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In dollar terms and with futures described in the article, one parties losses is the gains of another party. Risk mitigation or liquidity are parts of the portf
by WA 6y ago
In dollar terms and with futures described in the article, one parties losses is the gains of another party. Risk mitigation or liquidity are parts of the portfolio management, not the trade itself. I sell you the future, you buy it. Difference of price is my loss and your gain or the other way around.
- kasey_junk 6y agoThats an extremely restrictive definition of zero sum. If that were the normal definition most transactions would be considered zero sum. But its not. Zero sum has to do with the utility provided to each side of the transaction. I may have a completely different desire to own a future than you. Perhaps my portfolio needs less risk or my predicted oil needs have changed. In those cases I gain a lot of utility by being able to move out of the future into cash, even if later you make more than I would have by selling it.