Buying calls for a living and arguing with derivman

[GTS]

Quote from Derivman:

Thanks for the reply GTS. Can you please clear up what you are referring to in that there is more losers than winners or the Zero Sum Game.

Zero-sum: The sum of all profits must equal the sum of all losses

Note that there is nothing in there that there has to be an equal number of winners and losers and/or that the amount each person wins or loses must be the same.

The only requirement is that the total sum of all option participants equals zero.

With regard to options "premium" that is just part of the pricing model; don't confuse yourself with that. All options and futures are priced based on supply and demand. You sell at a price that someone else is willing to pay.

There is no 3rd party creating premium or paying it out. Everything is settled between buyers and sellers.

 

[Derivman]

Quote from TraderMojo:

So you accept that in the futures example, you can have different numbers of winners and losers but still be a zero sum game? Yes or no?

With options you have buyers and sellers of premium. You can have differing numbers of buyers and sellers just as with the futures example. There is no difference.

Thanks for the reply TraderMojo. As of now my understanding is that it is a Zero Sum Game if one person loses X and another person wins the exact same amount X. If one person loses X amount of money on a trade and another person makes any amount greater than X then it is not a Zero Sum Game. Is this not a logical deduction. Cheers.
Derivman

 

[A Dashing Blade]

Quote from Derivman:
. . . a Futures contract does not have any premium attached to it and thus the passage of time will have no additional effect on the price apart from the normal price changes resulting from the supply and demand over time . . .

Theoretic Futures Price = Underlying Price + Financing Cost.
Given ceterus parabus conditions, Financing Costs will obviously fall in absolute terms as the contract nears expiry.
For index futures, depending on how the underlying is structured, dividends and how the withholding tax regime is applied may or may not have to be taken into account.

Obviously supply & demand allows for deviations away from the theoretic price.

 

[GTS]

Quote from Derivman:

As of now my understanding is that it is a Zero Sum Game if one person loses X and another person wins the exact same amount X. If one person loses X amount of money on a trade and another person makes any amount greater than X then it is not a Zero Sum Game. Is this not a logical deduction.

Please give an example of options trading where one person loses X and another person gains an amt greater then X on the option transasction.

 

[TraderMojo]

Quote from Derivman:

Thanks for the reply TraderMojo. As of now my understanding is that it is a Zero Sum Game if one person loses X and another person wins the exact same amount X. If one person loses X amount of money on a trade and another person makes any amount greater than X then it is not a Zero Sum Game. Is this not a logical deduction. Cheers.
Derivman

OK, that's enough entertainment for me. We've all played along with your new alias but the joke is getting a little old. Perhaps if you change the subject a little, I'd be happy to play along again.

 

[jeffm]

Derivman is hung up on symantics, and his inflexible thinking will not allow him to move beyond. I really don't think anybody on this board is going to be able to help him. Even if he does figure out that trading is zero sum (minus the edge given to the broker), he will simply fixate on the next pointless barrier. He is destined to lose money.

I do think its funny that one of his "educational website" (uh huh) used the long stock plus protective put example to say trading is not zero sum. I hope that education doesn't cost too much... Although I'm sure it will be very expensive in the long run.

For Derivman: the stock + put is still zero sum. Options can be used to accomplish different objectives. In this example, the objective of the stock owner was to also have downside insurance, so he bought a put. The stock didn't crash; the put expired worthless. The stock owner got what he wanted. He is happy with the outcome. But the fact remains that he lost money on the option trade. For every dollar he lost, the option seller made a dollar. Everyone walks away happy. For someone to say this scenario disproves zero-sum is false. For them to charge you a monthly fee for such educational wisdom is simple thievery.

You also keep referencing the dead weblink some evil forumgoer foisted on you in another thread. Please give it up. Anyone who can't understand that http://ura.tool.duh is a joke really shouldn't be posting online or risking their money in the markets.

 

[atticus]

Troll alert.

 

[Derivman]

Quote from A Dashing Blade:

Theoretic Futures Price = Underlying Price + Financing Cost.
Given ceterus parabus conditions, Financing Costs will obviously fall in absolute terms as the contract nears expiry.
For index futures, depending on how the underlying is structured, dividends and how the withholding tax regime is applied may or may not have to be taken into account.

Obviously supply & demand allows for deviations away from the theoretic price.

Apologies Dashing Blade if I did not make myself clear enough. As I stated I am a newbie looking for advice so please do correct me if I am wrong. What I meant above is the simple mans way of looking at the prices. Options are a derivative which are used for a few purposes in the same way as Futures and that is namely Hedging and Speculation. As a private trader I am only interested in Speculation. When I look at a Futures Price I do not think of a premium aspect, that is there is a part of the price that can change dramatically over time depending on how close we are to the expiry date. When I look at a Futures price I only see the price changing in relation to supply and demand. As both prices take interest rates into account then the only difference that I am concentrating on is the time premium. You have raised a very good point here. When I am trading Options should I only be concerned with the premium aspect of the price and forget about anything else. If I am only going to look at the premium of an Option for trading do I then sell Options or buy them. I now know that I can roll over long calls if the market goes against me and pay more premium out, but am I not better selling puts, which is the same in relation to market bias, in that I am anticipating a rise in the market price, and if the market goes against me I can take in more premium instead of paying it out. Which in your opinion would be the best choice. Would you prefer to go long calls and then roll them over if the market went against you or would you prefer to sell puts and roll them over if the market went against you. I have seen where an experienced trader says that you can roll over long calls as successfully as short puts but I am still not decided as to what the best way might be. Thanks for your king help. Cheers.
Derivman

 

[Derivman]

Quote from GTS:

Please give an example of options trading where one person loses X and another person gains an amt greater then X on the option transasction.

Thanks for the reply GTS. I apologise if I am coming across as a nuisance but I am just trying to learn from the experienced traders on Elite. I do not have an example and I was hoping that some of the experienced traders here can show me. Cheers.
Derivman

 

[Derivman]

Quote from jeffm:

Derivman is hung up on symantics, and his inflexible thinking will not allow him to move beyond. I really don't think anybody on this board is going to be able to help him. Even if he does figure out that trading is zero sum (minus the edge given to the broker), he will simply fixate on the next pointless barrier. He is destined to lose money.

I do think its funny that one of his "educational website" (uh huh) used the long stock plus protective put example to say trading is not zero sum. I hope that education doesn't cost too much... Although I'm sure it will be very expensive in the long run.

For Derivman: the stock + put is still zero sum. Options can be used to accomplish different objectives. In this example, the objective of the stock owner was to also have downside insurance, so he bought a put. The stock didn't crash; the put expired worthless. The stock owner got what he wanted. He is happy with the outcome. But the fact remains that he lost money on the option trade. For every dollar he lost, the option seller made a dollar. Everyone walks away happy. For someone to say this scenario disproves zero-sum is false. For them to charge you a monthly fee for such educational wisdom is simple thievery.

You also keep referencing the dead weblink some evil forumgoer foisted on you in another thread. Please give it up. Anyone who can't understand that http://ura.tool.duh is a joke really shouldn't be posting online or risking their money in the markets.

Thanks for the reply jeffm but you seem to have read the wrong post. This is the parnk that I was talking about. It was posted in the "Writing options for a living thread". Cheers.
Derivman


http://www.elitetrader.com/vb/showthread.php?s=&threadid=53037&perpage=6&pagenumber=152


Profitaker


Registered: Feb 2005
Posts: 379


04-24-07 09:50 AM

Derivman

You will find everything you need to help you here;

http://www.coffeemarket.options/