If you've ventured down to the comment section to tell me "Winthorpe doesn't say 2000, he says...", please only do so in reply to THIS comment thread or else it will be removed. So far I've had people commenting to say it's: -20 -30 -200 -2000 -20,000 -"Short" -"Navels" -“Down” -“Sell” So I'd much rather gather them all in one place and you can debate with each other.
Good question, it’s because it’s a very common thing for people to comment and caused a lot of repetition. My thinking was if all of the comments on this topic were in one place, then people could discuss it with each other and maybe we could reach a consensus rather than giving your opinion and having it be instantly lost to the rest of the comments section.
I've watched this movie likely 5 or 6 times and I just figured out that I never really understood the ending and I still am amazed at the rack on Jamie Leigh Curtis.
i thought I understood the final scene. but I never realized what he was doing was selling short, and I didn't know what that meant until a few weeks ago :) I thought he was just driving the price up to sell the orange futures they had bought. if they were selling short, I wonder why they needed seed money from their friends?
@@BlackMambo Now that I think about it.The money could have just been for the plot for all of us who had no idea what was going on, but maybe the money was just in case the plan didn't work and they had to cover the difference.
It wasn't illegal for insider knowledge trading of commodity future at the time. They finally amend the rules 30 years later (see "Eddy Murphy Rule") to make it illegal.
I don't know how those guys know what they're doing with all that madness. I understand the principal, I just don't know how they can hear what anyone else is saying.
@@matthewmolina2706 Actually, nobody takes a "cut": it's a series of betters gambling that they will come out on the winning end. The producer and the ultimate buyer are the only two people truly involved in the transaction. Everyone in the middle is mitigating the risk to those two parties, it's a zero sum game for them. Some win, some lose.
The protections in place to stop trading volatility like this weren't implemented until the crash of 1987. The movie came out in 1983, four years before the markets "Circuit Breakers" were conceived.
Aww damn I missed that detail, thanks for letting us know! I’d read they were revised in 1987, I didn’t realise that was the first time they were implemented… If anyone’s interested there’s a good summary here on Investopedia, I’ve added it to the video description too :) www.investopedia.com/terms/c/circuitbreaker.asp
@@AndrewW2733 It was certainly a critique of it yeah! Apparently that ruling is colloquially referred to as the "Eddie Murphey rule" though I'm not sure if anyone in finance or law ACTUALLY uses that phrase...
[5:20] "Sell 30 April at 142!" Selling 30 contracts for delivery at $1.42 per pound. Also, what they did in the movie was legal at the time. Everyone just assumed it was illegal. Only after Dodd-Frank was passed did it become illegal, some 28 years after the movie came out. They specifically called it "The Eddie Murphy Rule" when discussing it in the Senate committee.
@Rusty Shackleford Oh, I know, but the Gamestop thing is the most blatantly open event of cheating. There isn't even a denial, or a level of gatekeepers that can label everyone 'conspiracy theorists'.
@@taitjones6310 oh thats not over they are just getting all the information they can everyone involved in that commited a very illegal act the second they grouped up like they did. took them something like 10 years to nail enron bunch of randoms probably wont take that long but its coming.
The issue is, I don't think what WallStreetBets members did was illegal. Any one who understands balance sheets and has 1/2 a brain would have realized that GME shares were selling way below intrinsic value considering GME's cash position and lack of debt. In fact, I think Wall Street was trying to BK the company so that they can pay off the debts on cents on the dollar, create 2 private equity companies, one to take the cash and one to load with debt, cash out the cash one and truly BK GME a 2nd time with nothing in assets. This is what was done to Sears and Kmart and many other companies. At best, regulators could say coordination but even that is loosely based because everyone had a choice to buy in or not. Besides, the coordination was no worse than what the hedge funds did on the other end of the trade.
My uncle Carmen was in the opening credits. He was in a beret cleaning up some heads of lettuce. Always get a kick out of seeing him. Something to remember him by.
@@sha11235 Yes. he didn't appear in the movie but when Rocky is running down the street, he told his friend who was standing next to him to throw him an orange. He said the van was white and there were no cameras visible. The person was the son of the owner of Giordanos, the large corner grocery at 9th and Washington. He worked there for many years.
You know this movie comes out every Christmas time. Besides the first time I seen it was on VHS from. Blockbuster. No internet then so who had the time to go to the library after renting videos.
as a viewer you really get caught up in the flow of the movie. Winthorpe had been so abused in the story by that point that you were ready to see him get revenge and the way its shot really put you on the floor in that chaos
In college my finance professor told us about a friend of his, who was trading cattle futures. He lost track of one and got a call from the rancher asking him where he wants his cattle delivered.
Finally. After years of videos very broadly explaining what happens, we finally get a video that goes into the minutia of what actually happens. There is so much dense information provided at the end of that movie that it’s almost impossible for a lay person to understand what’s going on at first.
Would it be insider trading if you're not in a position to have insider knowledge of the report? What I mean is let's say the government report in this movie was lost by someone in a public place and you happen to find it and act on it. Would that be insider trading even though you're not inside that industry?
@@jay_mw A government report that is not meant for publication yet would by default mean you're not allowed to see what's in it. So the moment you accidentally find it you're obligated to report finding it to the proper authorities not use the knowledge in it for your personal enrichment.
Movie is from 1983. $394 million that the Dukes owe would be over $1.2 billion in 2023. The $25.2 million profit that Akroyd and Murphy characters made would be over $77 million in 2023.
Thank you for explaining this. The thing was that I always realized is that no one knows what the actual crop report is until it is announced so you are gambling which way to go. The Dukes wanted to get their hands on it so they would know which way to go right away so they'd win. It's like knowing the outcome before you start. Of course, the report they got was the opposite so it backfired on them.
Despite it not being accurate, a scary thought came to mind watching this movie again recently. The Dukes wouldn't be the only people Winthorp and Valentine screwed over. Some analysts looked at the numbers in this scene and actually calculated that the two of them walked away with about 250 million dollars (hence why the Dukes also lost a 9 figure amount) by doing a short sale. Basically selling at a higher price than what they'll be paying for it after the crop report. So the other traders on the floor combined paid that 250 million, when they offered the buyout everybody likely sold to them at a loss. There's proof of this when we see that person on the phones yelling to their trader "we're gonna end up in debt!" meaning their position was approaching the red. Only reason the Dukes got the worst of it was because their trader had already bought up a considerable amount and when he tried to sell, Winthorp and Valentine made sure they didn't buy from him, meaning what they bought lost 394 million dollars in value after the report. So with that big of a drop, you can imagine how much value the rest of them lost if they didn't sell quickly enough or still had some on their books.
Whether they took $25M or $250M _out_ of the market, either way, it's less than the $394M the Dukes put _into_ the market, making a net _gain_ to the market, created by their scheme. Now, I'm in no way saying that this justifies their action, but the overall effect was for them to _add_ to the total valuation of the market, calculated as (money added by Dukes) - (money removed by the protagonists).
I´ve always felt the entire stock market sequence in the movie was so chaotic it seemed near impossible to understand what was going on without having general experience with stock trading. This explanation really helped, being suitably simplified.
I follow a lot of reaction channels where people are watching this movie for the first time, and it really does confuse people exactly what it is that they did, and how did they get rich while bankrupting the Dukes? Hell, I didn't understand it till probably 25 years after I saw the movie for the first time back in the 80s. I actually post a link to this video in their comments these days cuz this is about the easiest to understand and clearest explanation about what actually happened.
With respect to JHEBox's explanation, a poster from another video covering the topic made a good summary. "For those who are little confused, allow me to try to explain. The people on the floor are trading in future contracts for Frozen Orange Juice (FCOJ). Future contracts are a deal between a seller and a buyer: "I promise to provide this commodity at this time as long as you promise to pay for it at this price." It doesn't matter if you don't have the commodity or even the money right then, as long as you provide it at the time. Before, the Dukes received a fake crop report that says that the winter damaged the orange harvest. They think that this will cause the price of orange juice to rise. However, Valentine and Winthorpe know that the harvest was unaffected, and that the price of OJ will go down. Here's what the Dukes' plan is: 1. Borrow money "on margin" from the stock exchange, with the promise to pay it back. 2. Buy a lot of future FCOJ contracts to drive the price up. 3. When the crop report is revealed, the price of FCOJ will skyrocket because of the lower supply and higher demand. 4. They then sell all the contracts they bought up at a higher price than they bought them for, earning a profit. Here's what actually happens: 1. The Dukes start to buy up contracts, driving the price up. The other brokers think that they're trying to corner the market and start buying as well. 2. Winthorpe and Valentine offer to sell future contracts, causing the other brokers to start buying from them and drive the price back down. 3. The crop report is revealed: the orange harvest is unaffected and the price of FCOJ plummets. Everyone who bought the contracts, including the Dukes, is now trying to sell them and "zero their position" so they don't lose all their money. 4. Winthorpe and Valentine start to buy back all the contracts that they previously sold to zero their position, earning a profit on each purchase due to the lower price; however, they are careful not to buy any from Wilson, since they want the Dukes to be holding the ball at the end of the day. 5. At the end of the trading, Winthorpe and Valentine have bought back all the contracts that they sold, and have made off like bandits. Meanwhile, the Dukes are left holding a bunch of now-worthless contracts. They are hit with a margin call-a demand to settle their debts to the stock exchange immediately-and because they don't have the money to pay back what they borrowed, they wind up bankrupt. " Poster - PonyJosiah13 ua-cam.com/video/RLySXTIBS3c/v-deo.html
Not to mention that using misappropriated government information was specifically made illegal in 2010 under the Section 136 of the Wall Street Transparency and Accountability Act of the Dodd-Frank Wall Street Reform and Consumer Protection Act, under Section 746, aka "The Eddie Murphy rule."
I've been trying to figure out this scene for years! Good video but a few points: 1. They didn't start with nothing, in the video at 5:57 it talks about W & V not having any fake oranges to sell. But earlier in the movie they took JLC's savings (42K in T bills earning interest!) and Coleman's life savings and maybe Winthorp's 150K in his bank (although that was frozen by the IRS). So I'm thinking they must have bought at the beginning when the price was at 102, but how much of an of an initial buy could they have made with an investment of likely less than 100K in order to get rich and ruin the Dukes? This leads to the next point.... 2. At that time I believe commodities could be bought on the margin, meaning you only have to put 10% down in cash to start but at the end of the day's trading "margin call" happens and you have to pay the full amount if you owe. I think that was part of the reason of the big stock crash in the 1920's, stocks could be bought on the margin at that time. But I digress, so... next point... 3. I think Winthorp says "Sell 200 April at 142" not "20 April" which might make sense since they bought at a value of 10% of the actual value of the contracts ( on the margin). This would result in a gross value of ~250 million split 4 ways (200000 contracts vice the 2000 contracts shown in the video above) not ~25 million. This would make them ultra rich "Coleman you're about to become the richest butler who's ever lived!" 25 million split 4 ways would be great (especially in the early 80''s) but it wouldn't make them completely filthy rich. 250 million would! Or maybe I'm all wet! This is one of my favorite movies. :)
Great job on explaining the trading/ending scenes and with the synopsis of the entire movie. Bonus for using Trudeau in the video. 😂 was not expecting that at all.
This also helps to explain the movie "Margin Call" and the crash of the housing market of a few years ago. At the end, when they say "margin call, Mr Dukes", it all just sunk in..
Just a couple of comments: You've been told in the pinned tweet that he's saying "Sell 30 April at 142!" But that's not the total number of contracts he's offering all day; that's the number of contracts he's offering in a single transaction. And they execute many, many of those transactions. Very likely, the bulk of the $300M+ the Dukes lost ended up in their pockets. (And those of the butler and Jamie Lee Curtis.) The other reason a farmer might sell a futures contract, other than stabilizing the price, is to raise funds at a time of year when he might otherwise have no income at all. This way he can sell part of his crop ahead of time so he can keep his farm in operation until harvest. Finally: While there are safeguards against this kind of thing nowadays, back in the 1980s not only did those safeguards not exist, but not even insider trading -- where you execute trades based on information not available to the general public -- were illegal, at least not when it came to commodities. So that part is realistic for the time the movie was made.
And you must be one of those perpetually offended snowflakes. If these so-called minorities are so proud of what they are, why should a word hurt so much?
My entire life, this scene has plagued me. As a kid i was able to pass it off as incomprehensible grown-up stuff. THANK YOU for helping me redeem my adulthood 🙏
Not really, if anything it's kind of the opposite! In the film, the price is rocketing up because everyone assumes oranges are going to be super valuable in April. It's only when they find out that they won't be very valuable that the price plummets. This has nothing to do with Winthorpe and Valentine, they're just taking advantage of knowing it's going to happen ahead of time. With GME, the issue is that lots of big institutions shorted GME when it was already relatively low in the $10 range. But rather than the price then going down (which it needs to when you short in order to profit) "amateur" investors have actively and purposefully driven the price up just by buying loads. This is so that when the big institutions have to close their positions (like the Duke's at the end of the film) they'll be forced to close out at ridiculously high prices by buying off the "amateurs" - essentially handing over loads of money to Reddit and losing loads of money for themselves. Tl;dr - In the film the price tumbles because something everyone thought was valuable is basically worthless, and in real life everyone though GME was worthless but it ended up becoming super valuable. Sorry for the block of text :)
@@JHE_Box you missed a few things. First of all, no one believes gme is valuable. Second of all, they are very similar, if not exactly the same. What happened was the greedy hedge fund traders knew that gme was going down because they bet a lot of money that it would go down which normally makes it go down. They bet so much that if you look at this analogy, they sold more oranges than what were even available to sell. u/Deepfuckingvalue noticed it and stuck with it and basically figured out what was going on in plain sight instead of behind the scenes like in the movie. Then he told his buddies just like in the movie, and they bet the other direction.
You forgot to mention the Eddie Murphy Rule! “Until the Eddie Murphy provision (Section 746) in Dodd-Frank, trading on inside information in commodities markets was not illegal. To protect our markets, we have recommended what we call the “Eddie Murphy” rule to ban insider trading using nonpublic information misappropriated from a government source.””
Ironically the climax is where the movie falls apart a bit. They really just assume that everyone watching is somehow in the know about trading, futures, short selling and so on. The scene just left me confused when I first saw the movie, which was in 1999 when I was ten years old. You're not supposed to think about it when watching the movie and there's enough to distract from all that gibberish, but when the movie ended and I asked my dad what exactly they did to get rich... He didn't know either. And he owned stocks and knew people in the stock market business. He asked a colleague at work who explained it to him and then he tried to explain it to me. Somewhat successfully, but this video finally had me going "Ohhhh... OK, that's how they did it!"
~5:30 He said "Sell 200 April at 142." I know because I pay attention to the subtitles on the DVD. On to of that, the number 200 pops up repeatedly in that scene.
Love the video. You missed the Duke's attempt to "corner the market". Believing the crop would be small, they tried to buy more fake oranges than the entire harvest of real oranges. They would then be able to name their price as brokers would have to pay any price to settle their contracts and keep their seat on the exchange. It's also the reason they were willing to pay any price themselves. The thing is, the Dukes should have known that almost all attempts to corner markets result in failure and loss.
question: why did they need the money from coleman and ophelia before going to the world trade center if all they'll ever did was basically a clever tactical trade with money they earned in the part before the rapport about the harvest drops?
They needed to show capital to be allowed on the trading floor. Otherwise, any rando could enter and just pretend to make trades backed with no capital.
You aren't kidding. To see those two get there's after what they did to Winthorpe and what they were going to do to Valentine. Plus, it would be great to hear about what happened to Louis' old girlfriend, Penelope. Maybe she went bankrupt... Lol
Thanks for explaining this! I saw this film when I was 13 and I got the gist of it, because in school they had taught us supply and demand. If there's a great demand and a short supply the price goes up. If there's an overabundance of something the price goes down. Trading with insider info, of course, illegal, but I'm sure it's done all the time.
I didn't understand the "futures" part, where they were actually agreeing to sell the oranges at a fixed price and not buying the actual oranges. So all I saw was sell high and buy low, but where did they get the stuff to sell in the first place? And that's really the key to the whole thing; they PROMISED to sell at the high price, and then they PROMISED to buy up enough oranges when the price was low. So then they actually buy the oranges at the low price and then actually sell them at the high price. This video really helped explain that.
@@PILATUS1968 She didn't go to jail for insider trading. She was convicted of lying to a federal officer when she claimed she did not receive a tip when they first interviewed her, in an attempt to protect her friend. She didn't actually act on the tip.
this has been an all time favorite movie of mine since i was a teenager, and i still love it the same 35 years later, untarnished eddie murphy at his finest, i know the movie word for word, the script was manificently written. absolute classic!!
HOLY COW! Just noticed Giancarlo Esposito (from Breaking bad & the Mandalorian) in the prison cell at 1:12 , guess it shows how long its been since i saw this movie
Excellent video. I’ve always wanted to know exactly what happened at the end of the movie. Too bad it was necessary to caution people about some of the racial language in the movie. In the 1980s adults could laugh at a joke and realize it was a joke and not be considered a racist. In a few years youtube will ban any reference that this movie ever existed as it will be deemed a racist movie.
The butler had a lot of money saved up, along with Winthorpe's savings/Valentine's salary and Ophelia's prosty savings (she mentions she's saving so she can stop in 5 years) they buy enough to get in and do some damage. They all take a risk when they meet and send them to the trading floor.
Thank you very much for this video! I am asking this question because you seem to be around to answer sometimes... can you briefly explain how people standing in a pit, yelling and pointing with pieces of paper, turns into binding sales contracts? Does it have something to do with that stamp machine later on in the scene? I suppose I could just go read this, but heck I like this discussion section :)
I believe when traders in pit call out buy/sell orders, the person receiving that order writes down their Id (which they all have on their badges), and then yes these orders get carried away by “runners” who stamp them to make them official. As for how they understand each other, practice and experience getting yourself noticed I suppose! This page was pretty useful in explaining the specifics: www.wallstreetmojo.com/trading-floor/ Of course these days most trading is done by computers, so the trading floors and the pits are far quieter, more just there to act as backgrounds for new reels!
I just have one question and please correct me if these numbers are wrong. Winthorpe & Valentine made a profit of $25 million? And the Dukes lost $394 million? What accounts for the other $359 million?
So there's two answers to that. The first is that, since making the video, I've realised my maths was probably a bit off in that whilst they originally offered 2000 (or however many) contacts, that was just their initial offer and they probably went on to sell a lot more than 2000 (meaning they made a hell of a lot more money, though we're never told exactly how many contract they sold in total). Second is the fact that there are a lot of other traders on the floor. The Dukes gave millions of dollars away at the beginning in exchange for contracts (at an ever increasing price). So when the contracts reach the very peak of their price, the Dukes have already "lost" all of that money and instead just have a bunch of contracts. The thing is that they never sell any of them, so they never convert the contacts back in to cash, and the money remains in the hands of the other random traders who sold them the contracts right at the beginning. So the main thing which accounts for the difference is that the money doesn't just belong to either "Winthorpe and Valentine" or "the Dukes", but rather the Dukes initially gave away a load of money to anyone who take it in exchange for contacts, but then never got the chance to sell them on later! :)
many and many a long year ago I studied in Business Organisation in what would be "junior high" in the US. I thought I only learned two things 1) legally-speaking companies are people. And they are inherently psychopathic and you would be foolish to expect anything else of them 2) the only rates of interest higher than credit card companies are money-lenders who will break your legs if you don't pay-up But I now realise I learned (at least) three things. Because I always understood this scene of selling-short.
And there were no trading pits at the World Trade Center. It was just a couple of office buildings. Futures trading happens at the New York Stock Exchange, over on Wall Street.
Not exactly. The twin towers were office buildings indeed. But the World Trade Center had 7 buildings in total. The twin towers were buildings 1 and 2, building 3 was a Mariott Hotel, building 4 housed the commodities trading pits seen in the film (the stock exchange is on Wall Street as you said, but building 4 of the world trade center housed a number of trading pits for commidities, not stocks), building 5 housed a police station and several banks, building 6 housed a US customs house and served as the local headquarters for various government agencies like the IRS, ATF and Department of Agriculture, building 7 housed more government agencies and a couple of architectural firms.
This movie came out when I was about 15, I've seen it now maybe 25 times and to this day I can only remember two pieces of fruit in the movie, and only for a brief moment, food and rent aren't the only things that cost money around here.
Excellent explanation which has always fascinated me. I actually calculated these profit and loss balances on paper but now this video explains it. There is one more calculation I did. That would be the approximate net worth of the Bates brothers (or at least the liquidation value of their trading account) before they got wiped out. It was based on a presumption of taking the amount of their margin call and multiplying by two.
Thanks for the definitive video! First of all, I can’t believe (what looked like) all of the traders in the pit would take up Dan’s offer at 142. There certainly would be some who would sell short. Let's imagine two guys (or multiple people pooling money together) who go into the exchange with the same idea in mind as the movie. They consider a 50/50 coin-flip, the result of the not-yet-disclosed crop report. Depending on their cumulative bankroll to start, the risk would be nowhere near the potential reward of $25.2 million. The reward/risk ratio would be enormous, even more so if they sold on margin. If the coin-flip didn’t go their way, they would lose their bankroll, but why would they care? Rich traders will try again next time (unlike the Dukes, who stupidly committed their entire worth). What’s to prevent anyone from doing this? OR, am I wrong? Meaning, if Dan and Eddie were wrong about the crop report, would they be on the hook for several million dollars?
Yeah, the main risk with selling short is that the risk is potentially unlimited. At least if you're buying, you can only lose as much as your stock is worth (ie, if it went to 0), but if you sell short then the stock could theoretically go up by a practically infinite value, so it's far more risky. However here they knew there was no risk because they already knew what the market was going to do based on the information they... "acquired". As for other people selling short, there probably would have been a few others in the pit selling short based on information they had also heard on the grape vine, but I suppose most traders were just assuming the Duke's had found more reliable information if they were going in so hard, so everyone else just followed them like sheep :)
@@JHE_Box Great explanation. But why did everyone jump to buy from them at 142? They were already buying up until then. It's not like he offered a lower price point?? He was selling at the then market price. Never got that.
I have to imagine they made even more money than that. The line is "Sell 200 April at 142," and they're selling and buying at a good clip at both phases of trading. 2000 contracts is probably quite an underestimate.
I’ve never truly understood all the technical things about this scene.But I have to ask another question. At the end of the trading those come up for “Margin Call Gentleman “ And bearded one says Seize this,start seizing that,along with… Is that how exchange realistically works??
I could be wrong, but it is actually because of this movie that a lot of the laws were changed to make your disclaimer at the end true. Great job though and really did a good job of explaining.
The "Eddie Murphy Rule" is an actual SEC rule that forbids using inside information to make a short play just as Billy Ray and Louis did. I'm sure there is a rule that forbids what Randolph and Mortimer tried to pull as well.
@@JHE_Box Yours came very handy after the disappointment after watching another vid which complete failed to address the key issue about how it can be possible to buy low/sell high - in reverse order. For the ignorant uploader that arbitrage principle which even a child could understand - as it even is being displayed on the boards with the rates - came as a big surprise and apparently he thinks that we all are puzzled about that like him. The video do have twice as many likes as yours - but it is more than a month older - but yours already have 25% more today than yesterday, so you will soon catch up with him. He is stilling yelling at me for my criticism - not that he claims anything that is wrong - but he doesn't really explain anything which isn't obvious. You can check it yourself - I praise your video on his also. You actually inspired me to see a bunch of videos about derivatives - even to point where I regret not having studied finance. Tonight I am going to rewatch "The Big Short" (2005) - a favorite movie. ua-cam.com/video/Aa5-CsWLGu8/v-deo.html
@JHEBox Great video mate. Loved the animation would love to be able to make a video like that so hats off. My video which @@henrikhansen1023 so kindly posted in his comment, was a simple explanation. Didn't wanna go into much detail just simple, something that I wanted to see. I made the video really quick nothing too it. But your man commented on my video saying it was a crap video. So that's why I told him to fuk off 😂. But anyways good video man 👏
Cheers MC, glad you liked it! The animations are still a work in progress that kind of just get built on in every video…. Glad you liked it though! Nothing wrong with keeping it simple of that’s your style, I just tend to end up going overboard a bit sometimes, once ended up staying at the British Library until closing to research a video which currently has less than 300 views! 😂 Keep up the vids too. It takes all sorts and the way I see it is that if someone gets their question answered and learns something along the way then the video was a success, no matter who made it 👍
@henrikhanen well I’m glad you found the answer to your question here. I must say that The Big Short does give Trading Places a run for it’s money in terms of finance movies. I’d consider doing an explanation video of that too, though Margot Robbie in a bathtub and Selena Gomez playing cards do a much better job than I could ever hope to…!
Basically they bought low and sold high - they just did it in the opposite order you typically think of things they sold high because it turns out that price was the peak when everyone thought orange juice would be scarce they bought low when the price tanked because people were desperate to unload once they realized orange juice would be in abundance they pocketed the difference
I know someone that was a commodities trader when this was filmed. I'm told they actually filmed in the Gold pit, but there was an actual FCOJ desk. Also, I learned everything I know about shorting the market from Frozen Concentrated Orange Juice.
Who is everyone buying from in the first place? When the buy at first the price goes up but when they buy from Winthorpe and Valentine it goes down? How come?
He says, "Sell 30 in April at 142" - which means he was initially looking for 30 contracts. He could have stopped at 30 (which is why everyone was trying to jump on it) but he can buy as many as he wants.
That’s a great point which I didn’t really elaborate enough on in the video, thanks 👍 The main reason I thought “2000” instead of “30” is because I thought it sounded like 3 syllables in that jumble of noises instead of 2, and 2000 would have been a great way for them to kick things off and draw attention to themselves, but I still have yet to find a definite answer so you could well be right!
I would explain futures and options as they were historically created: insurance. The film talk about orange, because that was the first thing insurance covered and hence futures and options were formed.
If they bought more contracts than they sold could they return the following day and buy more up to just under the price they originally sold them for for even more profit?
When I saw this movie I only half understood it because my uncle was a commodities broker. He’s the one who actually delivered the oranges to the stores. But it was basically buy low sell high. Dan and Eddie’s characters bought up all the money at 142. Once that was done they cornered the market with cash. They could have walked away and made a fortune. But that cash was used to buy up even cheaper contracts at 42 and on down to 29. So in April when they sell all those contracts that they bought at 29 cents are sold for 142. Bam rich.
If you've ventured down to the comment section to tell me "Winthorpe doesn't say 2000, he says...", please only do so in reply to THIS comment thread or else it will be removed. So far I've had people commenting to say it's:
-20
-30
-200
-2000
-20,000
-"Short"
-"Navels"
-“Down”
-“Sell”
So I'd much rather gather them all in one place and you can debate with each other.
I hear "Sell 200 in April at 142", but that doesn't mean they didn't sell more contracts after that.
Why not just let the comments go where ever they go?
Good question, it’s because it’s a very common thing for people to comment and caused a lot of repetition. My thinking was if all of the comments on this topic were in one place, then people could discuss it with each other and maybe we could reach a consensus rather than giving your opinion and having it be instantly lost to the rest of the comments section.
Maybe he said, "Sales started in April at 142!!"
@@JHE_Box the more comments the more youtube will reccomend the video. Also reading comments is the best part of youtube.
I've watched this movie likely 5 or 6 times and I just figured out that I never really understood the ending and I still am amazed at the rack on Jamie Leigh Curtis.
I tell my friends her rack is underrated in this movie
Jamie Lee Curtis nudity in '80s movies is what Sharon Stone's was in '90s movies.
@@Liggie55821 what other films brother, please tell lol..
@@droopjohnson9068 "Love Letters" from 1984 has copious amounts of Jamie Lee in the altogether.
Droop Johnston. Really nigga. True Lies. Really.
This movie started to make a lot more sense to me yesterday.
Its anout sending a message
"They wont get it"
i thought I understood the final scene. but I never realized what he was doing was selling short, and I didn't know what that meant until a few weeks ago :) I thought he was just driving the price up to sell the orange futures they had bought. if they were selling short, I wonder why they needed seed money from their friends?
@@Mehwhatevr Good question
@@BlackMambo Now that I think about it.The money could have just been for the plot for all of us who had no idea what was going on, but maybe the money was just in case the plan didn't work and they had to cover the difference.
"This is insider trading and unless your rich it's illegal." Most factual statement in this video.
Or a member of Congress they can and do insider trade.
It wasn't illegal for insider knowledge trading of commodity future at the time. They finally amend the rules 30 years later (see "Eddy Murphy Rule") to make it illegal.
Actually the least factually correct statement.
Rich people are literally the only ones who would ever get caught
@@hankdoughty4375 They're not supposed to. That doesn't stop them from doing so, however.
As a commodities broker I can sum up the Futures markets in one sentence. "BUY LOW, SELL HIGH....IT DOESN'T MATTER WHICH YOU DO FIRST."
yep
I don't know how those guys know what they're doing with all that madness. I understand the principal, I just don't know how they can hear what anyone else is saying.
I figured that's what they were doing: Selling something they didn't have but would need to acquire later. They made money on the spread.
So your like the 5th middle man taking a cut
@@matthewmolina2706 Actually, nobody takes a "cut": it's a series of betters gambling that they will come out on the winning end. The producer and the ultimate buyer are the only two people truly involved in the transaction. Everyone in the middle is mitigating the risk to those two parties, it's a zero sum game for them. Some win, some lose.
Best line, Unless you're rich it's illegal.
GameStop.
wall street: Yep, seems about right.
Legality is in direct proportion to the lawyers fees you can afford.
The protections in place to stop trading volatility like this weren't implemented until the crash of 1987. The movie came out in 1983, four years before the markets "Circuit Breakers" were conceived.
Aww damn I missed that detail, thanks for letting us know! I’d read they were revised in 1987, I didn’t realise that was the first time they were implemented…
If anyone’s interested there’s a good summary here on Investopedia, I’ve added it to the video description too :)
www.investopedia.com/terms/c/circuitbreaker.asp
@@JHE_Box AND..... As I understand it the movie was used as an example of why the rules needed to change.
@@AndrewW2733 It was certainly a critique of it yeah! Apparently that ruling is colloquially referred to as the "Eddie Murphey rule" though I'm not sure if anyone in finance or law ACTUALLY uses that phrase...
I thought 29 was the lower limit. Otherwise the trading day was 5 minutes long.
200 April at 142.
[5:20] "Sell 30 April at 142!" Selling 30 contracts for delivery at $1.42 per pound. Also, what they did in the movie was legal at the time. Everyone just assumed it was illegal. Only after Dodd-Frank was passed did it become illegal, some 28 years after the movie came out. They specifically called it "The Eddie Murphy Rule" when discussing it in the Senate committee.
It isn't 30 contracts the contract expiration date is the end of April. And these were traded in Chicago at the Chicago Mercatile Exchange not NYC.
"Don't try this at home, there are safe guards in effect."
Wall Street Bets: Hold my beer.
The RobinHood/ GameStop scandal hadn't happened yet when he made this.
Lol hold
@Rusty Shackleford Oh, I know, but the Gamestop thing is the most blatantly open event of cheating. There isn't even a denial, or a level of gatekeepers that can label everyone 'conspiracy theorists'.
@@taitjones6310 oh thats not over they are just getting all the information they can everyone involved in that commited a very illegal act the second they grouped up like they did. took them something like 10 years to nail enron bunch of randoms probably wont take that long but its coming.
The issue is, I don't think what WallStreetBets members did was illegal. Any one who understands balance sheets and has 1/2 a brain would have realized that GME shares were selling way below intrinsic value considering GME's cash position and lack of debt. In fact, I think Wall Street was trying to BK the company so that they can pay off the debts on cents on the dollar, create 2 private equity companies, one to take the cash and one to load with debt, cash out the cash one and truly BK GME a 2nd time with nothing in assets. This is what was done to Sears and Kmart and many other companies.
At best, regulators could say coordination but even that is loosely based because everyone had a choice to buy in or not. Besides, the coordination was no worse than what the hedge funds did on the other end of the trade.
My uncle Carmen was in the opening credits. He was in a beret cleaning up some heads of lettuce. Always get a kick out of seeing him. Something to remember him by.
That's nice. Did he do any other extra work?
@@sha11235 Yes. he didn't appear in the movie but when Rocky is running down the street, he told his friend who was standing next to him to throw him an orange. He said the van was white and there were no cameras visible. The person was the son of the owner of Giordanos, the large corner grocery at 9th and Washington. He worked there for many years.
@@starpartyguy5605 Thanks for answering my question.
Cool!
I like the fish workers...
It's about time I've waited 30 no almost 40 years for an explanation. Thank you.
Glad you finally found it then!
Me too fam
Hmm, 40 years? You know, you could have just cracked open a book on finance.
You know this movie comes out every Christmas time. Besides the first time I seen it was on VHS from. Blockbuster. No internet then so who had the time to go to the library after renting videos.
I think I'm close to get it.
When Ackroyd calls out the sell at 142 and everyone jumps on it it always gives me goosebumps
I like the guy on the left. He goes "oh, f*ck".
as a viewer you really get caught up in the flow of the movie. Winthorpe had been so abused in the story by that point that you were ready to see him get revenge and the way its shot really put you on the floor in that chaos
In college my finance professor told us about a friend of his, who was trading cattle futures. He lost track of one and got a call from the rancher asking him where he wants his cattle delivered.
😂😂😂
Finally. After years of videos very broadly explaining what happens, we finally get a video that goes into the minutia of what actually happens. There is so much dense information provided at the end of that movie that it’s almost impossible for a lay person to understand what’s going on at first.
At last, someone explained the profit.
RIGHT!! I was always baffled how they bought for more and sold for less and made a profit.
Me too sheesh ive asked so many people
It's almost 70 million in 2021 dollars
I read somewhere that Winthrop and Valentine made over $200 million while the Duke brothers lost, as Randolph says, $394 million.
It wasn’t just them buying and selling.
Eddie Murphy gave the Dukes a large handout in Coming to America. “Mortimer, we’re back!”
Insider trading commodities wasn't illegal back when the movie was made. It was made illegal in 2010 via the "eddie murphy rule".
I can't even tell if this is a joke or not
@@fitrianhidayat Indeed truth is often stranger than fiction, but alas it is true! :)
Would it be insider trading if you're not in a position to have insider knowledge of the report? What I mean is let's say the government report in this movie was lost by someone in a public place and you happen to find it and act on it. Would that be insider trading even though you're not inside that industry?
@@jay_mw A government report that is not meant for publication yet would by default mean you're not allowed to see what's in it. So the moment you accidentally find it you're obligated to report finding it to the proper authorities not use the knowledge in it for your personal enrichment.
@@florinivan6907 So if someone found something like that, and turned it in, they would be legally barred from acting on it?
Movie is from 1983. $394 million that the Dukes owe would be over $1.2 billion in 2023. The $25.2 million profit that Akroyd and Murphy characters made would be over $77 million in 2023.
"inside trading is illegal unless you're rich"
OR unless you are a member of congress.
Once in a blue moon someone like Martha Stewart goes to jail only so it looks like the law is enforced.
This kind of insider trading wasn't illegal, though, in 1983, when the movie was made.
@@hallieharker4384yet politicians get to do it all the time
Thank you for explaining this. The thing was that I always realized is that no one knows what the actual crop report is until it is announced so you are gambling which way to go. The Dukes wanted to get their hands on it so they would know which way to go right away so they'd win. It's like knowing the outcome before you start. Of course, the report they got was the opposite so it backfired on them.
Despite it not being accurate, a scary thought came to mind watching this movie again recently. The Dukes wouldn't be the only people Winthorp and Valentine screwed over. Some analysts looked at the numbers in this scene and actually calculated that the two of them walked away with about 250 million dollars (hence why the Dukes also lost a 9 figure amount) by doing a short sale. Basically selling at a higher price than what they'll be paying for it after the crop report. So the other traders on the floor combined paid that 250 million, when they offered the buyout everybody likely sold to them at a loss. There's proof of this when we see that person on the phones yelling to their trader "we're gonna end up in debt!" meaning their position was approaching the red. Only reason the Dukes got the worst of it was because their trader had already bought up a considerable amount and when he tried to sell, Winthorp and Valentine made sure they didn't buy from him, meaning what they bought lost 394 million dollars in value after the report. So with that big of a drop, you can imagine how much value the rest of them lost if they didn't sell quickly enough or still had some on their books.
This was an excellent explanation.
The Brothers went Long and Valentine went short.... it went Tits up
Well the farmers seem to be in a good position after this though, so at least there’s that.
Do you know how they were able to come up with 250 million dollar estimate when this guy's estimate was $25 million, a 1/10 of that?
Whether they took $25M or $250M _out_ of the market, either way, it's less than the $394M the Dukes put _into_ the market, making a net _gain_ to the market, created by their scheme. Now, I'm in no way saying that this justifies their action, but the overall effect was for them to _add_ to the total valuation of the market, calculated as (money added by Dukes) - (money removed by the protagonists).
I´ve always felt the entire stock market sequence in the movie was so chaotic it seemed near impossible to understand what was going on without having general experience with stock trading.
This explanation really helped, being suitably simplified.
I follow a lot of reaction channels where people are watching this movie for the first time, and it really does confuse people exactly what it is that they did, and how did they get rich while bankrupting the Dukes? Hell, I didn't understand it till probably 25 years after I saw the movie for the first time back in the 80s.
I actually post a link to this video in their comments these days cuz this is about the easiest to understand and clearest explanation about what actually happened.
With respect to JHEBox's explanation, a poster from another video covering the topic made a good summary.
"For those who are little confused, allow me to try to explain.
The people on the floor are trading in future contracts for Frozen Orange Juice (FCOJ). Future contracts are a deal between a seller and a buyer: "I promise to provide this commodity at this time as long as you promise to pay for it at this price." It doesn't matter if you don't have the commodity or even the money right then, as long as you provide it at the time.
Before, the Dukes received a fake crop report that says that the winter damaged the orange harvest. They think that this will cause the price of orange juice to rise. However, Valentine and Winthorpe know that the harvest was unaffected, and that the price of OJ will go down.
Here's what the Dukes' plan is:
1. Borrow money "on margin" from the stock exchange, with the promise to pay it back.
2. Buy a lot of future FCOJ contracts to drive the price up.
3. When the crop report is revealed, the price of FCOJ will skyrocket because of the lower supply and higher demand.
4. They then sell all the contracts they bought up at a higher price than they bought them for, earning a profit.
Here's what actually happens:
1. The Dukes start to buy up contracts, driving the price up. The other brokers think that they're trying to corner the market and start buying as well.
2. Winthorpe and Valentine offer to sell future contracts, causing the other brokers to start buying from them and drive the price back down.
3. The crop report is revealed: the orange harvest is unaffected and the price of FCOJ plummets. Everyone who bought the contracts, including the Dukes, is now trying to sell them and "zero their position" so they don't lose all their money.
4. Winthorpe and Valentine start to buy back all the contracts that they previously sold to zero their position, earning a profit on each purchase due to the lower price; however, they are careful not to buy any from Wilson, since they want the Dukes to be holding the ball at the end of the day.
5. At the end of the trading, Winthorpe and Valentine have bought back all the contracts that they sold, and have made off like bandits. Meanwhile, the Dukes are left holding a bunch of now-worthless contracts. They are hit with a margin call-a demand to settle their debts to the stock exchange immediately-and because they don't have the money to pay back what they borrowed, they wind up bankrupt.
"
Poster - PonyJosiah13
ua-cam.com/video/RLySXTIBS3c/v-deo.html
And then an African prince hands them a massive wad of cash, giving them a chance to try and rebuild their millions.
My favourite Christmas film with compulsory viewing on Christmas Eve every year.
Not to mention that using misappropriated government information was specifically made illegal in 2010 under the Section 136 of the Wall Street Transparency and Accountability Act of the Dodd-Frank Wall Street Reform and Consumer Protection Act, under Section 746, aka "The Eddie Murphy rule."
A fictional movie that collided head-on with reality this past week.
Not a big deal. Demolition Man has been coming true for years
@@ColonelCarnage and 1984, and Brave New World, and and....
I've been trying to figure out this scene for years! Good video but a few points:
1. They didn't start with nothing, in the video at 5:57 it talks about W & V not having any fake oranges to sell. But earlier in the movie they took JLC's savings (42K in T bills earning interest!) and Coleman's life savings and maybe Winthorp's 150K in his bank (although that was frozen by the IRS). So I'm thinking they must have bought at the beginning when the price was at 102, but how much of an of an initial buy could they have made with an investment of likely less than 100K in order to get rich and ruin the Dukes? This leads to the next point....
2. At that time I believe commodities could be bought on the margin, meaning you only have to put 10% down in cash to start but at the end of the day's trading "margin call" happens and you have to pay the full amount if you owe. I think that was part of the reason of the big stock crash in the 1920's, stocks could be bought on the margin at that time. But I digress, so... next point...
3. I think Winthorp says "Sell 200 April at 142" not "20 April" which might make sense since they bought at a value of 10% of the actual value of the contracts ( on the margin). This would result in a gross value of ~250 million split 4 ways (200000 contracts vice the 2000 contracts shown in the video above) not ~25 million. This would make them ultra rich "Coleman you're about to become the richest butler who's ever lived!" 25 million split 4 ways would be great (especially in the early 80''s) but it wouldn't make them completely filthy rich. 250 million would!
Or maybe I'm all wet! This is one of my favorite movies. :)
Alfred from Batman would disagree with you.
He's the richest Butler in the world. Just ask Dick Grayson.
Great job on explaining the trading/ending scenes and with the synopsis of the entire movie.
Bonus for using Trudeau in the video. 😂 was not expecting that at all.
“Unless you’re rich, it’s illegal.” Truer words have never been spoken.
You also have to be connected, and connected to the right people. Merely being rich is not enough.
“Unless your rich, it’s illegal “- Hudge Funds Hmm hmm
Unless your rich or a member of Congress
Being a hedge fund manager: that's a paddlin'
It's illegal if you're rich, too. Take it from Martha Stewart.
He should have said it's illegal unless you're politically connected.
This also helps to explain the movie "Margin Call" and the crash of the housing market of a few years ago. At the end, when they say "margin call, Mr Dukes", it all just sunk in..
Just a couple of comments: You've been told in the pinned tweet that he's saying "Sell 30 April at 142!" But that's not the total number of contracts he's offering all day; that's the number of contracts he's offering in a single transaction. And they execute many, many of those transactions. Very likely, the bulk of the $300M+ the Dukes lost ended up in their pockets. (And those of the butler and Jamie Lee Curtis.)
The other reason a farmer might sell a futures contract, other than stabilizing the price, is to raise funds at a time of year when he might otherwise have no income at all. This way he can sell part of his crop ahead of time so he can keep his farm in operation until harvest.
Finally: While there are safeguards against this kind of thing nowadays, back in the 1980s not only did those safeguards not exist, but not even insider trading -- where you execute trades based on information not available to the general public -- were illegal, at least not when it came to commodities. So that part is realistic for the time the movie was made.
What a wonderful time... the 80s... when people could take a joke.
Oh you must be one of those offended racists.
And you must be one of those perpetually offended snowflakes. If these so-called minorities are so proud of what they are, why should a word hurt so much?
And open outcry trading was still a thing.
@@stephen300o6 and you must be one of those people who gets offended by everything. There is nothing wrong with what is said in that movie.
Well said.
My entire life, this scene has plagued me. As a kid i was able to pass it off as incomprehensible grown-up stuff. THANK YOU for helping me redeem my adulthood 🙏
i just had to ask is what we seeing in the stock Market with gamestop silmler to the stock market scene in the end of this movie?
Not really, if anything it's kind of the opposite!
In the film, the price is rocketing up because everyone assumes oranges are going to be super valuable in April. It's only when they find out that they won't be very valuable that the price plummets. This has nothing to do with Winthorpe and Valentine, they're just taking advantage of knowing it's going to happen ahead of time.
With GME, the issue is that lots of big institutions shorted GME when it was already relatively low in the $10 range. But rather than the price then going down (which it needs to when you short in order to profit) "amateur" investors have actively and purposefully driven the price up just by buying loads. This is so that when the big institutions have to close their positions (like the Duke's at the end of the film) they'll be forced to close out at ridiculously high prices by buying off the "amateurs" - essentially handing over loads of money to Reddit and losing loads of money for themselves.
Tl;dr - In the film the price tumbles because something everyone thought was valuable is basically worthless, and in real life everyone though GME was worthless but it ended up becoming super valuable.
Sorry for the block of text :)
@@JHE_Box thanks you i reall like the explantion
@@JHE_Box you missed a few things. First of all, no one believes gme is valuable. Second of all, they are very similar, if not exactly the same. What happened was the greedy hedge fund traders knew that gme was going down because they bet a lot of money that it would go down which normally makes it go down. They bet so much that if you look at this analogy, they sold more oranges than what were even available to sell. u/Deepfuckingvalue noticed it and stuck with it and basically figured out what was going on in plain sight instead of behind the scenes like in the movie. Then he told his buddies just like in the movie, and they bet the other direction.
Dude has blessed timing with this video, surpassing his next most viewed video by three times in on third the time.
You forgot to mention the Eddie Murphy Rule! “Until the Eddie Murphy provision (Section 746) in Dodd-Frank, trading on inside information in commodities markets was not illegal. To protect our markets, we have recommended what we call the “Eddie Murphy” rule to ban insider trading using nonpublic information misappropriated from a government source.””
We need a Nancy Pelosi rule to include current members of the government
😂 Domo sensei
Illegal for stocks but not commodities??
8:25 what about when Randolph and Mortay stick the landing in the bathroom talking about Valentine's future?
I've watched several of these that explain the end trade and this one is the only one that made sense, great work!
Ironically the climax is where the movie falls apart a bit. They really just assume that everyone watching is somehow in the know about trading, futures, short selling and so on. The scene just left me confused when I first saw the movie, which was in 1999 when I was ten years old. You're not supposed to think about it when watching the movie and there's enough to distract from all that gibberish, but when the movie ended and I asked my dad what exactly they did to get rich... He didn't know either. And he owned stocks and knew people in the stock market business. He asked a colleague at work who explained it to him and then he tried to explain it to me. Somewhat successfully, but this video finally had me going "Ohhhh... OK, that's how they did it!"
~5:30 He said "Sell 200 April at 142." I know because I pay attention to the subtitles on the DVD. On to of that, the number 200 pops up repeatedly in that scene.
So I guess the profit was then more like $ 2.5M?
I think he said “Sell 30 April at 142.”
@@SimoExMachina2 Their were many trades. Not just that one.
Love the video. You missed the Duke's attempt to "corner the market". Believing the crop would be small, they tried to buy more fake oranges than the entire harvest of real oranges. They would then be able to name their price as brokers would have to pay any price to settle their contracts and keep their seat on the exchange. It's also the reason they were willing to pay any price themselves. The thing is, the Dukes should have known that almost all attempts to corner markets result in failure and loss.
I think that was based on the Hunt brothers fiasco of trying to corner the silver market back in 1980.
Interesting part is Insider Trading wasn’t illegal back in 1983 when trading places was released it, it did however become illegal just one year after
Insider trading _in commodities_ wasn't made illegal till… wait for it… *2010,* as part of Dodd-Frank. It was actually called the Eddie Murphy Rule.
question: why did they need the money from coleman and ophelia before going to the world trade center if all they'll ever did was basically a clever tactical trade with money they earned in the part before the rapport about the harvest drops?
They needed to show capital to be allowed on the trading floor. Otherwise, any rando could enter and just pretend to make trades backed with no capital.
@@karinaburana562 that makes sense! thank you!
I also love the Margin Call the Dukes got. So darn fitting.
You aren't kidding. To see those two get there's after what they did to Winthorpe and what they were going to do to Valentine.
Plus, it would be great to hear about what happened to Louis' old girlfriend, Penelope. Maybe she went bankrupt... Lol
@@DaDitka Probably, since she was a niece of the Dukes, right?
They deserved it. Winthorp almost died, remember?
Thanks for explaining this! I saw this film when I was 13 and I got the gist of it, because in school they had taught us supply and demand. If there's a great demand and a short supply the price goes up. If there's an overabundance of something the price goes down. Trading with insider info, of course, illegal, but I'm sure it's done all the time.
At the time it was legal, because only rich people had the connections to do it
I didn't understand the "futures" part, where they were actually agreeing to sell the oranges at a fixed price and not buying the actual oranges. So all I saw was sell high and buy low, but where did they get the stuff to sell in the first place? And that's really the key to the whole thing; they PROMISED to sell at the high price, and then they PROMISED to buy up enough oranges when the price was low. So then they actually buy the oranges at the low price and then actually sell them at the high price. This video really helped explain that.
8:36 I LOVE how you used a Justin Trudeau picture to cover the "blackface" person! lol
Nudity for some reason? That was one of the best topless reveals in the history of film.
The thing was that for commodities it wasn't illegal at the time hence the "Eddie Murphy" rule being put into place in the 2000s if I remember right.
that s how Mrtha Stewart went to jail inside trading tips.
@@PILATUS1968 She didn't go to jail for insider trading. She was convicted of lying to a federal officer when she claimed she did not receive a tip when they first interviewed her, in an attempt to protect her friend. She didn't actually act on the tip.
2010. Look up the “Eddie Murphy Rule”.
this has been an all time favorite movie of mine since i was a teenager, and i still love it the same 35 years later, untarnished eddie murphy at his finest, i know the movie word for word, the script was manificently written. absolute classic!!
HOLY COW! Just noticed Giancarlo Esposito (from Breaking bad & the Mandalorian) in the prison cell at 1:12 , guess it shows how long its been since i saw this movie
You just blew my mind.
WHOA
7:54
25.2 Million dollars in 1983 when the film was set is now equivalent to $68,595,461.6 in November 2021
According to CPI inflation calculator.
Excellent video. I’ve always wanted to know exactly what happened at the end of the movie. Too bad it was necessary to caution people about some of the racial language in the movie. In the 1980s adults could laugh at a joke and realize it was a joke and not be considered a racist. In a few years youtube will ban any reference that this movie ever existed as it will be deemed a racist movie.
One of the best explanations I have heard on UA-cam of selling short.
Great job.
Well done. For yrs I had no idea what they were doing.
I'm going to sound so smart when I explain this next Christmas
'It turns out a con man is pretty good at financial trading' - in all fairness, they are all con men haha!
That is what he was implying
but how did they get those 2000 contracts?
The butler had a lot of money saved up, along with Winthorpe's savings/Valentine's salary and Ophelia's prosty savings (she mentions she's saving so she can stop in 5 years) they buy enough to get in and do some damage. They all take a risk when they meet and send them to the trading floor.
Thank you very much for this video! I am asking this question because you seem to be around to answer sometimes... can you briefly explain how people standing in a pit, yelling and pointing with pieces of paper, turns into binding sales contracts? Does it have something to do with that stamp machine later on in the scene? I suppose I could just go read this, but heck I like this discussion section :)
I believe when traders in pit call out buy/sell orders, the person receiving that order writes down their Id (which they all have on their badges), and then yes these orders get carried away by “runners” who stamp them to make them official. As for how they understand each other, practice and experience getting yourself noticed I suppose!
This page was pretty useful in explaining the specifics: www.wallstreetmojo.com/trading-floor/
Of course these days most trading is done by computers, so the trading floors and the pits are far quieter, more just there to act as backgrounds for new reels!
After 36 years I finally understand this now.
Thank you
Thanks for the explanation after 40 years
I just have one question and please correct me if these numbers are wrong. Winthorpe & Valentine made a profit of $25 million? And the Dukes lost $394 million? What accounts for the other $359 million?
So there's two answers to that.
The first is that, since making the video, I've realised my maths was probably a bit off in that whilst they originally offered 2000 (or however many) contacts, that was just their initial offer and they probably went on to sell a lot more than 2000 (meaning they made a hell of a lot more money, though we're never told exactly how many contract they sold in total).
Second is the fact that there are a lot of other traders on the floor. The Dukes gave millions of dollars away at the beginning in exchange for contracts (at an ever increasing price). So when the contracts reach the very peak of their price, the Dukes have already "lost" all of that money and instead just have a bunch of contracts. The thing is that they never sell any of them, so they never convert the contacts back in to cash, and the money remains in the hands of the other random traders who sold them the contracts right at the beginning.
So the main thing which accounts for the difference is that the money doesn't just belong to either "Winthorpe and Valentine" or "the Dukes", but rather the Dukes initially gave away a load of money to anyone who take it in exchange for contacts, but then never got the chance to sell them on later! :)
Even with the explanation making sense to me, it still all goes way over my head. I would be slaugtered in that trading pit.
many and many a long year ago I studied in Business Organisation in what would be "junior high" in the US.
I thought I only learned two things
1) legally-speaking companies are people. And they are inherently psychopathic and you would be foolish to expect anything else of them
2) the only rates of interest higher than credit card companies are money-lenders who will break your legs if you don't pay-up
But I now realise I learned (at least) three things. Because I always understood this scene of selling-short.
Great job! I thought that I understood this, but you have made it much clearer. Thank you, one of my all time favorite movies.
"And unless you're rich, it's illegal" truest shit ever...
I've been wondering about this my whole life 🤣🤣🤣
Me too
And there were no trading pits at the World Trade Center. It was just a couple of office buildings. Futures trading happens at the New York Stock Exchange, over on Wall Street.
Not exactly. The twin towers were office buildings indeed. But the World Trade Center had 7 buildings in total. The twin towers were buildings 1 and 2, building 3 was a Mariott Hotel, building 4 housed the commodities trading pits seen in the film (the stock exchange is on Wall Street as you said, but building 4 of the world trade center housed a number of trading pits for commidities, not stocks), building 5 housed a police station and several banks, building 6 housed a US customs house and served as the local headquarters for various government agencies like the IRS, ATF and Department of Agriculture, building 7 housed more government agencies and a couple of architectural firms.
Nudity for "some reason"? That reason is the 1980's, nuff said.
nudity makes it art, doesn't it?
@@manlymcstud8588 it certainly does my friend it certainly does
Short scene with Jamie Lee Curtis
I grew up in Philly and remember when this came out loved it
Unless your rich it’s illegal. Truer words never spoken.
I didn't realise how well that would age in such a short space of time!
a weally clear explanation about the pwice of owanges.
Great movie!!! GameStop anyone??
This movie came out when I was about 15, I've seen it now maybe 25 times and to this day I can only remember two pieces of fruit in the movie, and only for a brief moment, food and rent aren't the only things that cost money around here.
one month after this was posted, Wall Street Bets would become the stuff of Legends.
Excellent explanation which has always fascinated me. I actually calculated these profit and loss balances on paper but now this video explains it. There is one more calculation I did. That would be the approximate net worth of the Bates brothers (or at least the liquidation value of their trading account) before they got wiped out. It was based on a presumption of taking the amount of their margin call and multiplying by two.
How timely. Even a shout out to wallstreetbets. This video has indeed aged well.
I've seen the film maybe a dozen times and have never understood this. Thank you.
Who's here after Watching the Gamestop rebellion?
it was the dukes , it was the dukes
@@viddrone LOL spelled Melvin Wrong.
Is that a new movie? Does it have nudity? :P
A question I’ve always had is how much money would the Butler had to pony up for them to be allowed to buy or sell in those quantities?
Thanks for the definitive video! First of all, I can’t believe (what looked like) all of the traders in the pit would take up Dan’s offer at 142. There certainly would be some who would sell short.
Let's imagine two guys (or multiple people pooling money together) who go into the exchange with the same idea in mind as the movie. They consider a 50/50 coin-flip, the result of the not-yet-disclosed crop report. Depending on their cumulative bankroll to start, the risk would be nowhere near the potential reward of $25.2 million. The reward/risk ratio would be enormous, even more so if they sold on margin. If the coin-flip didn’t go their way, they would lose their bankroll, but why would they care? Rich traders will try again next time (unlike the Dukes, who stupidly committed their entire worth). What’s to prevent anyone from doing this? OR, am I wrong? Meaning, if Dan and Eddie were wrong about the crop report, would they be on the hook for several million dollars?
Yeah, the main risk with selling short is that the risk is potentially unlimited. At least if you're buying, you can only lose as much as your stock is worth (ie, if it went to 0), but if you sell short then the stock could theoretically go up by a practically infinite value, so it's far more risky.
However here they knew there was no risk because they already knew what the market was going to do based on the information they... "acquired". As for other people selling short, there probably would have been a few others in the pit selling short based on information they had also heard on the grape vine, but I suppose most traders were just assuming the Duke's had found more reliable information if they were going in so hard, so everyone else just followed them like sheep :)
@@JHE_Box Great explanation. But why did everyone jump to buy from them at 142? They were already buying up until then. It's not like he offered a lower price point?? He was selling at the then market price. Never got that.
I have to imagine they made even more money than that. The line is "Sell 200 April at 142," and they're selling and buying at a good clip at both phases of trading. 2000 contracts is probably quite an underestimate.
"Don't try this at home."
Reddit 2021:😏😏😏😏😏
I’ve never truly understood all the technical things about this scene.But I have to ask another question. At the end of the trading those come up for “Margin Call Gentleman “
And bearded one says
Seize this,start seizing that,along with…
Is that how exchange realistically works??
Now I understand how Louis and Billy Ray got rich from the stock market. Thanks for the explanation.
I could be wrong, but it is actually because of this movie that a lot of the laws were changed to make your disclaimer at the end true. Great job though and really did a good job of explaining.
The "Eddie Murphy Rule" is an actual SEC rule that forbids using inside information to make a short play just as Billy Ray and Louis did. I'm sure there is a rule that forbids what Randolph and Mortimer tried to pull as well.
Great video compared to others trying to explain the same.
Thanks, I actually wanted to make this one after I was dissatisfied with my search results this time last year. So I’m glad you liked it!
@@JHE_Box
Yours came very handy after the disappointment after watching another vid which complete failed to address the key issue about how it can be possible to buy low/sell high - in reverse order. For the ignorant uploader that arbitrage principle which even a child could understand - as it even is being displayed on the boards with the rates - came as a big surprise and apparently he thinks that we all are puzzled about that like him.
The video do have twice as many likes as yours - but it is more than a month older - but yours already have 25% more today than yesterday, so you will soon catch up with him.
He is stilling yelling at me for my criticism - not that he claims anything that is wrong - but he doesn't really explain anything which isn't obvious.
You can check it yourself - I praise your video on his also.
You actually inspired me to see a bunch of videos about derivatives - even to point where I regret not having studied finance.
Tonight I am going to rewatch "The Big Short" (2005) - a favorite movie.
ua-cam.com/video/Aa5-CsWLGu8/v-deo.html
@JHEBox Great video mate. Loved the animation would love to be able to make a video like that so hats off. My video which @@henrikhansen1023 so kindly posted in his comment, was a simple explanation. Didn't wanna go into much detail just simple, something that I wanted to see. I made the video really quick nothing too it. But your man commented on my video saying it was a crap video. So that's why I told him to fuk off 😂. But anyways good video man 👏
Cheers MC, glad you liked it! The animations are still a work in progress that kind of just get built on in every video….
Glad you liked it though! Nothing wrong with keeping it simple of that’s your style, I just tend to end up going overboard a bit sometimes, once ended up staying at the British Library until closing to research a video which currently has less than 300 views! 😂
Keep up the vids too. It takes all sorts and the way I see it is that if someone gets their question answered and learns something along the way then the video was a success, no matter who made it 👍
@henrikhanen well I’m glad you found the answer to your question here.
I must say that The Big Short does give Trading Places a run for it’s money in terms of finance movies.
I’d consider doing an explanation video of that too, though Margot Robbie in a bathtub and Selena Gomez playing cards do a much better job than I could ever hope to…!
Basically they bought low and sold high - they just did it in the opposite order you typically think of things
they sold high because it turns out that price was the peak when everyone thought orange juice would be scarce
they bought low when the price tanked because people were desperate to unload once they realized orange juice would be in abundance
they pocketed the difference
I know someone that was a commodities trader when this was filmed. I'm told they actually filmed in the Gold pit, but there was an actual FCOJ desk.
Also, I learned everything I know about shorting the market from Frozen Concentrated Orange Juice.
Yep, they filmed on the real New York Board of Trade trading floor in the previous World Trade Center 4.
Who is everyone buying from in the first place? When the buy at first the price goes up but when they buy from Winthorpe and Valentine it goes down? How come?
He says, "Sell 30 in April at 142" - which means he was initially looking for 30 contracts. He could have stopped at 30 (which is why everyone was trying to jump on it) but he can buy as many as he wants.
That’s a great point which I didn’t really elaborate enough on in the video, thanks 👍
The main reason I thought “2000” instead of “30” is because I thought it sounded like 3 syllables in that jumble of noises instead of 2, and 2000 would have been a great way for them to kick things off and draw attention to themselves, but I still have yet to find a definite answer so you could well be right!
@@JHE_Box Actually 200 April contracts.
I would explain futures and options as they were historically created: insurance. The film talk about orange, because that was the first thing insurance covered and hence futures and options were formed.
Caribbean retirement would sound pretty good right about now!
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You have to remember to wear a Christmas sweater while on the beach
That was well explained. I shall forget the details almost instantly, but it was an interesting watch.
Yeah evidently it hasn't learned to stop volitility. Hedgefunds just got burned like the dukes.
If they bought more contracts than they sold could they return the following day and buy more up to just under the price they originally sold them for for even more profit?
that PSA didn't age well at all. in real life, the market, news, and social media would rally behind the dukes and save their asses.
We're seeing it right now
Well, considering how shitty the Dukes were, they get what they deserved.
I love it!! My son and I were watching it for the g-zillionth time and we we’re still confused. Knowing now helps me sleep better.
Now explain how the hell anyone could make a trade on the floor with that much screaming and yelling going on.
Ikr?
They can hear each other, I suppose. They also give signals. You may also be trading more with the people closer around you.
When I saw this movie I only half understood it because my uncle was a commodities broker. He’s the one who actually delivered the oranges to the stores.
But it was basically buy low sell high.
Dan and Eddie’s characters bought up all the money at 142.
Once that was done they cornered the market with cash.
They could have walked away and made a fortune.
But that cash was used to buy up even cheaper contracts at 42 and on down to 29. So in April when they sell all those contracts that they bought at 29 cents are sold for 142. Bam rich.