If markets are a Zero-Sum game, is the PPT making $ or subsidizing everyone on net basis?

[tommcginnis]

Please please please, before any more babblings about what is or is not a zero-sum game, could posters actually just pause and GO LOOK IT UP.

(And fergawdsake, not on frikken investopedia. freakin' com.)

NO ASSET HAS ANY SORT OF LOCK on whether trades are zero-sum, positive-sum, or negative sum 'games'.

 

[Sig]

But according to Sig, if everyone keep rolling their contracts, then it is no longer zero sum, everyone will win!

Do you disagree that you can replicate SPY with an S&P futures portfolio?

 

[southall]

Do you disagree that you can replicate SPY with an S&P futures portfolio?

How do you get dividends with S&P futures?

 

[pinetboltz]

Please please please, before any more babblings about what is or is not a zero-sum game, could posters actually just pause and GO LOOK IT UP.

(And fergawdsake, not on frikken investopedia. freakin' com.)

investopedia gives fairly accurate info and i don't have anything against it

there are tons of sources available & just to take vanguard, which has like $5 trillion under management, as an example, they also say the same thing in their literature: https://www.vanguard.co.uk/documents/adv/literature/zero-sum-game-2013.pdf

"Investment markets are effectively a zero-sum game, with every outperforming pound being balanced by a pound that lags the benchmark."

 

[Sig]

investopedia gives fairly accurate info and i don't have anything against it

there are tons of sources available & just to take vanguard, which has like $5 trillion under management, as an example, they also say the same thing in their literature: https://www.vanguard.co.uk/documents/adv/literature/zero-sum-game-2013.pdf

"Investment markets are effectively a zero-sum game, with every outperforming pound being balanced by a pound that lags the benchmark."

If you read the document they're obviously not saying that investment in the stock market over time is a zero sum game, that would be absurd given what Vanguard does since it would effectively be saying that their product is worthless. They're trying to sell indexing and basically saying that the funds that outperform the market in a given time period are balanced by the funds that under perform the market in a given period (duh!), so you should go with an index fund to capture the market.

 

[pinetboltz]

If you read the document they're obviously not saying that investment in the stock market over time is a zero sum game, that would be absurd given what Vanguard does since it would effectively be saying that their product is worthless. They're trying to sell indexing and basically saying that the funds that outperform the market in a given time period are balanced by the funds that under perform the market in a given period (duh!), so you should go with an index fund to capture the market.

well there are 2 topics & let's not get them mixed up:

1) Derivatives markets (trade on nearly 24/5 basis) -- futures & options, etc, where the markets are a zero-sum game in the absolute sense, where every contract has someone long or short

2) Cash markets (trade 9:30am to 4pm ET for NYSE) -- eg. cash equities, where the markets are still a zero-sum game in the relative sense, which is Vanguard's stated point, where if the broader market goes up X% a year, an active manager who outperforms is counterbalanced by someone who did worse than the market.

But since the original topic of the thread is focused on mostly the derivatives markets, where S&P 500 futures lead the cash markets (precisely bc of that you see huge overnight moves on geopolitical events - the derivative markets have constant price discovery), and S&P 500 futures are being ramped on massive volume, that's where the markets are zero-sum game in the absolute sense.

Also S&P 500 futures have much higher notional volume that dwarfs SPY the etf, so it makes more sense to talk about the futures instead of the etf

 

[Sig]

well there are 2 topics & let's not get them mixed up:

1) Derivatives markets (trade on nearly 24/5 basis) -- futures & options, etc, where the markets are a zero-sum game in the absolute sense, where every contract has someone long or short

2) Cash markets (trade 9:30am to 4pm ET for NYSE) -- eg. cash equities, where the markets are still a zero-sum game in the relative sense, which is Vanguard's stated point, where if the broader market goes up X% a year, an active manager who outperforms is counterbalanced by someone who did worse than the market.

But since the original topic of the thread is focused on mostly the derivatives markets, where S&P 500 futures lead the cash markets (precisely bc of that you see huge overnight moves on geopolitical events - the derivative markets have constant price discovery), and S&P 500 futures are being ramped on massive volume, that's where the markets are zero-sum game in the absolute sense.

Clearly a given futures contract is a zero sum game for the seller and buyer. And clearly the weighted sum of all participants equals the market per Vanguard. I would point out that S&P 500 futures only "lead" the market in after hours trading when they are the only game in town. There is a no arbitrage relationship between futures, dividends, and interest rate which means they trade in a mechanical relationship to the index when markets are open.

 

[tommcginnis]

pinetboltz -- for the sake of your own trading, pause here and learn the difference between zero-sum, positive-sum, and negative-sum games. Then go *really* think about the difference between a transaction, and a market.

This stuff is not hard -- but you're (apparently) getting your opinions from investopedia, and are thereby being monstrously ill-informed.

One bottom line is this: there is nothing about stocks, options, futures, antique wagons, or Pokemon cards, that necessitates individual transactions OR markets to be additive, negative, or neutral, except whether post hoc that 'game' has more value, less, or the same.

https://www.elitetrader.com/et/thre...ption-traders-here.327487/page-4#post-4768478

 

[pinetboltz]

This stuff is not hard -- but you're (apparently) getting your opinions from investopedia, and are thereby being monstrously ill-informed.

One bottom line is this: there is nothing about stocks, options, futures, antique wagons, or Pokemon cards, that necessitates individual transactions OR markets to be additive, negative, or neutral, except whether post hoc that 'game' has more value, less, or the same.

well just because you don't like investopedia doesn't mean they are wrong in this instance

for the futures markets, the game is zero-sum when excluding transaction costs, because for every long there is a short. if including transaction costs, and taking the exchange fees, etc to be skimmed off by an external party to the buyers and sellers, the game is slightly negative-sum

how would it be otherwise? please share where you're getting your info from, as it goes against all the sources i've come across

 

[tommcginnis]

how would it be otherwise? please share where you're getting your info from, as it goes against all the sources i've come across

((The world is flat. Investopedia sez so. And when there's a short-squeeze in the futures market? That's just external players siphoning off their blood portion..."))