a.Explain why futures trading is a zero-sum game.Are options also a zero-sum game? What about buying warrants?
b.Suppose you are long 100 shares of XYZ stock at 50 and you have written a December 50 call option against your long position.Do you want the stock price to go up or down tomorrow? Explain.
c.Answer part b if you have written a December 50 put option instead of the call option.

Question

a.Explain why futures trading is a zero-sum game.Are options also a zero-sum game? What about buying warrants?
 b.Suppose you are long 100 shares of XYZ stock at 50 and you have written a December 50 call option against your long position.Do you want the stock price to go up or down tomorrow? Explain.
 c.Answer part b if you have written a December 50 put option instead of the call option.

Quizplus · Accepted Answer

The Answer of a.Explain why futures trading is a zero-sum game.Are options also a zero-sum game? What about buying warrants?
 b.Suppose you are long 100 shares of XYZ stock at 50 and you have written a December 50 call option against your long position.Do you want the stock price to go up or down tomorrow? Explain.
 c.Answer part b if you have written a December 50 put option instead of the call option.

AExplain Why Futures Trading Is a Zero-Sum Game