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How much can I earn with Options?
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How much can I earn with Options?

  #31 (permalink)
Market Wizard
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harryguy View Post
I had to give my opinion on this advice. YOU ARE ONLY COMPETING WITH YOURSELF! I believe the only "competition" you have is yourself.


This is dangerous thinking.

Trading is a (less than) zero sum game, so every dollar you make is coming out of someone else's pocket.

Everyone who trades is competing against each other, you just do not know exactly who you are against on any trade.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #32 (permalink)
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kevinkdog View Post
This is dangerous thinking.

Trading is a (less than) zero sum game, so every dollar you make is coming out of someone else's pocket.

Everyone who trades is competing against each other, you just do not know exactly who you are against on any trade.

If this line of thought motivates you stick with it. But you are not ever competing with "professional traders". Say I went long one contract on Friday. Someone else is on the other side of that trade and very likely it is a "professional". We can both make money from our position and when I close the trade it will be by offsetting my position with entirely different trader. And the theory of the market is that hedgers transfer risk to speculators. You can't assume that every trade you make is "against better traders". It will plant a seed that says every position you take must be wrong because professionals took the other side.

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  #33 (permalink)
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Right, sometimes trading is competitive but I don't like to think about it that way. For example, I'm always offering liquidity to help the wrong sided traders (or trying too). If I didn't take the position against them then they wouldn't be able to exit into my orders. Now if I can't get my orders filled then yes I feel like I'm competing and the HFT love to blast in orders to make it competitive.

Rationally though, even if trading is negative sum then we still cannot know that traders are competing. The only time you are competing against a trader who is trading the exact same method with exact same entries and exits but neither of you know if you will be profitable. Trading is a risk transference mechanism. For example, let's imagine a trader is a swing day trader. Let's say they bought the low and sold near the high (relatively speaking). They made money. They transfer the risk to a scalper. As soon as they exit, the market bounces a few points. The scalper is able to make a profit too. The trade was let's imagined transferred to a longer term trader who plans to hold the trade over a few days and then the market drops.

It is more realistic to say that futures trading is a many summed game, in terms of individual trades, with an unknown outcome and/or trading is negatively summed and even if competitive there is unknown outcome. However, under certain conditions it becomes more negatively summed. Yes, when the volatility is low and/or only one type of trader is dominant then it is more likely negative sum and that is why it is so difficult to make money during those periods, i.e. when the range is narrow and the volatility is low.

We can also suspect the game becomes more negatively summed as your trading volume increases and risk decreases. Even if we consider it negatively sum, it still doesn't imply competition in the normal sense.

For example, let's imagine that two traders are competing to buy on some sort of support or trendline. One trader wins the fill (the other cancels) and the market moves up a bit and then some news hits and the market drops several points. The trader that "won" ended up taking the loss. Or imagine the trader that won, didn't want to take much risk, and gets stopped out for a few ticks and the other trader left their order and they get filled. The new trader that was filled was willing to take say greater risk, the market drops a few points, and then rallies and the "losing" trader takes profit.

In summary, even though trading is negatively summed then it does not posit that it has to be competitive. In terms of individual trades, it is not true that someone needs to win for you to lose. And even when traders do compete for a given trade, it is unknown whether the winner will be profitable or not. If it is viewed as competitive then one isn't competing against any individual trader but rather the entire market. But, the entire market is an abstract entity. Is it negative sum in the sense that if you open trades randomly you'll lose your account due to trading commissions: yes. But is it negative sum in the sense that you are trading/competing against another for a known outcome, less certain. The point is in normal games of competition you have known and fixed rules and goals. Markets are more complex. Is it competitive like if you were to bid/compete for an unknown prize at an auction that might even cost you something? I can see that.

As for all your profits must come from losing traders, this is not really meaningful because of 2 reasons I will point out. First, if we're talking about the market being competitive then it implies the market is predictable and if that is true it is probably only true with highest certainty under the shortest time frames. This implies 1 tick in most liquid markets. So, the most a trader can "take" from you is 2 ticks unless the market gaps. Also, this "you don't know who you are against" is also silly. If you trade futures, you know who you are against. You are always trading against the HFT who are trying to capture that 1-2 ticks or sometimes passive institutions/liquidity providers. There is another argument for why the most a trader could take from you is ~1 tick because you could always exit/transfer the risk with 1 tick stop.


Last edited by tpredictor; February 3rd, 2018 at 10:03 PM.
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  #34 (permalink)
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kevinkdog View Post
I think the point here was not the professionals are on the other side of any particular trade, but that the professionals are out there, and their job is to make lots of money. They don't care about any individual - they just care about making money.

Many retail traders treat trading like a pickup basketball game at the local YMCA, not realizing that LeBron and Kevin Durant might be playing (and might not be on your team).

So my take on @myrrdin comment "You will compete against the best professional traders, having large experience and best possible education. They have all fundamental knowledge available almost in real time, and can use the best computers." is that you really have to have your act together to have a chance at success.

kevinkdog's comment is right on the mark, and explains well what I intend to express.

Best regards, Myrrdin

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  #35 (permalink)
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Le Bron is retired from trading.

Now it's all Robocop.

Or rather Robocop with LeBron at the joystick.


"No one is coming to help you. There is no back up. There are no reinforcements. You are alone. It's on you. SO GET IT DONE." -- Jocko Willink
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  #36 (permalink)
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kevinkdog View Post
This is dangerous thinking.

Trading is a (less than) zero sum game, so every dollar you make is coming out of someone else's pocket.

Everyone who trades is competing against each other, you just do not know exactly who you are against on any trade.

Kevin I appreciate your input and I see where you are coming from, a futures day traders perspective

But there are multitudes of reason some bank, fund , trader could be buying or selling premium, hedging, protection, re-balancing. With highly traded equities and options literally thousands upon thousands are traded daily with infinite amount of reasons for those trades.

The market is so complex trying to outsmart or win against someone else is futile in my opinion and has absolutely no bearing whether I take a trade or not. If I think the company is solid and I sell option premium Who cares who is on the other side of the 1, 2 or 10 option contracts I traded, among the thousands that are traded that day.


I could see where this might play into someone's reasoning when trading illiquid commodities or trading at hundreds or thousands of contracts.

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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  #37 (permalink)
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When I saw...

I thought this was satire.

Although many of you would love to see wldman get started and type like wldman...I'm not gonna do it.

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  #38 (permalink)
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blb014 View Post
The market is so complex trying to outsmart or win against someone else is futile in my opinion and has absolutely no bearing whether I take a trade or not.


So are you saying when you trade you are not trying to outsmart others and win?

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #39 (permalink)
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wldman View Post
I thought this was satire.

Although many of you would love to see wldman get started and type like wldman...I'm not gonna do it.

I'd be interested to hear your thoughts!

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #40 (permalink)
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kevinkdog View Post
So are you saying when you trade you are not trying to outsmart others and win?

I have no idea who the others are and what their motivations are for the trade so how could I outsmart them.

I don't look at charts drawing lines squiggly lines where I think sellers are buyers are going to be because IMO it is waste of time. What made Friday and Monday so special according to the charts?
I had a finance prof that studied chaos theory and the seemingly order of the market follow by chaos. Or disorder/followed by order with irrational human behavior as one of the main drivers. How could I outsmart that?

All I can do is invest/trade on good companies that I perceive to be a good long term return.

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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