but every long contract has to have a corresponding short. it is the nature of a zero sum game just like every call you buy has to have a call writer, (who is thus short a call). these are created out of thin air. it's not a stock. it's an agreement. you have to have TWO sides to every agreement. that is the fundamental difference between stock market and derivatives market.
Ok, so what about baskets and options? Specifically in regards to manipulation. Zero sum or not? IN THEORY: Baskets are a hedged transaction and NEVER lose money. Large firms can move the market on options expiration. They trade on 1% margins normally and with puts and calls near options expiration, selling for 0.30 to control a $100.00 stock they have leverage of 1000 x the norm. If they wish to peg the DOW @13,000 it is very possible to do so. If you sell 12 million shares of MMM to thwart them, options will be used to create 3 million shares of BA and move it up the exact amount MMM goes down. They can sell short tens of thousands of SPY puts which creates basket program buying because if they do get into trouble, they can quickly sell short 10,000 S&P futures to insulate the transaction. In theory large funds can anything they want within the last five days of expiration. Of course the Monday after is a completely different story altogether. Then the SPY puts and calls aren't 0.30 but $3.00 and the leverage is gone.
AGAIN, it's a structure question if each position has an offsetting position, it's a zero sum market. if that is not the case, then its not a zero sum market. a zero sum market HAS to have the same amount of money won by positions to offset the amount lost by offsetting positions. if you can answer those questions, you have your answer. i know nothing of this specific practice, but if its options - its zero sum. has to be. for every person long a call, somebody is short the exact same call. same for puts thus, has to be zero sum
Using "dumb expectancy" instead of zero or non-zero sum then share markets are positive (for longs) and share shorts and futures markets are negative (because my misuse of zs was pointed out earlier in this thread). IMO the dumb expectancy sets a level for joe average. My goal has been to find high expectancy situations in the markets daily movements. This pursuit has given me opportunities. The follow-on challenge for me has then been to extract money from them well. So I would say that zero / positive / negative dumb expectancy isn't the issue. The issue is whether this zpn market offers you opportunities to find positive expectancy situations. I find futures markets excellent because they suit the type of opportunity and liquidity I look for - I find stock markets chaotic and thus more difficult (to me) even though they are non zero dexpectancy.
this is one of the best posts that i ever read on anywhere. thank for op and ppl who contributed, and will contribute to it. as far as i can see, one can always make $$ if he/she has: 1 super nice auto-trading/scan software type tools 2 common knowledge of long/short 3 always communicate with other professionals like other professional do in academic disciplines. 4 a little bit more faith and hope(maybe luck.) Ovovov
Not to get hung up on semantics, but: Expectancy (positive or negative) is based on the expected odds of a profit or loss and the amount gain/loss anticipated. Expectancy is not primarily based on contest costs as has been suggested. It has nothing to do with trading being a zero sum game or not. The structure the game is the same regardless of how well one selects their positions. Not trying to get the last word in here, just trying to clarify. Peace and gtty, Lar
exactly. for example. DIA and YM move (generally) in concert. they have to, due to arbs. however DIA is part of a non-zero sum game (the stock market) YM is part of a zero sum game it is 100% correct that whether or not you are in a zerosum game says little to nothing about whether you can or will be successful