Hacker News Reader

Comment by PHGamer | Hacker News Reader

the more i hear about options/puts and then the short counterpart i feel as if the whole game is convoluted to hide the fact that its less investing and more gambling.

View on HN

Straw man. No one's saying that options are for investing. They're used for speculation and hedging/risk management.

Why downvoting? It's undeniable that some people are lured in bad investments practices because they share many characteristics with gambling. I'm not complaining about morality or ethic, it's just clear that these platforms are making a lot of money from trading addicted people.

I didn’t downvote but I’ll share that I have a reflexive dislike of this conflation because gambling is inherently ludic whereas option trading is intended to be an activity that creates value on the market. Gambling is consumption whereas options are capital allocation.

Capital allocation can be ludic; where do you get the idea that just because you're allocating capital, there's no thrill or enjoyment to be found? You're taking a crank on the slot machine of the economy; throw in the inherent rush of leverage, and the dopamine hit of a profitable/successful trade, and I'd say speculation is inherently ludic.

Its not inherently ludic because the point isn’t having fun. The point of gambling is the contest. The point of trading options is making money or hedging risk. The fact that someone can have fun doing work doesn’t make work inherently fun. Having fun is inherently fun. Speculation is work, gambling is fun, according to the nature of the activity, regardless of the existence of professional gamblers and recreational option traders.

Unlike stocks and bonds, options are a zero sum game (minus fees). So they're like gambling in that sense. But they are a useful tool for investors to hedge risk.

> Unlike stocks and bonds, options are a zero sum game

If each party only makes the one trade and has no other securities in his portfolio, maybe. That's almost never the case.

For example, if you're a market maker at Goldman Sachs and you sell 10k calls to a hedge fund, you want the stock to go up monotonically and gradually so that the customer profits on direction, you profit on volatility, and you can make money on the unwind trade as well. Win-win.

basically there's continuous choice of risk, going from shares, to ITM options, to OTM options.

Using various combinations of option for a single trade allows the risk/reward of the position to be more finely tuned based on changes to the underlying.

Reply on news.ycombinator.com