Monday, April 19, 2010

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

 

Actually –

 

In a zero-sum game, winners make as much as losers lose.  Options is a minus-sum game. Winners receive less than what losers lose because of commissions and slippage.  This is pretty basic options 101.  The majority of options players will lose.  J  I believe even MCatalico would attest to this – this ain’t an even sum game…….

 

Tom

 

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.
>
>
>
>From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On Behalf Of praesto12
>Sent: Monday, April 19, 2010 1:49 PM
>To: OptionClub@yahoogroups.com
>Subject: Re: [TheOptionClub.com] Re: are options a zero sum game?
>
>
>
>
>
>Options do seem like a very fuzzy-logic sort of situation. I really dont' know specifically what one means by the term "zero-sum game" ? I generally have an idea, but perhaps some one can give a clearer meaning. Ha. I'll just go to dictionary.com . Take care guys.
>
>
>Richard
>
>
>
>
>
> _____
>
>From: Ricky Jimenez <rickyjim@bestweb.net>
>To: OptionClub@yahoogroups.com
>Sent: Mon, April 19, 2010 8:37:10 AM
>Subject: Re: [TheOptionClub.com] Re: are options a zero sum game?
>
>
>
>The trouble I have with this question is that I have never seen a
>precise specification of what the numbers are that have to add up to
>zero. And I have looked in books on mathematical finance for it.
>People who insist on the affirmative answer to the question say things
>like, "Look, I am a trader, not a mathematician and you know what I
>mean". :-)
>
>
>
>

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