Just a quick question on the zero sum game.
Futures and options are definitely a zero sum game, excluding commissions.
But the stock market, is it really a zero sum game when it pays dividends?
From my understanding, with dividends, it would be a positive sum game (excluding commissions).
Being zero-sum has nothing to do with whether a trade is of an option, a stock, a future contract, or a box of CrackerJacks. It has nothing to do with a single trade versus a series of trades per se, or with dividends or coupons or anything over a time outside the immediate trade, or whether any sort of statistical edge is present.
As an event, "zero-sum" has only to do with whether the game ("trade") itself was additive to the (summed) players, or not: if one players gets precisely what another player loses, the SUM is zero. If one player gets $1.00, but the other player only *loses* 80¢, then that *game* (or whatever it is) sums to +20¢. Similarly, if one player gets $1.00, and the other player loses $1.20 ("Ouch!"), that is a *negative*-sum game. And what of a negative-summed game where *both* players lose value? UGH.
That's it. That's the only calculus at work. But from this simple set-up we get terms like Win-Lose, Win-Win, Lose-Lose..... and if you wish to look over a *series* of such games to a broader, *meta*-game, you can pose a financial market where the succession of trades bids the next instance's prices up, raising
all the holders' long positions (whether stocks or options or bonds or....cows), or eviscerating the short positions, to Win-Win or Lose-Lose tales to tell, the next time someone asks.
So, for an individual cake, where you can only eat what I don't -- that's zero-sum. If the cake *gets*bigger* by the very act of dividing it, that's positive-sum. And if the cake is *diminished* by the very act of cutting it (like, selling slices of the Mona Lisa), that's a negative-sum 'game.'
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