Buying calls for a living and arguing with derivman

Life begins at conception, right? I've read a number of experts who say it is true.

I just want to be 100% clear on this before I move on with any future decisions in my life. I'm pretty sure I know the answer, but I want to find out what you all think. I'll just continue to waste my time and yours until we get this simple question sorted out. Discuss!
 
Quote from Derivman:

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.
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(yawn) Believe what you want. I can't tell if you have an agenda or are just dense.

What is really important isnt a semantic game which is all this zero-sum issue boils down to, its how options are priced and how likely it is that you will make money with options.

If you think you've found the holy grail (everyone wins) with options then you are in for a rude awakening.
 
Life begins at conception, right? I've read a number of experts who say it is true.

I just want to be 100% clear on this before I move on with any future decisions in my life. I'm pretty sure I know the answer, but I want to find out what you all think. I'll just continue to waste my time and yours until we get this simple question sorted out.
Discuss!
 
Quote from 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
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I assume you're talking about this:

Options: Not a Zero-Sum Game
With the possible exception of futures contracts, trading is not a zero-sum game. In other words, for every winner there doesn't have to be a loser. Therefore, because there are so many different combinations and ways options can be hedged against each other, it doesn't make sense to look at overall figures (e.g., the number of options that expire worthless) and reach conclusions about how many people made or lost money.

For simplicity, let's take the case of a butterfly spread. The fact that one person made money buying a butterfly does not automatically mean that someone else lost. Instead, the person who sold the butterfly may have traded out of the position using spreads or by selling individual options. For every person who is long a butterfly, call spread, put spread, or whatever, there are not necessarily people who are short the corresponding position. As such, the profitability of their positions will necessarily differ.

The problem here is that they don't explain the concept well enough. It is true that if you hold 1 butterfly spread then it doesn't mean that there's someone else holding the exact opposite position, in fact, there may be 4 different people on the other side, one contract each, but the sum of all gains/losses within this mini system is equal to zero. Of course, it may branch out to other participants, but again, that wider system will be zero sum.

Once again, derivatives are contracts and contracts have two parties so no matter how branched out the parties become the sum is still zero. You may not be able to trace a particular gain to a particular loss as the system is too big, but the system is still zero sum!
 
As MTE said, options are always zero-sum. If they are not, you're either using the wrong frame of reference or including a non-option.

You: Buy options A, B, C
Bob: Sell option A, B
Frank: Sell option C

You make money on A & B, lose on C.

Is this a zero sum system? Of course! Any money you make is lost by the combination of Frank and Bob. The argument you quoted basically ignores Frank and says you made more money than Bob lost.

The bottom line is this: for every contract in options, there is a buyer and seller. Therefore, there is a winning contract for EVERY loser. It can't possibly be any other way.

If you buy a butterfly from 3 different people, you will make exactly as much as the sum total those 3 separate people lose.

Let's try one more:

You: Buy A, B, C
Bob: Sell A, B, C
Frank: Sell C to Bob

Net position:
You: +A, +B, +C
Bob: -A, -B
Frank: -C

Did anything change? Your winnings will now be distributed to Bob AND Frank rather than just attributed to Bob. It is still zero-sum.
 
To everyone except Derivman: How come there are so many smiley face icons but no picture showing you throw up your hands and shake your head? You guys have been incredibly nice to this guy, I am interested to see if you will succeed in getting him to understand or end up giving up in frustration.

Derivman,
Your question has already been answered numerous times. Everyone here already knows and accepts as fact that option contracts, in and of themselves, are zero-sum. Period. End of question. Do you have another question?
 
Quote from opt789:

To everyone except Derivman: How come there are so many smiley face icons but no picture showing you throw up your hands and shake your head? You guys have been incredibly nice to this guy, I am interested to see if you will succeed in getting him to understand or end up giving up in frustration.

Derivman,
Your question has already been answered numerous times. Everyone here already knows and accepts as fact that option contracts, in and of themselves, are zero-sum. Period. End of question. Do you have another question?
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It looks like this guy is playing some type of silly game (fraternity prank?) to see how many responses he can get by asking the same question over & over. Personally, I have difficulty believing anyone could be this thick ... (my apologies for the less-than-complimentary assessment but ...)

To all those attempting to answer in a way he can grasp, I commend you for your patience.
 
12 FU%$&ng pages to explain that very few people make it in the options game?

Come on dude! Might as well give your cash to someone to manage it for you 'cause it seems you're a bit slow. Comprende?
 
Quote from RL8093:

It looks like this guy is playing some type of silly game (fraternity prank?) to see how many responses he can get by asking the same question over & over. Personally, I have difficulty believing anyone could be this thick ... (my apologies for the less-than-complimentary assessment but ...)
More...
Ehrm, this guy started posting in the "Writing options for a living"" thread http://www.elitetrader.com/vb/showthread.php?s=&threadid=53037&perpage=40&pagenumber=23 right after those vandals ateht and cyof were banned from it (and from ET). Does that ring a bell somewhere, someone. Supertroll.

Ursa..
 
Good morning to all. I am sorry to disappoint you all but I must again stress that I am not a troll and I do take such name calling very seriously. Recently I have had to get involved in a series of bullying accusations between children in a school that I will not name. Please do not make me revert to the same tactics that I have had to adopt to sort out this bullying for the families involved. I will review the posts since yesterday and post accordingly. My view overnight has not changed and I will be happy to post additional information that supports my view. All constructive criticism is welcomed but bullying will not be tolerated and will be reported to the authorities as it should rightly be. Cheers.
Derivman
 
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