zero sum game?????????????

Don't fight kids, better google and look up the definition first, i.e. per investopedia:
  • A situation in which one participant's gains result only from another participant's equivalent losses. The net change in total wealth among participants is zero; the wealth is just shifted from one to another.

    Options and future contracts are examples of zero-sum games (excluding costs). For every person who gains on a contract, there is a counter-party who loses. Gambling is also an example of a zero-sum game.

    A stock market, however, is not a zero-sum game because wealth can be created in a stock market.
Obviously, you may not want to accept this definition ...

If you're so inclined (to fight), I'm throwing here more myths to fight on: The Five Biggest Stock Market Myths
 
this thread shows more about human psychology that the stock market

the proof has been offered over and over again

the naysayers refuse to even comprehend it. they CANNOT be that stupid

futures - zero sum
stocks - not zero sum

interestingly, half the opposition to these obvious facts comes from people who keep talking about benefits etc.

which are completely irrelevant

it is a definition of structure, not beneficence

amazing
 
Every academic will tell you that Futures and options trading is zero sum. However that does not make it true. To say that it is zero sum fits nicely into how academics think. We as traders do not have this luxury, we have to be right to make money, academics only have to fit the consensus to make money.

An example of how futures create money is a Canadian farmer hedging dollar risk. A fully hedged farmer would have made tremendous gains on the Canadian dollar appreciation. This would create excess margin in the futures account. This margin could then be withdrawal and used to pay down a line of credit or prepay seed.

North Americans have a very poor sense of what money is. They treat paper money as if it is a "real" thing with permanent value. "Learn the value of a dollar", "Cash Money" and other such expression reflect this. Money is just a concept. It only has value because you think it does. A lot of these post suggest that the stock market creates "real money" but the futures market creates phoney electronic money. Both are equally valid as the concept of money.

Ask Brazilians about what money is. They can give you a really good answer.
 
you still don't get it dood

of course he made money

but no WEALTH WAS CREATED INSIDE THE FUTURES MARKET

why is this hard to understand?

two people can have opposing contracts

i am short winter wheat Oct
he is long winter wheat Oct.

winter wheat goes down in price

i make $$$

he has twice as much winter wheat in a silo, as the amount that he hedged with his long holding in the futures market

he ALSO makes money

it's still a zero sum game. because the "game" of the futures market has not gained any wealth. it cannot. the short contract has lost EXACTLY as much money as the long contract.

futures can be used for all sorts of things - transferring risk, hedging, speculating, making money off spreads (contangos i love) etc.

it's still a zero sum game, because they are agreements, and they counteract each other

duh
 
Quote from DynamicReplic8r:

I begged. I pleaded. But, this thread made it past 40 pages anyway. What a disappointment. :(
More...


thats because You alone posted 14 times about what a useless thread it was.
 
Quote from whitster:

this thread shows more about human psychology that the stock market

the proof has been offered over and over again

the naysayers refuse to even comprehend it. they CANNOT be that stupid

futures - zero sum
stocks - not zero sum

interestingly, half the opposition to these obvious facts comes from people who keep talking about benefits etc.

which are completely irrelevant

it is a definition of structure, not beneficence

amazing
More...




This thread is confusing as hell and now I am going to add more fuel on the fire. The original shares issued by a publicly traded company are sold to investors in the beginning for a set price at the ipo. If the share price appreciates 10 dollars from the ipo price , and the company decides to do a buyback, then they have to pay 10 dollars more than what they issued the shares for in the beginning. Is this not a zero sum example ?
 
that is part of your problem

it's irrelevant

the issue is not whether a single (or specific subset) of transaction is or isn't zero sum

it is a matter of the MARKET.

a market is the aggregate of transactions. it is a lattice, a matrix

a futures market necessarily HAS to be zero sum. because by the structure, they cannot be anything but. there is no way i can be long a YM contract, unless there is a corresponding short contract. because a futures contract is a CONTRACT. it has to have complementary parties, or it is meaningless. where does the money COME from when a long contract is EXERCISED (from somebody who is short). duh

if a stock market was made up of one stock.

and i bought the stock at IPO. for $40. and then for the next 30 years, the stock never moved from $40. then, the company bought the stock back. for $40. that market would have a net zero sum of transactions. you are correct. it neither gained nor lost wealth. it was merely transferred. HOWEVER, that is an isolated example of ONE transaction. and course my ownership of that one share did not necessarily mean that somebody else was short that item. the fact that in this one isolated transaction, no wealth was created is nifty keen, but it is irrelevant to the structure of the market. that the market can gain wealth and is thus not zero sum.

this is a totally different structure than a futures market
 
Quote from whitster:

you still don't get it dood

of course he made money

but no WEALTH WAS CREATED INSIDE THE FUTURES MARKET

why is this hard to understand?

two people can have opposing contracts

i am short winter wheat Oct
he is long winter wheat Oct.

winter wheat goes down in price

i make $$$

he has twice as much winter wheat in a silo, as the amount that he hedged with his long holding in the futures market

he ALSO makes money

it's still a zero sum game. because the "game" of the futures market has not gained any wealth. it cannot. the short contract has lost EXACTLY as much money as the long contract.

futures can be used for all sorts of things - transferring risk, hedging, speculating, making money off spreads (contangos i love) etc.

it's still a zero sum game, because they are agreements, and they counteract each other

duh
More...



when you buy common stock there is an agreement, management agrees to let you have voting rights , you also agree to assume the market risk in exchange for future capital appreciation and a dividend. You also agree to be at the bottom of the totem pole as far as your right's to the company's equity.



If the company is paying dividends, then every dollar you get, comes at the expense of the company.
 
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