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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.03

+0.8%

Nov 14 9:30 AM EST

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To: Uncle Frank who wrote (64378)	8/7/2003 10:43:46 AM
From: Greg Higgins	Read Replies (2) of 77399

"Zero-sum game" implies that both writers and buyers can expect to end up with $0 gain/(loss). I think that means that one party will win what the other loses, Ron. This assumes that all players in the market are equal and that is simply not true. When you buy or sell an option, you are not buying it from or selling it to another (investor/trader/speculator), you are buying it from and selling it to a market maker. The market maker gets paid to sell you the option (this is the bid/ask spread) and has at his disposal a variety of methods to offset the effect of the option on his position; this is called hedging. Market makers are almost always position neutral; they don't care whether the stock goes up or down.

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