On a double zero roulette wheel, you have about a 47% chance of hitting red. There's options I'd buy at that price, and options I wouldn't. With options in particular you also have your various calculations regarding time, volatility and so forth.
But you can be pretty sure if an option is being bought and sold, that the buyer and the seller are pretty happy about the price of it...
When in fact volatility, time decay and many more factors are really shaping the success probabilities.
At the same time it is a leveraged position. If winds tilt in your favor you have the option for 100 shares of the underlying for only the cost of the premium.
It could, or even probably should be, argued that one should remain dispassionate about the outcome of any specific transaction in particular.
If you can't do that, then you probably are gambling, and that's probably a bad thing.
"Happy" here is used in a very specific sense: If two parties engage in a transaction without coercion, it must be because they are both made better off by the transaction or they would both be less happy without the transaction.
This is where "gains from trade" come from.
The ability to make this statement disappears the moment either or both parties are required to participate in the transaction or are required to engage in different transaction.
The argument of the grandparent is that just like in any transaction, there are two parties to an option being traded at a given price. One party believes it's a good deal because they think the price they paid is low enough to accept the risk-reward balance and the other part believes the price they received is high enough for the certain payoff to cover the reward-risk balance they are giving up.
They might both be right because the reward you seek and the risk you can bear is a function of your current endowment in human and financial capital.
That's is about as accurate as physics homework you do in school, two objects collide without friction and air resistance, no energy is lost to sound, heat or deformation of the objects, calculate their resulting velocity.
As soon as you enter the real world and those objects are cars, equations aren't remotely accurate.
Any layman can come up with examples where this statement doesn't hold, drugs, etc.
We should focus on discussing real-life effects of options trading rather than spouting free-market theory clishes, everyone knows them, there are at least 3 such statements in every HN thread and I don't feel they contribute much to the coversation
The theory is a remarkably good approximation to reality in this case. If you feel otherwise, you did not establish your point.
Our societies literally have enshrined in law that most people cannot be trusted with financial instruments.
https://www.handbook.fca.org.uk/handbook/glossary/G3061.html
What do you have to support the claim that "The theory is a remarkably good approximation to reality in this case."?
You're saying that even although both parties are happy with the trade they made, when one party is a professional and the counter-party is an amateur, the amateur is likely misguided and has a much higher chance of getting the worse end of the deal.
That seems very likely to be true and applies to much more than just stock market options. Salary negotiations have that imbalance of knowledge/power as well. Probably even dating follows that pattern if one partner is much more experienced than the other.
Is that a fair characterization of your argument?
I don't actually see a problem here though - I mean it's pretty obvious professionals beat amateurs at just about anything. I don't think we would want to make rules to prevent the amateurs from playing the game. There are already some rules to restrict access to e.g. margin, naked options trading by amateurs - are you saying we should have more regulations and restrictions on the little guys for their own protection?