4 ms·
Many trades are non-zero sum actually. It doesn't matter that you made money because someone lost SOME. Both market participants receive what they wanted to ou
by gammateam 8y ago
Many trades are non-zero sum actually.
It doesn't matter that you made money because someone lost SOME. Both market participants receive what they wanted to out of it.
For example, you take linear bets - going short a stock - and you bought to cover at a profit to someone that was maybe long and selling at a loss. You say wow so zero sum.
But little did you know, the person that was long was actually collecting premium from their covered call options trade, and is still getting what they wanted out of it. They may not have begun losing more money for their tolerance for another 2% or 10% drop in the stock. They would come out net positive until then, even though their MAXIMUM potential profit was still more.
Both participants still got what they want, and you wouldn't be the wiser - unless of course you were trading products that had no derivatives market. But even then you wouldn't know, because they could be written OTC.