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I'm more relying on my experience in trading with Goldman and other banks than I am assuming anything. I also don't see where I said anything about zero sum gam

• sowbug 9y ago
  FWIW, I read your comment the same zero-sum way. Perhaps it was because you used the term "the price" as if there's one price and any deviation from that value represents error. If I have three shoes, I might correctly place little value on the extra, while a person with only one shoe might correctly place a lot of value on it. My selling the shoe for anything more than $0 is rational, and the other person's buying the shoe for anything less than the price of a full pair of shoes is also rational.
  • vostok 9y ago
    The shoe analogy is great. It isn't perfect because in finance everyone's goal is to make money so it's a little more complicated, but there are similarities. You might have a situation where ex-ante both parties are making the right decision, but one party would have rather not traded ex-post. I might have some oil exposure so I want to sell oil futures. Maybe you think oil is going up because it's above some moving average so you show me a better market than the exchange for my size. We trade. If a minute later oil is higher than I will have wish that I waited a minute to sell and you'll be glad that you bought. I'm not saying it's zero sum because we both willingly went into the trade and it's even possible that you'll make money on a 1 minute time frame and I'll make money on a 1 year time frame or I'll receive some other benefit. This would happen all the time in a product that I used to trade at a non-bank financial firm. I had one way of valuing it and the banks had another way. We'd trade when we disagreed.