Comment by phyzix5761
11 hours ago
Equity trading is not zero sum. There are real businesses and assets behind the equities they represent that have actual value and produce actual money.
11 hours ago
Equity trading is not zero sum. There are real businesses and assets behind the equities they represent that have actual value and produce actual money.
The business-building is not zero sum, but the trading is zero-sum, and the societal purpose of the thing is to provide liquidity
theoretically equity trading is about distributing stonks most optimally so that productive companies get more and less productive ones get less, improving productivity of society as a whole
We all know it hasn’t actually been about that for a long time.
Derivatives (options, futures, swaps, etc) are a zero sum market, there is always a winner and a loser necessarily because the contracts have an expiration date.
The same is not true for trading equities, they are not zero sum. There are dividends, buybacks, companies will sometimes spin off a part or parts as separate companies that you get newly issued shares of stock from (GE splitting into parts is a recent example), public companies get taken private at a premium to the market price, etc.
Futures are zero sum, but can also be a win for both sides, because what they gain is stability.
"I will buy y tons of corn from you in April for £x" - now I don't have to worry about how much my corn will cost and you don't have to worry about what your income will be.
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The market has been heavily engineered and gamed to be positive sum. But sometimes I wonder could it turn out to be negative sum on certain timescales. That is that overall money would be lost on markets.
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Presence of many options directly affect equity prices.
Presumably they mean HFT / "locals" / "sell side."
These folks compete in a reasonably zero-sum game.
They're market makers who provide liquidity. So it's not exactly zero-sum.