The Inside Story of How George Lucas Became the Greatest Options Trader of Our Time

Reza Kunimoto
Dec 16, 2019 · 5 min read
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STAR WARS.

Love it. Hate it. It doesn’t matter.

The force WON’T stop printing money.

Just like with Marvel, Disney paid BILLIONS for Star Wars. And now it’s everywhere you go: The Last Jedi, The Mandalorian, Solo, Rogue One, Kenobi.

Every success, though, comes from humble beginnings.

Were you aware the original concept for Star Wars was a ‘Space Opera’?

Furthermore, did you know that George Lucas gambled his directorial salary on its success?

And by doing so, he carbon froze his place in history as the most profitable options trader of our time?

If you don’t know the story, then read on to learn how Lucas actually made his billions.

By understanding his tale, you’ll see opportunities in your own life.

How, by executing the right trade, you can make a windfall later in life. In one form or the other.

A Young Director Named George

The year was 1969, and George was working on one of Hollywood’s lowest budget films with an abysmal production cost of US$750,000. He eventually filmed it in a record 28 days to save on costs.

The movie was ‘American Graffiti,’ and was released in 1973.

It became an overnight box office hit.

The film got nominated for Best Picture in that year’s Academy Awards, as well as Best Director, Best Original Screenplay, Best Supporting Actress, and Best Film Editing.

At the Golden Globes, it won Best Motion Picture, Most Promising Newcomer, Best Director, and Best Actor.

George Lucas had made it to the big leagues.

‘The Adventure of Anikin Starkiller’

Huh?

Yup.

A Space Opera.

That was his concept, and Lucas had identified Alan Ladd Jr, an executive at Fox Studio’s, as the only person in Hollywood capable of understanding his vision. That, along with the fact that all the other studios had already rejected his crazy idea.

George loved science fiction as a kid. Growing up on his family’s walnut farm, he fantasized about the outer space adventures in movies such as Flash Gordon and Buck Rogers. When Lucas came of age, though, all the sci-fi available had turned into dark dystopian tales. He wanted to make something fun for teenagers to relate to.

His idea was a movie shot in space in a ‘used future’ style of cinematography. Unlike the pristine shots of the future, which was the norm at the time, he wanted a style where the audience could picture used candy wrappers being tossed around in the cockpit of a spaceship.

Fox Studio identified the project as a massive risk, but with Ladd Jr. having loved American Graffiti, he agreed to give it a shot.

It would be an understatement to say he wasn’t expecting much.

Early drafts of the movie were NOTHING resembling what eventually became the movie we know and love.

The first script was a cringe-worthy 132 pages and was titled ‘The Adventure of Anikin Starkiller.’ Han Solo was a frog-like alien, the force was called ‘The Bogan’, and Luke Skywalker was an old grizzly general.

Over years of hard work, the script evolved into what we now know as Star Wars: Episode IV-A New Hope.

Thus was the backdrop going into the now legendary salary negotiations.

The Greatest Options Trade of Our Time

Quick Primer: Options contracts can be used to lock in prices ahead of potential moves higher. E.g. Airlines may purchase options contracts to buy oil at the current price of US$50 for the next year, as protection against a potential move to US$100.

At the time, the going rate for a director of George Lucas’ caliber (an award-winning director) was around US$1mil.

As he was mostly unknown until the sudden success of American Graffiti, the salary he would receive for Star Wars would be a HUGE payday.

US$1mil in 1970, if inflation-adjusted to 2019, would equal roughly US$ 6.6mil. A substantial amount for a 30-year-old just hitting it big.

What he decided to do, though, is what separates legends from the rest of us.

While negotiating his pay with Fox, George said he’d be okay with getting paid just US$150,000 to not only direct but also write the script. In exchange, he asked for the merchandising and sequel rights.

The studio thought Lucas was insane as merchandising toys up until that point was a disaster. The studio had just come off a financial debacle in merchandising their recent movie Dr. Dolittle where they were stuck with unsold stocks of toys no one wanted. They didn’t want to repeat their mistake.

And sequel rights to a dud? The studio deemed the project so risky they would have been happy at this point just to make their production cost back.

Not surprisingly, they jumped at the chance to lower costs and agreed to the proposal.

And so George Lucas executed his options trade. And history was made.

The US$850,000 in pay that Lucas had agreed to forego was the cost of the option contract he bought. In options trading lingo, George Lucas had paid US$850,000 to buy a call option (with no expiry date) on the merchandising and sequel rights of Star Wars.

“Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period… A call buyer profits when the underlying asset increases in price.” -Investopedia-

And this call option would eventually grow to a US$4.1 Billion fortune known as Lucas Film (the company he set up to own the Star Wars rights). That was how much Lucas sold it to Disney for in 2012, the year he finally closed his options trade.

In other words, his US$850,000 call option turned into a US$4.1 billion profit. An unprecedented 482,253% investment return.

Selling the company made his net worth at the time US$5.2 billion

Today, as of December 2019, George Lucas is worth US$8.2 billion, mainly due to his success in the Star Wars options trade.

A Life Abundant with Options

By believing in his vision, he executed the most profitable options trade of our time. And as a result, he’s one of the world’s most successful and wealthy men with a net worth of US$8.2 billion.

Going for a straight paycheck isn’t always the best life choice. Doing so may be short-sighted, costing you a massive future windfall.

If you look for it, you’ll see options trades executed everywhere in life.

Giving up part-time work for an unpaid internship, in hopes of a lucrative job offer after beefing up a resume and contact list.

Sacrificing money and time to further education, whether an MBA or a Data Science certificate, to advance a career and paygrade.

Forgoing some salary for shares in a start-up.

There’s an options trade out there you can use to implement your life vision. You’ll give up something in hopes of gains of more abundance.

Once you find it, ignore the haters, and execute the trade.

That’s what George did.

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Reza Kunimoto

Written by

Ex-Corporate Equities Trader | Ex-JP Morgan | Early Retiree | Options Trader | Investor | Author | encoreyourlife.com

The Startup

Medium's largest active publication, followed by +771K people. Follow to join our community.

Reza Kunimoto

Written by

Ex-Corporate Equities Trader | Ex-JP Morgan | Early Retiree | Options Trader | Investor | Author | encoreyourlife.com

The Startup

Medium's largest active publication, followed by +771K people. Follow to join our community.

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