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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: LPS5 who wrote (1224)	6/21/1999 10:01:00 PM
From: -	Respond to of 18137

Thanks, LPS5 you bring up a good point: Futures (and options) trading is a zero-sum game. [Of course, many option-writers are actually "hedged" into the underlying security, through benefit of those fantastic stock-margin rules they grant the boys with a seat on the CBOE...] With stocks, real wealth is being created. Of course, a lot of the trading activity is simply passing money back and forth (as we might like to think, "price discovery" activity). However, stock prices value companies, which effects their operations sharply on a number of levels - fund-raising, business-to-business, employee morale and net worth, etc. The stock market is tied into reality in a much more direct fashion; real wealth is being created - value-added. Futures and options contracts, on the other hand, are a derivative products - essentially a purely financial abstraction. Not that they don't serve a purpose, or have great value. The futures markets, and to some degree the options market, exist primarily to provide a mechanism for the transferrance of risk - that's what they boil down to. That's one reason why the leverage is higher in the futures market - those markets are designed primarily as a place to "buy and sell risk", essentially a place you can go to shoulder the risk that someone else doesn't need or want to carry! Speculation at it's unblemished finest [which can serve a valuable purpose in our economy - saving farmer's, and hedge fund manager a___s, and giving the mutual fund and arbitrage guys a playground with mega-leverage ;)]. Don't get me started about "Options on Futures", which have become very popular. Many, talk about making the odds hard on yourself! Glad you liked my ramblings... I'm sure many futures-types would be deeply offended <G>. But, consistent with what you say, I've met a number of serious futures Pros that watch the stocks intensely intraday and prefer to trade them (even from the floor, in one case), in lieu of their own markets... On the other hand, I've met a lot more Futures traders that would never touch a stock... and many of them are quite good. Look at Larry Williams, he evolved from stock trader to world-class Futures Trader - and he's sure no dummy. A lot of the futures traders talk about how they enjoy having "only 30 symbols" (markets) to watch, vs. the thousands of stocks they feel like they'd have to watch. There are more than two ways of looking at it, for sure. -Steve