Monday, April 19, 2010

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

 

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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