Javelin,


I must confess to being baffled. You are the one who gave "reasons" why some sucker would pay "too much" for straddles. Your reasons, essentially, were that he is not a sucker!


For instance, if he owns stocks and you don't, then he can hedge and diversify his stock portfolio by betting on an increase in implied volatility in bonds. Or, maybe he is just more risk-averse than you, meaning for you a 50/50 shot at 1.50 vs. .50 is worth .99, for him it's only worth .98!


The simplest proof I can give that options are not a zero-sum game is that, if they were, the most successful options and futures traders would have bankrolls no bigger than the most successful poker players. But for some reason, the suckers are willing to manufacture billionaires in futures?


I don't think so. They suckers are getting something out of it. If you care to explore this further, here are some 2+2 posts dealing with this concept:


http://www.twoplustwo.com/cgi-bin/ne....pl/read/29310


http://www.twoplustwo.com/cgi-bin/ne....pl/read/29226


http://www.twoplustwo.com/cgi-bin/ne....pl/read/29310


http://www.twoplustwo.com/cgi-bin/ne....pl/read/29184


I think this stuff is important to understand, or at least interesting, since it is how most people on Earth make money!


eLROY