are options really ZERO SUM GAME ? i don't think so
- Thread starter chanakya
- Start date
If you want to ignore several good explanations of why options are a zero sum game and continue running this around then what's the dollar breakdown if... ?
Barbara who is 36 years old and rather gamey looking with her ill fitting thick horn rimmed glasses shorted the original 100 shares that Jon who is 65 years old bot which subsequently rose to any price in the world that you like ...
No matter how old they are or what they look like, the options are a zero sum game, no matter how you choose to see it.
LOLOL
This has been answered for you several times now.
In terms of the options contracts written and bought the outcome is zero sum.
What else is there to discuss?
By the way, what material difference does it make that John is 65 years old?
Another way to look at it:
- John had a (synthetic) short PUT position.
- Carl had a long CALL position.
Together their positions = long CALL + short PUT = long stock.
This is obvious. The short CALL and the long CALL cancel each other out if you look at John and Carl's position combined.
Therefore, if the stock goes UP, yes the combined amount of money John and Carl end up with will be greater at the end of day - because the stock went UP!
If the stock goes DOWN, the opposite is true.
Sadly, you insist on considering the stock position when asking the question why are options a zero sum gaime so this will all be lost on you.
Chanakya, ask why John writes the call on his stock. Only reason is he does not want to sell the stock for gain (realized) at this time. And the same time John thinks the stock will go down probably. So he does not want to sell for profit now, and he does not want to lose if the stock price go down. So he hedge that with call premium that he makes.
But the stock did go up. So he made money from selling the call, but he lose money on the gain from the stock going up (because he sell all possible gains to him at strike price)
I think that is what happen, but I am still learning.
But the stock did go up. So he made money from selling the call, but he lose money on the gain from the stock going up (because he sell all possible gains to him at strike price)
I think that is what happen, but I am still learning.
When asked by Chanakya why he wrote calls on his stock, John replied that in just 15 minutes a day, he uses this simple, conservative method for online trading that is powerful enough to make a steady income every month with limited risk.
He can profit:
- no matter if the market moves up, down, or sideways
- no matter how the economy is doing
- even if new to trading without watching the markets during the day
- with as little as $5,000 in his account
Tho it sounds incredible, this strategy can earn 8-12% a month. That's about 100% a year!
Of course, in years like last year, you have to ignore the huge losses on the underlying
:eek:If you look at the way its bieng discussed here ,why are stocks not zerosum game then ?
If a company if selling stocks at IPO , lets assume its writing a call with 0 intrinsic value and getting premium for all the future growth.
Any increase in the value of the stock in future would be potential loss for the company as it could have had the profit if it kept the stock ! same for later transactions as well.
If a company if selling stocks at IPO , lets assume its writing a call with 0 intrinsic value and getting premium for all the future growth.
Any increase in the value of the stock in future would be potential loss for the company as it could have had the profit if it kept the stock ! same for later transactions as well.
Quote from spindr0:
When asked by Chanakya why he wrote calls on his stock, John replied that in just 15 minutes a day, he uses this simple, conservative method for online trading that is powerful enough to make a steady income every month with limited risk.
He can profit:
- no matter if the market moves up, down, or sideways
- no matter how the economy is doing
- even if new to trading without watching the markets during the day
- with as little as $5,000 in his account
Tho it sounds incredible, this strategy can earn 8-12% a month. That's about 100% a year!
Of course, in years like last year, you have to ignore the huge losses on the underlying
Oh, John is the trillionaire with that system.
But I think Chanakya is confusing 2 bets (his stock bet) and (his option bet) as one bet in a zero sum game.
FredBloggs
Guest
are jon and carl gay?
i think its a much better discussion because of the implied ambiguity.
i know one of them is because op said he had hedged his position with the underlying.
i think its a much better discussion because of the implied ambiguity.
i know one of them is because op said he had hedged his position with the underlying.
I'm sorry but that is the wrong answer.Quote from trendlover:
Oh, John is the trillionaire with that system.
But I think Chanakya is confusing 2 bets (his stock bet) and (his option bet) as one bet in a zero sum game.
John has only been using the system for 2.7833 years and is only a multi-millionaire.
Please feel free to submit additional entries since you are now eligible for the consolation prize (an evening with Jon and Carl)
No thank you for the prize of Jon and Carl. Someone on the thread say they are gay, so they do not want to be with me.