To those that say trading is a 0 sum game...

Discussion in 'Trading' started by bonds, May 20, 2011.

  1. bonds


    Can you explain something to me.

    For all those people that got into Linkedin at $45 ipo price... it closes at $94 yesterday.

    So obviously they all made a killing, but if its a 0 sum game then there must be equal and offsetting losses. So who lost all the money that the ipo buyers made? Keep in mind this stock is non shortable as well so there are no shorts...
  2. rmorse

    rmorse ET Sponsor

    The sellers of the stock in the IPO. IF it was priced better, they would have sold their stock higher, or sold less stock.

    Although I would not make that statement, that trading is a zero sum game, it's not. The financial world is more complex than that.
  3. Bob111


    i'm no way an expert in this IPO field, but i've heard that ipo stands for initial public offering..mean(at least to me) that the stocks certificates are issued at certain price the the buyers of this IPO. THERE IS NO SELLERS,NO SHORT SELLERS EITHER at initial offering. they can't exist at that time.t.the company give you piece of paper in exchange to your money. now after company start trade at exchange-there is your choice to sell your shares,thus create a market.i didn't see it's trades at $45;ohlcvalues=0;logscale=off;source=undefined

    looks like it's starts traded @ $85. if you bought it at $45 here is your choice-hold it or sell it.
  4. PEBKAC ("Problem Exists Between Keyboard And Chair")
  5. rmorse

    rmorse ET Sponsor

    Bob111- There is always a seller of the stock. If you read the prospectus, it will state who the seller is. Sometimes it is only the Company, sometimes insiders and sometimes both. Someone sold something that had value, someone bought. If an IPO is up 10%- 15% in the first week of trading, in my opinion, the deal was priced well and everyone benefits from a secondary market in the stock.

    --Just my opinion.
  6. jokepie


    Equity is created and destroyed.
    Its not a zero sum game.
    Index trade made since the beginning of the time will never summed up to zero!!
  7. olias


    futures trading is a zero sum game. Stock trading is not. At least that's how I see it. In stock market the company sells it's shares. If the company performs well and the company keeps increasing in value, everybody wins basically.
  8. bonds


    i still dont see how anybody lost money. yes maybe some people sold at less than where the stock ended up or peaked, but they still made a killing.

    how do you lose when a stock keeps going up and up and you cant short the stock? im sure plenty made millions and millions explain what the people did to lose their millions?
  9. The stock market is more "zero sum" than you recognize.

    Of course an "index trade" can't go to zero.. controllers of the index keep replacing losers with current hotter ones.
  10. rmorse

    rmorse ET Sponsor

    Futures would be a zero sum game if there were no hedgers or spreads, or inter market spreads. But there are. If I own a farm and hedge my crop in the futures markets, we can both make money. Without that hedge the farmer would have more risk, have problems getting loans and run his business. If you sit in a room with a group of poker players, that is a zero sum game. The financial market don't work like that.
    #10     May 20, 2011