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BOOK YOUR FREE STRATEGY SESSION NOW >>The movie "Trading Places," starring Eddie Murphy and Dan Aykroyd, is undoubtedly one of the most popular movies of the 1980s for trading lovers.
In this video, we’ll analyze some famous scenes from the movie, focusing on the technical aspects explained from a trader's perspective.
Specifically, we’ll focus on some trading operations whose outcome directly impacts the course of the story.
By watching the video, you’ll learn many interesting facts about the pit markets, how trading was done in the 1980s, and the famous futures traded in the movie, namely Pork belly and Orange juice.
Enjoy the video!!! 🍿 🍿
P.S. Scenes from "Trading Places," (©1983, directed by John Landis, starring Dan Aykroyd and Eddie Murphy, and distributed by Paramount Pictures) are only shown here for educational purposes. Unger Academy doesn’t intend to violate copyright law.
Introduction
Hello everyone, and welcome to this brand new video. One of the coaches at Unger Academy here, and you know, since we’re so close to Christmas, we’ll undoubtedly find the film "Trading Places" on the Christmas movie list again this year. So today we thought that it would be fun to go and see the funniest scenes from that film from a technical perspective, if you will from a trading perspective.
So don't miss these two scenes from the movie! Let's go and check out!
First scene
"He's hit rock bottom, come on, let's buy! Mortimer Duke here, buy 200 Bacon May contracts at 66.8. Put them on my personal account."
In this scene from the movie "Trading Places," we see the Duke brothers purchasing 200 Pork belly contracts.
Interestingly enough, in the 1980s, to place orders on the market, you had to call the broker who was in the market to place the order.
I mean, today, it's just a few clicks, as you know, and we can go to market in less than a second.
But back then, wow, the time was much longer, but I assure you that prices still moved very quickly.
The trade in question was a purchase of 200 Pork belly contracts for $66.8.
Unfortunately, this contract, was listed on the CME at the time and remained on the CME until 2011, is no longer used. However, its close relatives, namely Feeder Cattle, Lean Hogs, and Live Cattle, are still present and widely used by retail and non-retail traders today.
In the scene, we see that Billy Ray, played by Eddie Murphy in this film, tries to stop the purchase by claiming that the price would drop to $64, after which it would stop and then rise again.
In the next few moments, we see on the screen how the Pork belly price does drop, saving the Duke brothers money. Let's go and check it out.
"Do you realize how much money he just saved us?"
But how much did they save?
"Advise our clients interested in belly to buy at $64. Mr. Valentine has set the price."
Okay, so let's go and do the math. The contract in question, with the ticker "PB," had a Big Point Value, or multiplier, of 400, just like the other products listed today on meats.
And, if we think about it, 200 contracts multiplied by $400 per contract equals $80,000 per point.
The points saved are from 64 to 66.8, so 2.8 points, so in a very short period, in a few minutes, the savings increase to over $220,000.
The film, of course, ironizes the situation, but that's precisely how it was at the time.
Duke & Duke had immense purchasing power. 200 contracts were quite a lot, indeed, in those years at least.
But it’s interesting to see that some of the dynamics, even though they’ve been improved, digitalized, and became even more efficient, still haven’t changed.
Second scene
"We want you to buy as much Orange juice as you can the instant the trading starts. Don't worry if the price starts going up, you just keep buying."
Well, in this other final scene of the movie, which you should only watch if you’ve already seen the film so as not to spoil the ending, we see our two heroes, Valentine and Winthorpe, entering the stock market to make the Duke brothers pay.
"Well, this is it, the last bastion of pure capitalism left on earth. Here in New York they trade everything. Gold, Silver, Platinum, Heating Oil, Propane, Cocoa and Sugar, and of course, Frozen Concentrated Orange Juice."
As mentioned in this excerpt, the exchange consisted of many pits where many other products were traded.
And in the case of our protagonists, they were trading Orange juice which, as you can see in this image, has different maturities, like all futures.
The April maturity was the most liquid then, when our protagonists had to buy and sell, and then gradually, all the prices of the other maturities.
"Buy at 102."
When the market opens, the happy Duke brothers start buying, seeing that the price goes up enough to attract other investors who jump in to take advantage of this situation.
That clearly couldn’t happen today because as you know, everything happens online these days.
Since the market opened, the last price reached is $132. That’s a significant difference of at least 30% from the opening, which was $102.
So, the Duke brothers are rubbing their hands together right now because their investment is doing pretty well.
"Now."
"Sell 200 April at 1.42."
So, you saw that Winthorpe placed a conspicuous short order, so a sell order, quite unlike the Duke brothers, hoping that the price would fall shortly after that.
But as we'll see, Winthorpe and Valentine had a trick up their sleeve, so we'll see how the market reacts shortly when the crop yield data is released.
"Ladies and gentlemen, the Orange crop estimates for the next year. After calculating the estimates from the various Orange-producing states, we’ve concluded the following. The cold winter has apparently not affected the Orange harvest."
And lo and behold, as soon as the report was published, prices began to fall, to the delight of our protagonists, who had been short before this data was published.
And only when the price continues to fall, they’ll close their short positions.
And again lo and behold, when they started buying back their positions, the market closed at $29.
Our two protagonists had shorted at $142 when the opening price was $102.
So, yeah a considerable profit, an outstanding profit, and one that will make the Duke brothers go bankrupt.
"The market is closed, gentlemen."
"You won’t expect us to..."
"You know the rules of the exchange, Mr. Duke. All accounts must be settled at the end of the day's trading without exception."
"You know perfectly well we don’t have $394 million in cash."
"I'm sorry boys, put the Duke brothers seats on the exchange up for sale at once."
And eventually, the Duke brothers, who had taken too much of a risk, took some extreme positions, trusting that the crop yield data would be on their side, and they too were insiders, playing in the financial system. They eventually went bankrupt because the clearing house picked up the tab and seized all of the Duke brothers' assets.
Well we hope that you enjoyed this video, something a little different.
If there's anyone among you who is interested in the world of systematic trading, I invite you to please go and click on the link that you find in the description of this video. From there, you can watch a free presentation by Andrea Unger, our founder and the only 4-time World Trading Champion in real money trading, or you can get our best-selling book "The Unger Method" by just covering the shipping costs, or even please, book a free strategic consultation with a member of our team.
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We thank you so much for watching and we will see you again soon in our next video, bye-bye for now!
We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.
BOOK YOUR FREE STRATEGY SESSION NOW >>Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.
