I think its important that traders understand the basics of the "zero sum" concept as another sobering reminder people are ready to kick your ass and take your money and that money does just not go to "money heaven". Options and futures are probably more pure "zero sum" plays than stocks are. The time taken to debate and vision how more pure zero sum they are relative to each other could be better spent. Along that line of a sobering slap in the face, people ready to take your money, etc is an article I read a while back....here is a link. http://www.turtletrader.com/zerosum.pdf No, its not a turtletrader document, although the link was there. It was written by a USC professor, all in all a pretty good read.
Hi, OddTrader, if you take my Friday DOW example the sum of the gyrations is 170 and net day trend is 10 down Open to Close(very approximate figures). So the multiple is 17.
Simple Equation FGL=futures gains on longs FGS=futures gains on shorts TFG=total futures gains Also keep in mind that FGL=FGS*(-1) SGL=stock gains on longs SGS=stock gains on shorts TSG=total stock gains Also keep in mind that SGL<>SGS FGL+FGS=TFG=0 Therefore futures are ZERO SUM SGL+SGS=TSG=X Therefore stocks are NOT ZERO SUM X does not equal 0 To be a ZERO SUM GAME the equation must equal 0 AT ALL TIMES. Whereas in reality, even if the stock market stops trading or even drops to zero the equation will not equal 0. This is really quite simple. It has absolutely nothing to do with value only price.