What’s more Christmas than that? A chair for two? The 1983 cult film is more than just a comedy: it’s a Finance Master Class Disguised as entertainment. Between identity swaps, futures contracts and the dirty game of insider trading, there is a story that still tells us about the world of investing today.
Finance the Hollywood way
A flawless pimp, Louis Winthorpe IIIand an entrepreneurial homeless man, Billy Ray Valentine. The Duke brothers, financial giants, put them on a collision course with one another. A dollar bet: Show that Winthorpe’s success is only a matter of context. The background is Duke & Duke, a company that trades in consumer goods such as coffee, wheat and frozen orange juice.
Derivative Tools: Protagonists in the Shadows
The film takes us straight into the world. Derivativescon i Future contracts Acting as a silent protagonist. These tools, which allow you to price a commodity today to be delivered in the future, are great for protecting yourself from market surprises. Imagine a company that uses large amounts of plastic: with a futures contract it can lock in the price and sleep well regardless of volatility.
In case of Orange juicebetting on crops becomes a real game of chess. If supply is plentiful, prices fall. If it is less, they increase dramatically. The Duke brothers, thanks to a secret relationship, believe they have control of the board. But the match takes an unexpected turn.
There are futures contracts. Also often used for speculative purposes.as shown in the film. Specifically, the value of each contract depends on a multiple: in the case of orange juice, each point change in price equates to thousands of dollars in profit or loss for those who have open positions.
The dark side of insider trading
“The harsh winter does not seem to have affected the orange crop.” A simple sentence but enough to ruin the plans of the Duke brothers in the movie. ‘There is insider trading The beating heart of this part of the plot. Using confidential information to gain an advantage in the market is not only wrong but also illegal. Yet, Winthorpe and Valentine turn the tables by using the same method to target their opponents.
The strategy is brilliant: two protagonists They replace the official report with a false one.convincing Dukes that the harvest has failed. Thinking that prices will go up bro They start buying contracts. At any rate, driving the market higher.
In practical terms, ratio substitution creates an artificial movement in the market: investors rely on false data, creating the illusion of scarcity. This kind of manipulation, if actually discovered, would lead to severe legal sanctions.
Sell high, buy low.
The climactic moment comes when Winthorpe shouts: “On sale April 30th for 142!”. With this move, it has promised to sell orange juice at $1.42 per kg in April. other traders, Prices are sure to rise further.they rush to buy, pushing the market further. But when the official announcement comes – the harvest is good – everything falls apart.
At this point, Winthorpe and Valentine They start buying contracts at rock-bottom prices.Taking advantage of the difference between the maximum price at which they sell and the minimum at which they buy back. The result? Magnificent profits for the protagonists and devastating losses for the Dukes.
From a financial perspective, this deal is a perfect example. Short strategy: Sell at higher prices first to buy back at lower prices, profit on the difference. The amount of contracts processed increases the economic impact: the main character manipulates thousands of dollars with each contract.
When bacon was on the market.
Another memorable scene sees the Duke brothers buying 200 pork belly contracts for $66.8. In the world of the 1980s, placing an order meant making a call. A broker is physically present at a stock exchange.A much slower process than today’s few clicks. Billy Ray Valentine weighs in, suggesting the price will drop to $64 before rising again. In doing so, he saves Duke more than $220,000 in just a few minutes, thanks to a difference of 2.8 points multiplied by the contract value of $400 per point. A perfect example of how even small actions can have a huge impact.
i Meat contractsAs with pigs or cattle, they are still important instruments in commodity markets today. Although the specific bacon contract is no longer negotiated, its successors – such as feeder cattle or lean hogs – are important to the agribusiness sector.
The magic of making noise on New Year’s Eve
Before the computer age, markets dominated. he shouts. In the film, the stock exchange is transformed into a theater where brokers and traders compete with each other amid shouts and hand gestures. This system is called Outcrywas a mixture of chaos and order. Hand movements and facial expressions were as important as numbers.
Winthorpe and Valentine take advantage of this dynamic to manipulate the orange juice market. They sell at high prices and buy back when panic sets in, demonstrating a surgical understanding of human emotions in trading.
Capitalism and its accounting
“This is the last bastion of pure capitalism on earth,” says one of the main characters, and the New York Stock Exchange is a symbol of this in the film. Between gold, cocoa, sugar and orange juice, each product has its own life, made up of variable maturity and liquidity. But when the stakes get too risky, as with the Duke brothers, the system calls for a bill. The relationship between the two brothers broke up.proving that even giants can fall if they ignore the rules of the game.
An interesting detail: in fact, the system does not allow you to sell contracts that cannot be covered financially. However, in the world of fiction, the revenge of the main characters and the failure of the Dukes add an epic touch to a story that tends to blend together. Finance, conspiracy and poetic justice.
