Are option trades a zero-sum game?

[earth_imperator]

The following definition by wikipedia states that options are zero-sum games:
"
[...] examples of zero-sum games in daily life include games like poker, chess, and bridge where one person gains and another person loses, which results in a zero-net benefit for every player.[3]
In the markets and financial instruments, futures contracts and options are zero-sum games as well.[4]
"
But is that really true? B/c the market itself as a whole is IMO not a zero-sum game b/c otherwise it wouldn't grow/expand or shrink. We know markets, ie. economies, usually grow, some bad ones even shrink, yes, but this just proves that markets & economies cannot be a zero-sum game.

So, then the above definition of options and futures (and possibly also stocks) being a zero-sum game cannot be true, IMO.

What do you think?

 

[maxinger]

When you lose tons of money, someone else is earning tons of money.

When you earn tons of money, someone else is losing tons of money.


Be kind to other traders ?!?!?!

 

[MacBookProHo]

In the markets and financial instruments, futures contracts and options are zero-sum games as well

What do you think?
View attachment 293004

The market has to be a zero sum game, it's constantly either deflating or inflating. Gyrating and moving. It's a dynamic entity. Money pumping into it, or money pumping out of it. Up or down -- ultimately winners, and losers. and Timing, and understanding of the future.
Mazal U'Bracha,

 

[maxinger]

 

[Peter8519]

I read somewhere that only 10% are profitable and 90% lost money. If markets are forever expanding, 90% would make money. How many IPOs make it big? Not many. Of course, some disappear through M&A. There are many start-ups and most flops. Some even say the market is a negative sum game.

 

[rb7]

The following definition by wikipedia states that options are zero-sum games:
"
[...] examples of zero-sum games in daily life include games like poker, chess, and bridge where one person gains and another person loses, which results in a zero-net benefit for every player.[3]
In the markets and financial instruments, futures contracts and options are zero-sum games as well.[4]
"
But is that really true? B/c the market itself as a whole is IMO not a zero-sum game b/c otherwise it wouldn't grow/expand or shrink. We know markets, ie. economies, usually grow, some bad ones even shrink, yes, but this just proves that markets & economies cannot be a zero-sum game.

So, then the above definition of options and futures (and possibly also stocks) being a zero-sum game cannot be true, IMO.

What do you think?

View attachment 293004

No it's not.
Some traders use options for edging, not necessarily to make money off of it. They can loose money with options, but they will achieve their goals of edging their other positions. Therefore, they will have an overall winning position even if part of it (option position) will loose some dough. So in this case, both parties (the real 'winner' and the edger) will be winning in a sense.

 

[Pekelo]

It is a negative sum game, because of the cas.. I mean the brokerage's take.

 

[newwurldmn]

No it's not.
Some traders use options for edging, not necessarily to make money off of it. They can loose money with options, but they will achieve their goals of edging their other positions. Therefore, they will have an overall winning position even if part of it (option position) will loose some dough. So in this case, both parties (the real 'winner' and the edger) will be winning in a sense.

options themselves are zero sum.

However the options market cam cause positive value by transferring unwanted risk to willing parties and thus lowering the risk premium in the market.

 

[misterkel]

Well, obviously if the total market only relies on investors/traders money in and money out, it would be zero sum. BUT...
Is the Fed (PPT) a player? If not, then it's a positive sum game cuz they input money they're not intending to make back.
Also, dividends are payouts for good investments, so that would make it positive sum.
Brokerage fees are just the brokerages method of trading, so it's part of the inputs, I'd say - but that's just definitional, so it really depends on how you look at it.
What about stock buybacks? This isn't really a company investing in itself so much as rewarding holders by decreasing the total shares available. Taking money from the public via exchange for goods and services and returning it to the market.

 

[betcashrun]

In theory options are a zero-sum game in a commission-free world where bid = ask.
As a result, in reality they are not a zero-sum game.
Edit: Besides in the wikipedia article all players are supposed to have the same rights. It is not the case in the options game: market makers have usually higher rights depending on the exchange and lower fees.