RE: [TheOptionClub.com] Re: are options a zero sum game?

 

Someone sold that option to the buyer.  He is short. 

 

If the owner sold it back, the seller lost – zero sum.  If the owner sold it to a third party, at expiration, the short seller would have to cover.

 

The real point about zero-sum derivatives is someone loses.  If you think it is immoral for you to make money when someone else loses – get out.

 

If you make a lot of money, a lot of someones have to lose a little each or one trader has to lose a lot.

 

We don’t have to be world class traders to make money.  We don’t have to take it out of Dan Sheridan’s pockets.  As long as we do better that the average/the newby, we can do all right.

 

From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On Behalf Of Dave
Sent: Thursday, April 22, 2010 2:56 PM
To: OptionClub@yahoogroups.com
Subject: RE: [TheOptionClub.com] Re: are options a zero sum game?

 

 

Hi mctalico,

 

I explained why the writer didn’t experience a real financial loss in a previous message – although he did experience an opportunity cost by deciding in advance to limit his profits.

 

But here’s another example of the trade not being zero sum.  Using that example, say the VIX soars and stays high through expiration.  The value of the buyer’s option increases and he sells it for a profit.  He just made money, but no one lost money (remember VIX stayed high thru expiration).  When someone makes money that’s not proportional to someone else’s loss, it’s not a zero sum trade.

 

Good trading -- Dave

 

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