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Politics : Just the Facts, Ma'am: A Compendium of Liberal Fiction
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To: TimF who wrote (50943)9/8/2006 6:41:49 PM
From: Solon  Read Replies (1) of 90947
 
It doesn't matter the reason that futures are bought. Hedging does not change the fact that it is zero sum. A contract to be bought must be sold. The gain equals the loss. Peace of mind or such is not a factor in zero sum as I was using the term. Through rationalization people could entirely negate the fact of zero sum. I would rather keep the concept as a valuable one.

An analogy:

A normal hold-em game is like futures trading inasmuch as the pot is analogous to a contract. The pot is the value--and the winning of each and every pot always amounts to zero sum. We ignore the rake because it is irrelevant in this context--the house being considered as separate and apart.

However, if we consider that the cheques represent the value of the antique table being played upon, and if during the evening someone discovers that the table has "G. Washington" signed thereon--THEN anyone left with ANY cheques is possibly a winner. This is analogous to trading equities which is NOT zero sum.

If you don't want to make ANY distinction between zero sum and non zero sum, then we could say there is no zero sum because of factors such as happiness, unhappiness, commissions, gas for the car, the air we breathe...and so on and on. But if you find it useful to consider the idea of zero sum, then you will recognise that commodities trading is indeed a zero sum game.
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