For the Wallstreet haters.

Discussion in 'Economics' started by KINGOFSHORTS, Apr 11, 2012.

  1. Yes but the statement was that "in options if you are making money someone else is losing it" and this is clearly wrong. Options market makers seek to remain delta neutral and limit their exposure to price fluctuations of the underlying instrument. Viewing an options trade as someone selling a call or put and another person buying it is a very simplistic view and not how most options are traded in the real world.
     
    #31     Apr 21, 2012
  2. What statement? Yours? Regardless, it remains true. That "simplistic view" is zero-sum, period. You can talk out of your ass all you like, but you can't spin this to win some moronic argument.

    WTF do market-makers have to do with zero-sum? You're stuck on "trade" as a euphemism for portfolio or specific outlook on vol or price. That's fine and dandy, but has nothing remotely to do with the topic of zero-sum.

    Zero-sum relates to two-sides of one market; whether it be a single call or put, or a butterfly (for example).

    Volatility itself is NOT zero-sum, but that's for another day. It's what differentiates volatility from premium.

    Conceptually, "zero-sum" serves no purpose for the options-trader. It simply means that nothing is added or taken from the market; it's purely distributional. You're concerned that it somehow limits your potential, when in fact it's a a silly abstraction.
     
    #32     Apr 21, 2012
  3. Reading is fundamental. Fifth post in this thread:


    Market makers have everything to do with discussion if you buy or sell an option, most likely you are buying or selling it from a market maker. Market makers hedge their positions with other options and the underlying. You can make money on an option you buy from a market maker while his net position does not lose money.
     
    #33     Apr 21, 2012
  4. While you are at it, you should probably go argue with the CBOE:

    http://www.cboe.com/Advisors/knowledge/myth7.aspx
     
    #34     Apr 21, 2012
  5. #35     Apr 21, 2012
  6. First of all I was not the one who made the original claim about "making money", read the tread. Second, stupidity is consider the options markets as a closed system without including the underlying from which they are derived. Options are zero-sum only when the options market alone is viewed as a closed system. This is not how options transactions work in majority of real world trades.
     
    #36     Apr 21, 2012
  7. Ask yourself if in the Universe of listed *options trading* a net profit of loss is generated in the *open interest of all options traded*. If you can provide proof of a positive-integer result then you will have proven me wrong on the topic of zero-sum.

    Majority, real-World. The qualifiers you offer make no difference.
     
    #37     Apr 21, 2012
  8. My arguments are:

    1. When someone makes money on an option trade someone else does not have to be losing money.

    2. Viewing the options market as a closed system is stupid.

    I never claimed that the options market when viewed as a closed system isn't zero-sum. Just that it should never be viewed as a closed system.
     
    #38     Apr 21, 2012
  9. You're an idiot.
     
    #39     Apr 21, 2012
  10. Haha you know you have won a debate when the other person has to resort to being impudent.
     
    #40     Apr 21, 2012