OK.
"A" buys the option for $5 (from "Z").
"A" sells the option to "B" for $10, making a nice profit.
But if the value stays high thru expiration, then "Z" is going to have to settle the option at expiration by paying $10 to "B".
"A" makes $5. "B" ends up even. "Z" loses $5. Zero sum.
On Thu, Apr 22, 2010 at 12:56 PM, Dave <trading83@comcast.net > wrote:
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.
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