Not really sure how futures trading is any more of a zero sum game than stocks. I don't see how in theory how earnings and dividends change the nature of the game. I'm looking to get into stocks for diversification only. Otherwise futures are great. lower commisions, no uptick rule, cross margining. Just like stocks can be directionaly or not. No surprise that everyone thinks what they trade is better.
Assuming you are flat, everytime you buy or sell a future contract you are either opening a new contract with a counterparty or the counterparty is closing out his open interest. So in that sense, it is purely zero sum.
The post above correctly explains the futures. In stocks you have annual return (average of 8-10%), earnings of the companies involved (appreciation and growth, adding to overall value). So, you could buy stock from me..I short it, thus collecting interest on my short sale, which makes me money. Stock stays at same price, company makes money and is either worth more or pays you a dividend. So, we both could make money from opposite sides of the trade. Regarding futures commissions. My brother pays a flat $50 per day for emini's and he trades a thousand or more each day...hard to compete with when you're paying $3.50-$5.00 round trip for each contract. FWIW, Don
Liquidity, instant execution, little or no slippage, 1 tick spread, no mm or specialist games, leverage (if used properly) are all benefits of futures. But too many people think that futures are too dangerous (afraid to get a truck of pork bellies) and confusing. redduke
I get that. What I don't get is why stock trading is any different other than the amount of shares being fixed. If you make a trade, the price is either going to be higher or lower at the end of the day. My counterparty still loses what I make and vice versa. Seems the same thing if you account for dividends, earning etc. Where does this money come for so that we can both win?
Let walk through this. You short a stock to me. You get interest on the money you get from the sale. I pay interest on the money I borrowed to buy the share( or I forgo interest on money that I have paid for the stock.) At this point it seems zero sum. Stock price moves in either direction seem, pretty easy to see that is zero sum. Dividend gets paid. Stock price drops the amount of the dividend in theory. The person who shorted the stock owes me the dividend to make up for the dividend that the company would have paid me. Seems zero sum to me. Sorry, this isn't my area of expertise. Is there something that I am missing?
This is a big part of it. When you are leveraged 100:1, the P&L shock can be discouraging for some. The risk/reward is much higher for futures, and is not for people who do not have a strong technical analysis background to trade intraday. Most people trade using fundamentals, which makes trading stocks much easier than an index which covers several stocks at once. I prefer futures trading myself though.
I think there are quite a few futures traders on this site, it's just that most of them aren't professional/full time traders, so while they voice their opinion often, they aren't going to post numbers like many of the equity traders, giving the illusion there are more equity guys. I think another way to ask the question is why are there so few successful futures traders as there are equity traders on this site. For that I think the primary reason is stocks, NYSE in particular, are simply less efficient. There are quite a few very short term scenarios I can exploit in the NYSE universe for small, quick gains, however if you took the tape away from me I'd be useless. I don't mean to demean myself or my style of trading. In the end it's all money, whether it's from an ecn arb or Winthrop going long pork bellies. However 'true' trading, position trading, directional trading, or whatever you want to call it, is a far more difficult way to make a living, but it's what is required to be successful trading futures. That said perhaps there are great ways to game the mini's and I'm not bright enough to figure it out, wouldn't be the first time.
I know I run the risk of "tapping the aquarium" by reposting this one: ___________________ Playing individual equities (Not ETF's or indices) is the very best game of all. Why? Think about who the other market participants are. Long term money is good. Dumb money is better. Futures & options have a lower ratio of long term & dumb money flowing in and out. Forex? The very worst game of all.