiary of Cantor Fitzgerald, will open an online futures market that will allow studios, institutional investors and filmgoers to bet on the box-office results of Hollywood releases.

Cantor says the trade in movie futures could be genuinely profitable for savvy investors and has made the exchange as simple as possible: contracts will trade at $1 for every $1 million a film is expected to bring in with that value set by traders. If a film is expected to bring in $100 million, a trader can buy a contract at $100. If it takes, say, $150 million, the trader makes $50 plus the principle.

"I've worked in the futures industry for a long time," Richard Jaycobs, the president of Cantor Exchange, told the New York Times. "And none of the products has the overall appeal that this does. This just has a tremendous potential audience."

Cantor has been looking at this market for almost a decade. In 2001, it bought the website HSX.com, where users can place bets on a film's box-office success.

Like a throughbred owner betting on his own horse to win, film studios themselves will take a further punt on their investment. Of course, if movie executives know their film is a turkey they could also short their film, effectively using the exchange as a hedge against a poor box-office showing.

Cantor expects to open the exchange shortly after April 20 and hopes, since Hollywood has long sought insurance itself - whether against bad weather during filming or against problems arising from the unpredictable habits of movie stars - it will be used extensively by movie-business people.

"The nature of the futures business is that many of the traders are in the business they're investing in," says David Gary of the US trading commission.

But observers of the movie business urge caution: choosing a hit isn't as easy or obvious as it looks. Most users of HSX.com predicted  Avatar would flop. They would have lost their shirts on the Cantor Futures Exchange – the 3D film has taken more than $2.6bn worldwide since December. ·