It is a loss because the position is marked to market daily.
http://www.cme.com/edu/course/intro/futrvsstck9697.html
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zero sum game?????????????
- Thread starter madmunny
- Start date
It is a loss because the position is marked to market daily.
http://www.cme.com/edu/course/intro/futrvsstck9697.html
Quote from DynamicReplic8r:
You didn't like my first two links? Fine. Here is another:
http://dictionary.reference.com/search?q=zero-sum game
"zero-sum game
A situation in which one person's gain must be matched by another person's loss. Without considering taxes and transaction costs, many types of investing, such as options and futures, are examples of zero-sum games."
Since we're talking about corn, here's something from the CBOT.
http://www.cbot.com/cbot/docs/56449.pdf
Look at the 3rd page:
"In mathematical terms, futures trading is a zero sum game."
This horse is dead. Can we please stop beating it?
Within the context of those definitions, can we explain how the corn farmer lost? If we decide he lost because of forgone profits, then everyone who sells a rising stock also loses, which would lead us to believe the equity market is also a zero-sum game.
A broader definition of "zero-sum game" might help:
http://en.wikipedia.org/wiki/Zero-sum
Umm. I think I already did a couple times. Let's try again. He sold a futures contract. The price of corn went up. His account was debited (by the same amount that someone elses account was credited).
I really don't know what to tell you. dictionary.com, the cme and the cbot, all say the futures market is a zero-sum game
I really don't know what to tell you. dictionary.com, the cme and the cbot, all say the futures market is a zero-sum game
Futures is zero-sum period. You may be using future contracts to hedge other positions but that is irrelevent to whether futures is zero-sum because what happens outside the futures market is irrelevent when discussing the futures.
It doesnt matter what the participants goals are. For every $1 made in the futures market a $1 is lost. I don't care if someone paid you $50,000 to intentionally lose $10,000 in the futures market. The fact that you net'd out $40k positive doesnt mean that you did not lose $10k in the futures market. The $50k is not part of the futures market. Your motives, goals or what you had for breakfast does not change the fact that its zero-sum.Quote from QQQShort:
By definition, the futures market is a non-zero sum game. To conclude otherwise is to believe all participants have similar goals for that market. They do not, as shown by aPismoClam in his example.
Excuse me if somebody already said this.......
Fresh Meat is the reason it is NOT a zero sum game. That is what pays the commissions to CME, CBOT, Merrill Lynch, etc and the traders that are winners of the game.
Without a daily influx of new capital we would all be out looking for work, because the leaches would eventually bleed the market dry.
Fresh Meat is the reason it is NOT a zero sum game. That is what pays the commissions to CME, CBOT, Merrill Lynch, etc and the traders that are winners of the game.
Without a daily influx of new capital we would all be out looking for work, because the leaches would eventually bleed the market dry.
Quote from patoo:
Excuse me if somebody already said this.......
Fresh Meat is the reason it is NOT a zero sum game. That is what pays the commissions to CME, CBOT, Merrill Lynch, etc and the traders that are winners of the game.
Without a daily influx of new capital we would all be out looking for work.
I don't know about you, but the market doesn't have to go up for me to make money..
As for the commissions, they are paid by everyone, not just the losers.
We agree the value of the corn contract was $50k at the time it was created. We also agree the value was $60k at the time of physical delivery.
The person taking physical delivery paid the corn farmer $50k. Within the futures market, there must be an offset of $50k for it to be a zero-sum game in mathematical terms. I don't believe there is such an offset.
The $60k market value is moot -- within the futures market -- for the parties involved in physical delivery. The $10k profit is made when the corn is sold to another party, but that profit does not occur within the futures market.
The person taking physical delivery paid the corn farmer $50k. Within the futures market, there must be an offset of $50k for it to be a zero-sum game in mathematical terms. I don't believe there is such an offset.
The $60k market value is moot -- within the futures market -- for the parties involved in physical delivery. The $10k profit is made when the corn is sold to another party, but that profit does not occur within the futures market.
The outflow of money has nothing to do with price. The capital is syphoned off regardless the the price movement. They get a commission which ever way the price goes including sideways.
.........corn, perhaps. But how many people are taking delivery of anything in the SP/ES/NQ/ND contracts. The number of open contracts left at the end of a contract's time is practically nothing.
.........corn, perhaps. But how many people are taking delivery of anything in the SP/ES/NQ/ND contracts. The number of open contracts left at the end of a contract's time is practically nothing.
What if the corn got washed away by hurricane Katrina, but it was insured, however, the amount in storage was not known, and an amount greater than 50K got claimed?
It is not zero sum. The only way it can be so, is if God thinks he is Bill Gates, and 200 buy and sell contracts can be matched per second every single trading day, assuming all indexes are coupled.
It is not zero sum. The only way it can be so, is if God thinks he is Bill Gates, and 200 buy and sell contracts can be matched per second every single trading day, assuming all indexes are coupled.
this thread is amazing.
it is incontrovertible that futures are a zero sum game
it is incontrovertible that stocks are not
fwiw, technically speaking, a zero sum game can still be theoretically a net neutral outcome game, however any system that is NOT a net neutral outcome game (once slippage and commissions are factored out) CANNOT be zero sum. by definition.
so, in brief (analytical reasoning time yo)
net non-neutral outcome is sufficient but not necessary in proving a system to be non zero sum
net neutral outcome is necessary, but not sufficient for proving a system is zero sum
rinse, lather, repeat
the fact that there are still people arguing otherwise is either the most amazing example of cognitive dissonance in recent history (somebody call the APA), or the most amazing example of intentional ignorance - not that there is much of a difference.
for people who have a hard time understanding this - use the closed vs. open system analogy. or my gizmo widget analogy.
or if that does not work, i suggest a full frontal lobotomy.
it is incontrovertible that futures are a zero sum game
it is incontrovertible that stocks are not
fwiw, technically speaking, a zero sum game can still be theoretically a net neutral outcome game, however any system that is NOT a net neutral outcome game (once slippage and commissions are factored out) CANNOT be zero sum. by definition.
so, in brief (analytical reasoning time yo)
net non-neutral outcome is sufficient but not necessary in proving a system to be non zero sum
net neutral outcome is necessary, but not sufficient for proving a system is zero sum
rinse, lather, repeat
the fact that there are still people arguing otherwise is either the most amazing example of cognitive dissonance in recent history (somebody call the APA), or the most amazing example of intentional ignorance - not that there is much of a difference.
for people who have a hard time understanding this - use the closed vs. open system analogy. or my gizmo widget analogy.
or if that does not work, i suggest a full frontal lobotomy.