You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Buying calls for a living and arguing with derivman
- Thread starter Derivman
- Start date
Quote from GTS:
That clearly isnt working. You need to construct an example yourself and then we can show you the errors if you make a mistake. You go first.
Thanks GTS, But how can I construct an example without relevant experience. Surely the experienced traders have a major advantage and can help the newbies out. Is this not the reason why experienced traders post, that is to help those that are starting out. I am sure that there are some traders on elite that can easily explain the concepts and we can put the topic to bed and move on to the next topic. Is this not how learning is accomplished. Sort out one thing first and then move on to the next. If we never get to the correct answer than what hope have we to move on to the next topics. I would have thought that my approach was very sensible and I apologise if I have offended anyone. All I am trying to do is learn something new. Surely that does not deserve criticism. Cheers.
Derivman
ROFL! Exactly! It was a funny forum joke.
You wouldn't get a subtle joke if it painted itself purple and danced naked on a harpsicord singing "subtle jokes are here again!"
You wouldn't get a subtle joke if it painted itself purple and danced naked on a harpsicord singing "subtle jokes are here again!"
Quote from Derivman:
Thanks for the reply jeffm but you seem to have read the wrong post. This is the parnk that I was talking about.
http://www.coffeemarket.options/
All derivatives, futures, options, swaps, and etc, are CONTRACTS between 2 parties, which means that what one party gains the other one loses. Simple as that. If those 2 parties have other contracts with each other or someone else then it has no bearing on that intial contract. Sure one party can make money overall when you consider all contracts that a party holds, but each individual contract is a zero sum game.
Also, the options market (and the same applies the futures market and the swaps market), when considered as a whole is a zero sum game, because the profits and losses on all outstanding contracts are exactly equal but opposite in sign, cause each contract has a buyer and a seller. Derivatives neither create nor destroy wealth, they merely distribute it within the system.
Also, the options market (and the same applies the futures market and the swaps market), when considered as a whole is a zero sum game, because the profits and losses on all outstanding contracts are exactly equal but opposite in sign, cause each contract has a buyer and a seller. Derivatives neither create nor destroy wealth, they merely distribute it within the system.
Quote from jeffm:
ROFL! Exactly! It was a funny forum joke.
You wouldn't get a subtle joke if it painted itself purple and danced naked on a harpsicord singing "subtle jokes are here again!"
I don't know what way other newbies are treated at Elite but this type of messing is only showing that people are wasting their time asking questions. When one asks a serious question they should at the least expect a reasonable reply. It may be joking to some of you but some of us newbies take trading seriously and if we want joking we can go to many other forums for that, not trading forums. I am beginnig to think that there are not too many here that can answer my questions honestly and I am now wondering why. I can back up all of my research if need be and in my opinion, based on the discussions here to date, and what information I have at hand, Option trading to me at the moment is not a Zero Sum Game. I am sorry to say that so far I have not been convincedby the answers I have been given, and apart from the few who appear to be genuine, it looks like there are a lot of messers at Elite. I apologise if I have offended anyone but I am just speaking from my recent experience and if you take the time to read through the start of this thread you will see that what I say is correct. Any time I go against what some of you say you are all jumping down my throat ans accusing me of been a troll. Is that a way for experienced traders to behave. I do not think so. Maybe it is time to put my research up for discussion and then we can debate who has the most accurate answers. If I do so will you all promise to act in a dignified and adult fashion. I can assure you I have no interest in time wasters and as I mentioned cash is not a problem with me, but that does not mean that I am going to throw it away by listening to advice from people who seem to not have a clear understanding of what they are talking about. Cheers.
Derivman
Quote from MTE:
All derivatives, futures, options, swaps, and etc, are CONTRACTS between 2 parties, which means that what one party gains the other one loses. Simple as that. If those 2 parties have other contracts with each other or someone else then it has no bearing on that intial contract. Sure one party can make money overall when you consider all contracts that a party holds, but each individual contract is a zero sum game.
Also, the options market, when considered as a whole is a zero sum game, because the profits and losses on all outstanding contracts are exactly equal but opposite in sign, cause each contract has a buyer and a seller. Derivatives neither create nor destroy wealth, they merely distribute it within the system.
Thanks MTE. I have just stated that my opinion now is that option trading is not a Zero Sum Game. If we look at the difference of opinions first we will see that the major difference is the transfer of premium from one trader to another. For Options trading to be Zero Sum then the amount of transfer between traders will have to be equal. When is the amount of premium transfer between traders not equal. I have an answer to this myself but I would like to see what the experienced traders think first and then we can compare answers. Cheers.
Derivman
Quote from Derivman:
Thanks MTE. I have just stated that my opinion now is that option trading is not a Zero Sum Game. If we look at the difference of opinions first we will see that the major difference is the transfer of premium from one trader to another. For Options trading to be Zero Sum then the amount of transfer between traders will have to be equal. When is the amount of premium transfer between traders not equal. I have an answer to this myself but I would like to see what the experienced traders think first and then we can compare answers. Cheers.
Derivman
How can it not be a zero sum game!?
I buy a 3-month call from you for $4. I pay $4, you receive $4. 1 month later the stock hasn't moved, volatility hasn't changed, in fact the only thing that has changed is that this call now has only 2 months to expiration and, thus, is worth only $3. So I have an unrealized $1 loss and you have a unrealized $1 gain. Next, I sell this call for $3 to some other guy. Now, I'm out of the game as I got no position at all. I made a loss of $1 and you have a unrealized gain of $1. Another month passes and the stock rallies so now the call is worth $6. This means that you have an unrealized loss of $2 and that other guy I sold the call to has an unrealized gain of $3.
Finally, another month passes and the call expires $5 in-the-money. So you end up with a $1 loss and the other guy ends up with a $2 gain.
So, here's what we have: I lost $1, the other guy gained $2 and you lost $1.
So, what is the total sum? It's zero. The same principle applies to the real market.
You do it one step at a time:Quote from Derivman:
Thanks GTS, But how can I construct an example without relevant experience.
Pick an underlying product be it a stock or commodity, a strike price and an expiration date. Have person A sell it to person B. Then decide what happens to the underlying (stock or commodity price). Then compute the gain or loss for person A and person B.
It is that simple.
There are plenty of sites that explain how options work - time to start reading because it is clear from the way you keep throwing terms like premium around that you haven't got a clue.
Expecting others to spoonfeed you again and again is not reasonable, especially when you reject the informaiton you have been given and instead rely on a web site trying to sell you something.
Quote from Derivman:
I don't know what way other newbies are treated at Elite but this type of messing is only showing that people are wasting their time asking questions. When one asks a serious question they should at the least expect a reasonable reply. It may be joking to some of you but some of us newbies take trading seriously and if we want joking we can go to many other forums for that, not trading forums. I am beginnig to think that there are not too many here that can answer my questions honestly and I am now wondering why. I can back up all of my research if need be and in my opinion, based on the discussions here to date, and what information I have at hand, Option trading to me at the moment is not a Zero Sum Game. I am sorry to say that so far I have not been convincedby the answers I have been given, and apart from the few who appear to be genuine, it looks like there are a lot of messers at Elite. I apologise if I have offended anyone but I am just speaking from my recent experience and if you take the time to read through the start of this thread you will see that what I say is correct. Any time I go against what some of you say you are all jumping down my throat ans accusing me of been a troll. Is that a way for experienced traders to behave. I do not think so. Maybe it is time to put my research up for discussion and then we can debate who has the most accurate answers. If I do so will you all promise to act in a dignified and adult fashion. I can assure you I have no interest in time wasters and as I mentioned cash is not a problem with me, but that does not mean that I am going to throw it away by listening to advice from people who seem to not have a clear understanding of what they are talking about. Cheers.
Derivman
I have gone through my notes and I am posting the following articles for discussion.
I have already posted this one and I am posting again as it is relevant to the discussion.
http://www.optionsnewsletter.com/expert2.asp
This is my second one and as Optionexpress is a highly recognised firm I tend to take heed of what they say.
http://www.optionsxpress.com/educate/investing101/players.aspx?sessionid=
As it now stands, for a newbie like myself, the big question is who should I believe. I am not calling anyone a liar here, and I just want to clarify that. I am trying to get to the correct answer before I move on to the next topic in relation to trading Options. So my answer is that trading Options is not a Zero Sum Game and I have a few reasons of my own as to as to why they are not. But first we will get to the bottom of the reports. Who is correct. The major trading firms and experienced Financial traders traders who have been trading the markets for years or the experienced traders at Elite. I would like if additional members gave their opinions as well based on the facts that we now have at hand. Cheers.
Derivman