Tuesday, April 20, 2010

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

 

I had never thought about a poker game having and ‘ending’ but that is true of all sports betting AND of options.  In fact, all derivatives.  Granted you can roll your position out to the next month, but that’s like starting a hand in another poker game before you finish the one you are in. J

While it is true I have no effect over whose call is exercised against, in the example, I was using an underlying with only 1 open contract. J  Course, the seller could always buy his was out from the market maker – or another investor. J

 

From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On Behalf Of Ricky Jimenez
Sent: Monday, April 19, 2010 8:20 PM
To: OptionClub@yahoogroups.com
Subject: Re: [TheOptionClub.com] Re: are options a zero sum game?

 

 

The difference between options and poker is that there is a definite
beginning and end of a poker game and that beginning and end applies
to all players so it is easy to total the profits and loses for the
individual players at the end of the game and get zero. There might
be a precise analogy for options but I have never seen it written
down.

By the way Jack, you can exercise a call you own but you certainly
can't specify that the person who sold you the call is also the one
who sells you the stock.

On Mon, 19 Apr 2010 16:28:10 -0500, "Jack" <jack@jackcpa.com> wrote:

>It’s like a poker game. If you win, someone has to lose (and the house takes a cut).
>
>
>
>Look at an individual option. If I buy a call for $1, the seller gets $1 (plus/minus our commissions). If the stock drops, he gets to keep the $1 and I am out $1. If it goes up and expires $2 ITM, I’d make $2 ($1 profit) either by closing before expiration OR calling his stock and selling it for a $2 more than the strike price. Now, I make a $1 profit and the seller loses a $1.
>
>
>

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