zero sum game?????????????

Discussion in 'Trading' started by madmunny, Feb 25, 2006.

  1. could one of you academics who beleive the stock market is a zero sum game please explain this idea to me? I personaly think if you actually believe the market is a zero sum game you dont belong in it and should probably try to get a job as a university prof teaching theory and not actuality.

    the way i see it...the only way it can be a zero-sum game is if every company in the market went bankrupt and became worthless and im pretty sure this wont happen.

    maybe im wrong.....if i am please show me the error of my ways cause i am really gettin pissed off at all these posts i read where people state that the market is a zer0-sum game and if you can prove me wrong i can stop being pissed off at my percieved stupidity of you. :)
  2. For every buyer, there is a seller. Therefore, when the long makes money the short loses money.

    This is easy to see in the future and options markets.

    In the stock market, I suppose it may be a little different. If you buy in the primary market, perhaps it could be a positive sum game for investors (at the opportunity expense of the company). But, once you get to the secondary market, and there is a fixed number of shares outstanding, for every buyer there must be a seller...for every winner, there is a loser.

    Perhaps you could explain why you think it is not a zero-sum game. Lay out a scenario where more money is made than lost. Do you think that money is just magically created in the markets?
  3. Given that when one person buys a futures contract, someone must sell it to them. (One side makes delivery of the underlying at expiration, one takes delivery at expiration).

    At expiration, one of them will have made $X amount and the other will have lost $X amount.

    The total sum is zero [$X-$X = $0].

    This is what is meant by a zero sum 'game'. Nothing more, nothing less.

    People apply the term broadly as though everyone has the same time horizon and so therefore markets are effecient.
  4. Its a NEGATIVE SUM game my friend...from the first nano-second you enter, because of the spread, the games and the commissions...

  5. yes for every buyer there is a seller....but that does not mean one has to lose money.....take a stock..any for instance......its ipo was somewhere around $85...say i buy every share at 85 bucks.....and then sell them all to a different buyer at $200....who then in turns sells them to another buyer at 350......

    who has lost money here???...

    until a stock becomes worthless from bankrupcy someone has always profited more than the losers have lost.....

    so how can this be a zero sum game?
  6. What difference does it make? There is an opportunity to take some money for those who can do it. Thats all that really matters.
  7. If you sell a stock at $50 and it goes to $60, does one or more people make the $10?

    If you buy a stock at $50 and if goes to $60, does someone miss out on that gain of $10 you received?

    IMO, it's completely a zero sum game except for this little thing called commission; but that can be considered zero sum as well because someone is paying and someone is receiving therefore if you minus the receiving from the paying you get ZERO!
  8. Well the point is that time is not on your matter what the edge is.

  9. Your missing the point, by selling at $200 you gave up $200 plus in potential gains and those gains are in someone elses pocket or probably many other peoples pockets. IMO, giving away $200 is the same as losing $200.
  10. You do not see all that the market has to give...because its a negative-sum game.

    The trends you see are reduced because of this...the charts represent to you the resulting movement, when they could be so much more reflective of buying and selling...

    #10     Feb 25, 2006