zero-sum game?

Discussion in 'Options' started by madeqx, Apr 20, 2006.

  1. madeqx


    Is the options-market really a zero-sum game, or are there, for instance, institutions or other participants that "give away" that little edge which make some win, say, 55% of the time just because they for example need to hedge a large portfolio (or any other reason..)?

    What I’m trying to say is that, are there not participants who take on positions just to protect another position, and really don't care what the outcome of that options-position is as long as they have secured the portfolio, or whatever, thereby giving some other participant an "edge-opportunity “ ?

    Hmm, it’s a bit difficult to express exactly…

    Anyone get my point? Thanks..
  2. Every few months a long windy childish thread emerges on the question of options nad Zero-Sum game.

    Instead of dredging this all up again, search some of the older threads on Zero-Sum and maybe your question will be answered (hopefully :D)
  3. madeqx


    well i'm sorry if you find my question childish... (?)

    I did try to search but 3000+ results kinda put me off..
  4. No, the question is not childish.. the responses that pop up are :D
  5. MTE


    Here's the one coach is talking about: Zero Sum Game.

  6. madeqx


  7. novel20


    Wait, so is option a zero sum game? :D
  8. Only in the East Coast. If you account for the time difference moving west, the game falls slightly net negative between -.10 and -.05

  9. madeqx


    :) i'm absolutely not questioning the fact of zero-sum, I justed asked whether or not there are those who basically take on losing postions because they simply do not care as they are merely hedging etc...

    I'm reading the interesting thread mentioned above and think I have found the answers I was looking for.

  10. DrChaos


    Assume that stock underlying is positive sum return.

    Furthermore, the stock's volatility is a negative ("psychic") return in the sense that it is less desirable than a time-consistent spacing of returns.

    Then the entire collection of options outstanding distribute positive return and negative-utility volatility from option and stock investors amongst each other, including some of the underlying stock's positive value.

    All options outstanding, are, collectively zero sum.

    This does not extend to the individual level.

    Consider an option as the strike price goes to zero, and time to expiration goes to infinity: this is no different from a share, which is presumably not zero sum return, and you are subjected to all volatility.
    #10     Apr 20, 2006