Certainly long-term investors are dramatically affected by the possibility of serious wealth creation, such has happened in our country.
Not to mention the economic benefits of hedging (not just ags, but airlines, transport cos., etc.). Not to mention the capital raising through the issuance of stock, or the fact that such profits find their way into the fractional banking system creating new money to loan and on and on and on. Even short term investors create value -- HFT is the greatest liquidity provider of all time. Of course it won;t be there in a pinch, no one should ever build their strategy around the assumption of there being ANY liquidity.
In options and derivatives? You are saying if I am profitable buying options, my counter party is also profitable selling the same options to me. I am actually taking money from someone other than my counter party? Who is that someone may I ask. OK, you say, my counter dynamically hedges so he gets the risk free rate of returns. But the fellows he trade with eventually will have to pay up. But you say they can also hedge... When the music stops someone is holding the bag? No? To add to the cost, every time there is a trade, we all pay commissions and slippages too. Not arguing just want to understand as I am not that smart. Kind regards,
You are assessing that transaction in isolation. Let's say you bought puts from me. But I sold them in lieu of a resting limit buy order - I want to buy the stock at the strike price of these options. And we increased open equity, which feeds upon itself. And the premium I received from selling those puts has been put to work elsewhere. Transactions don't exist in isolation.
First of all, on your specific trade itself, there is a winner and a loser, if your trade has a positive outcome you take money from the counter party. The fact that he makes money elsewhere does not negate this fact. Second, if not zero sum, all of us should make money trading options in the long run? Then why 90%-95% of trader lost money? In the big picture "grand scheme of things" view we are all in win-win positive sum trades and profitable. I am not a professional trader, just an amateur, so perhaps I do not understand how trading and high finance work. All you professionals please help me out. Thanks.
Those who lose, most underfunded as exchanges wanted more volume and fees, so they lowered margins to way low for day trading and it worked, people with $2500 can open an account and start trading. What most young traders are unaware is you need 100-150% return to just pay the broker/exchange fees. But the amount is even larger than most think. If you have a job or business on the side as I try to advise, you are better off as the stress of money coming in takes some stresses off your trading or learning to trade. if you have no job, whatever you were making by the hour should be included in the fees you must pay and including all the weekly pay spread out as you truly are losing those funds and including all the extra bennies you now not making, plus the cost of doing business, cable internet, desktops, what ever the equipment you need is a fee. So if you think it is zero sum, far mistaken where you need like 2 ticks to break even, if you doing 40 trades a week if doing a one lot and you expect to win all 40 to make that 2 ticks. So many want to do the opposite of whoever, study and read the charts as many large traders and some hedge funds do and tailcoat them then trying to beat them. Just cause you can get in/out in nano seconds don't make you profitable, makes you dumb. Learn patience, learn to wait to buy on support and sell resistance, one of few places where you can get in and risk little and aim for much, study charting.
You are basically saying that it is dumb traders like me that pay for the fees and commissions of the brokers, and profits of professional traders like you. So, it is not a win-win positive sum game?
HFT’s as frontrunners are takers of liquidity not providers. Value traders would provide liquidity when others will not. Deep discounts from ‘fair value’ are the price one pays for this service when being time-sensitive.