Options in and of themselves are a zero sum game (like all derivative contracts). For every specific contract there is a winner and a loser. That being said I agree with archon that this information is next to meaningless. Options are financial vehicles that can be used to control risk. They are often just parts of more complex positions including other options, futures, securities, etc...
I like options because they're available and it is nice to know in advance how much you can lose if you're wrong.
is it just me or is this guy budwick a world class a-hole. Hey, buddy, get over yourself. you know what the guy meant. do you feel compelled to be a jackass at All times. So many of the quotes I see from you are filled with acidity and vitriole. I think you need a good BJ. For god sakes....RELAX!!!!!
No myth....Options lose value over time. The total value of all QQQQ March options WILL be worth less on March 16,2007
I think it's just you. Of course he knew what the guy meant. That very important piece of information was directed at the many who actually do "play" at stocks and options. These players will not be around for long. You MUST look at this as a business first and always. You must consider the downside risk of every trade or before long, he and I and professionals like us WILL have YOUR money and we'll laugh as we take it from you...well, I know I will And it's spelled vitriol...
No argument there. But let's address your earlier statement in full, without conveniently discarding the "with the advantage leaning towards the seller.." part. If the option seller truly had an inherent advantage (like a casino) then just sell options and let the odds do their thing. The more you sell the more you'll make in the long run. Do you really think it's that simple? Whether you sell the option or buy the option your expectancy is zero (less commissions and slippage). Whether you make or lose money trading options, stocks, futures, or diapers depends on the same thing - how well can you trade? It's a disservice to option newbies (as I once was - and am not far beyond) to keep spouting this stuff.
Your logic floors me we you say that options are not a zero sum game. I think what you mean is that the combination of options with stocks is not zero sum game and I tend to agree. However, options alone are zero sum. If I win someone else loses. The only conclusion I would draw from the "zero sum" theory is that the conventional wisdom that options are risky and many option players lose money is probably well founded. Don
I really didn't feel like getting into this zero sum, option selling debate all over again as it has been discussed here on ET numerous times, but what the heck...Taken at face value, there is no edge in selling options vs. buying them. Successful strategies can be built around buying options, selling options or a combination of both, however, just selling options doesn't make you an automatic winner.
Zero-sum game is an academic theory that people in universities discuss. Professors who never trade like to repeat this mantra from their studies and students learn about it in an ivory tower setting. In the real trading world, zero-sum game is meaningless for the individual trader just as efficient market theory, CAPM, utility, and any other academic theory taught by intelligent non-traders. If I make money, I could care less if someone had to lose it nor would it affect my decision which is based on technical or fundamental analysis or volatility or anything else. So this zero-sum dicussions always goes nowhere for the very reason that it is meaningless
I think you're debating slightly different viewpoints. What you're saying is true. At some point an individual option has one side that made money, and the other side that lost money. However, I think what archon is stating has a different twist. To give an example, you sell a put on a stock you'd like to own at that strike price. The stock goes up a lot. The put expires worthless. You miss out on the stock but you keep the premium. You're a winner. I bought the put from you. So I'm a loser? What if that put was the long side of a vertical? I had sold a higher strike put at the same time. I made money off my spread and am also a winner in this case. A single option is black and white. But options can be combined into myriad of positions, complicating the "zero sum" equation. That's why one mustn't take option volume, put/call ratios, etc. at face value.