is it gain-loss or gain-gain???
is it possible for everyone who buys the shares of some company to get profit???
Isn’t it too complicated to conclude it as zero sum game?
When one trade option strategy with hedge, one leg is bound to lose and that doesn’t mean that person is net loss.
1 Like
It’s not a zero sum game…
All the shareholders make money as they get return on their investment because if Company is profitable then it’s stock price goes up. It also distributes it’s profits to shareholders through dividends.
Investment is positive sum game but trading is zero sum game.
3 Likes
Bro Dont you think investment return’s (profit) genuine profit is only the dividend but not the change in market price?( its not market price because its the someone else’s money not company’s money)
Thats correct, so someone MUST loose (many reasons but thats not important) his/her money right?
Bro shall consider only stocks (just buy and sell type) and discuss about it?
because if its someone else money then its bad right?
In my opinion when you invest in equity (intraday long or swing) its a part you ‘believe’ in the stock and in long term as the global (or in general) economy progress so will you progress (profit) along with the company. So it’s not necessarily a zero sum game since its not like the capital in the universe is constant.
Also, for futures it’s certainly a zero sum game because when you are bearish you are matched with someone equally bullish and what you lose/gain is EXACTLY what the other gains/loses.
I suggest reading the ZERODHA VARSITY MODULES since they’re really thorough and helpful.
Yeah. I will do that. But i wont stop asking Questions till i get answers XD XD…
You sure should never stop asking questions 
All questions are good questions. All knowledge is good knowledge.
Actually, it is a negative sum game. Every transaction results in brokerage and other statutory expenses from both buyer and seller side.
Stock market is not industry where in you create value to society (by solving problems) it is rather a business.
Not necessarily, for fno it is zero sum game but not for equities, for ex, one may buy eq at 100, it goes to 200 and he sells, the buyer at 200 can sell it at 300 so it is not a zero sum game in equities.
That can be said about any vegetable market too where farmers come and transact with customers… Transactional frictional costs are everywhere…but still its not a negative sum… It’s a positive sum game…
Negative sum game because of this:
let us say, you buy a fno contract for Rs 1000 from person A. For buying 1000/- you would have spent 1200. After some time you would sell it back to him at 1000/- to him. Theoretically, no one has won. But every transaction he and you would loose nearly Rs200. This means it is no longer zero sum game.
In case of farmers, it is not the same. They have generated value from agriculture 1 seed generates many seeds (actually food for whole of the society, it is not even comparable). Trading (especially derivatives) does not generate value to the nation or its people. It is just money flowing from 95% of people to remaining 5% of people. and govt. and middle men make their living and institutions with deep pockets make their money mostly from the retailers.
for ex, one may buy eq at 100, it goes to 200 and he sells, the buyer at 200 can sell it at 300 so it is not a zero sum game in equities.
Buyer thinks it might go up. Let’s say he buys at 200 and price goes down to 0. If you think little deeply, you can recognize that it is his money that has gone to the first seller. (zero sum game).
In case of equity, only dividends gives it a value proposition.
this is exactly my doubt/problem/point.
A-----> How does it goes to 200 from 100?
B-----> obviously company is not increasing the market price nor NSE or BSE)
C-----> so someone lost money. who is that someone? that someone is most of the time the person who are new to this market or the person who is not very good are the trading.
How is govt allowing it?
D-----> so can i just say only the true (legal {IDEALLY} ) profit is company’s dividend?
[Im new to stock market, im still learning about it so kindly correct me if im wrong]
I think I will have to concede with what u r saying in derivatives market… I have very less knowledge.
But CNC is another story altogether. People get capital infusion due to primary markets and subsequent generations then reap incremental benefits as and when they need money/retire…
B that someone are the employees and management of the company who are working hard to increase the EPS of the share that you own…
it goes to 200 from 100 if someone offers the stock at 200 and someone buys it 200, hence the last traded price now becomes 200.
obviously.
Now in order to sell a stock , you must first own it. So in question of who offered it? its the person who owns the stock who offers it. so the person offering it may have bought it at a lower price.
The reason a stock prices jumps is only if the buyer is willing to buy @ 200 and transaction takes place. if no one buys the stock at which the seller is offering , there is no transaction and price does not move.
Now your question is regarding the loss. In intraday you sell shares by borrowing(MIS), you don’t own them(CNC). so your initial price is will be the selling price and if the price trades below your initial price you lose money.
The way people make money in CNC is different from the way people make money in MIS i.e investing vs intraday trading.
The person doing intraday trading must know how markets trade and who are the participants and how they trade. without knowing this you are most likely to lose money.
you can’t blame the govt if you don’t understand how markets work.
1 Like