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

[1000]

What about convexity?

How do you account for 24 million new people in the US in one year?

If the total global economy is about 32 trillion annualized, and there are about 6.5 billion people in this world, then the average person is valued at about $5000 per year, or the equivalent to 1 futures contract annualized.

In order to keep the money flow cycle in check, the equivalent of about 200 contracts per second have to be traded to account for the 6.5 billion people in a 32 trillion dollar economy.

If whitster is right, and all indexes are coupled, and 200 buy and sell orders per second are matched up, then in my view...

extreme capitalism = communism.

So no one should ever have any bills to pay, and we should all be living on free air.

 

[aPismoClam]

it's not a zero sum game, period. quit worrying about it.

the guy who grows corn sells it via futures. the guy who buys his contract sells it higher. the guy who bought it the third time takes delivery and eats it.

all made money or derived value.

financial futures reflect income from interest rates.

the value of productive wealth monetized and traded.

 

[DynamicReplic8r]

Quote from aPismoClam:

it's not a zero sum game, period. quit worrying about it.

the guy who grows corn sells it via futures. the guy who buys his contract sells it higher. the guy who bought it the third time takes delivery and eats it.

all made money or derived value.

financial futures reflect income from interest rates.

the value of productive wealth monetized and traded.

The futures market is a zero-sum game by definition. It has nothing to do with whether prices are going up or down, or whether value is being created in the economy. I cannot buy a futures contract unless someone else goes short. Therefore, if I make X dollars, the short loses X dollars. If I lose X dollars, the short makes X dollars.

In fact, if you only buy futures, you should theoretically LOSE the risk free rate (assuming no dividends on the underlying, no cost of carry, etc. etc.), and the counterparty would make the same amount that you lost.

 

[QQQShort]

Quote from DynamicReplic8r:

The futures market is a zero-sum game by definition. It has nothing to do with whether prices are going up or down, or whether value is being created in the economy. I cannot buy a futures contract unless someone else goes short. Therefore, if I make X dollars, the short loses X dollars. If I lose X dollars, the short makes X dollars.

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.

 

[DynamicReplic8r]

Why do I bother?

It has nothing to do with one's goals.

http://www.pathtoinvesting.org/categories/choosinginvestments/futures/futures_071.htm

http://www.investopedia.com/terms/z/zero-sumgame.asp

By the way, I concede that the stock market is non-zero-sum.

 

[landboy]

Quote from trend_guy:

Your missing the point, by selling at $200 you gave up $200 plus in potential gains and those gains are in someone elses pocket or probably many other peoples pockets. IMO, giving away $200 is the same as losing $200.

IN more formal terms, "Opportunity cost"

 

[QQQShort]

Quote from DynamicReplic8r:

Why do I bother?

It has nothing to do with one's goals.

http://www.pathtoinvesting.org/categories/choosinginvestments/futures/futures_071.htm

http://www.investopedia.com/terms/z/zero-sumgame.asp

By the way, I concede that the stock market is non-zero-sum.

In aPismoClam's example, how did the farmer lose?

 

[DynamicReplic8r]

Because he sold corn at a price below the prevailing market price. He lost money on the futures contract. It doesn't matter if he made money by growing corn. HE LOST MONEY ON THE FUTURES CONTRACT, and it was the same amount that the other traders made cumulatively.

 

[QQQShort]

Quote from DynamicReplic8r:

Because he sold corn at a price below the prevailing market price. He lost money on the futures contract.

No, he did not.

For example, he may have agreed to sell his corn for $50k, and entered a contract to delivery his corn at a future date for that amount (a futures contract). At the agreed upon delivery date, he made physical delivery to the contract holder and received his $50k.

If he had chosen instead to accept the prevailing market rate at the time of delivery, he may have received $60k. The profit pontential he surrendered, however, is not a loss.

 

[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?