SERVING THE QUANTITATIVE FINANCE COMMUNITY

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Collector
Posts: 4414
Joined: August 21st, 2001, 12:37 pm

### what makes profit attainable ?

back to the question stated in the thread:in some markets there are big and small players that not necessary are looking for profitt: for example in the fx market:big players: central banks that got the idea that they want to keep the currency inside a peg or smooth the volatility...etc...all doomed to fail in the end ?small players: me going on a airplane to Spain, arriving at the airport I find out I have no euro, I need euro for the taxi, exchanging my usd at the airport I am not looking for profit, I know I get ripped off 5-30% .......uahhh (this is usd I made from fx trading in the first place Yes it is a zero sum game, but every time I go to the airport and exchange a dollar, let say I loose 5% and the counterpart make 5%. Yes the sum is ZERO, but I am always on the loosing side
Last edited by Collector on June 4th, 2004, 10:00 pm, edited 1 time in total.

EarthwormGod
Posts: 51
Joined: September 8th, 2003, 12:10 pm

### what makes profit attainable ?

QuoteOriginally posted by: CollectorYes it is a zero sum game, but every time I go to the airport and exchange a dollar, let say I loose 5%No more of this nonsense please. How much money do you lose when you buy a plane ticket?The reason people lose money when they trade, is because the don't sell at the price they had hoped to sell at. For you to lose money selling Euros in Spain, you would have to find out tapas cost more than you thought they would, or something.It is fair to say that, every time someone loses money on a trade, he tries to look for information that would have told him to do the opposite. Or at least he wishes he hadn't done the trade. When you got back from Spain, did you wish you hadn't gone? Did you wish you hadn't converted any dollars?To say that someone bought oil yesterday at $42, when he "could have" bought today for$39, lost money, is to say thet Heron of Alexandria lost money when he didn't invent the steam tractor. The problem is, you will find the total of these "losses" is thousands of times greater than the total amount of money people had before they began trading, and yet their net worths are not negative and they are not in bankruptcy!Worse, the next step after telling people they are losing money, is some politician stepping up with a scheme for them to keep the money that is rightfully theirs! And yet despite the fact that these losses are many times what people are making, when politicians make it illegal for winners to take these losses from people, the people always get poorer!How on Earth can whether one person takes a loss selling dollars, depend on the highest price another person theoretically sold them at? If someone else's wife is prettier than mine, does that mean I took a loss getting married? If someone else is making $900 an hour, does that mean I am taking a loss working for$500 an hour?If I'm not a movie star, does that mean that I took a loss simply by being born? Does the fact that factory workers only made $50 a year at the beginning of the industrial revolution, mean they would have been better off never having been born?For someone to have taken a loss, I would at least expect him to be poorer after he did the trade. People who pay for movies they don't like, or slot machines that don't pay off, have something to complain about. But people who never expected to get more than half their paychecks after taxes, do not. Unless you can come up with a scheme that would have created the opposite result, and regret having not pursued that scheme instead.If you people want to always look at the guy next to you driving a Mercedes, realize you are losing money, and then abandon everything you are doing to buy one lottery ticket to try and get even, please, go to some other country. In the Unites States, most people would rather grind out their$20 an hour and be able to afford at least half the medicine they would like to buy, rather than chase some socialist dream and end up with none.You people think I'm overreacting. But it's this type of zero-sum thinking that leads to Europe having the lowest growth on the planet. Heck, compared to growth in the US, you people are losing a trillion-dollars! And why? Impatience. And irrelevant comparisons of your situation to a utopia.

Collector
Posts: 4414
Joined: August 21st, 2001, 12:37 pm

### what makes profit attainable ?

this was just to illustrate someone make money and some loose even in a zero sum game, and everybody are happy ? the derivatives markets and the hedge fund industry (at least some of them) are here to stay >Did you wish you hadn't converted any dollars?no, but from experience I naturally knew the airport dealers would rip me off (they have done before), so in reality I exchanged into EUR at close to interbank rate just before I left... so it is all about information and knowledge about the markets..... there is always people in the markets that would like to rip you off (and they don't even feel bad about it), so you better check the prices, the same principle applies to exchanging fx private as when trading a multi million double-barrier option, people not comparing prices tend to get ripped off. Was it in copenhagen airport I think there was several places to exchange fx, and with big differences in spreads, one was a totally rip off, the other shop more reasonable...to exchange at the best price would defenately make me feel better. Doing some simple market research typically pays off (at least save you money).>you would have to find out tapas cost more than you thought they wouldsorry you are wrong, me and NeroTulip went out with 4 spanish girls and they actually gave us free tapas, there is may be no-free-lunch, but free tapas all night long is a reality! or actually we ended up buying them drinks later on, but the exchange rate was in our favor as i can remember >If someone else's wife is prettier than mine, does that mean I took a loss getting married?Definitely, just realize it and cut your losses! holding on to a loosing position (that even have negative carry) is how people end up in ruin! But don't forget Beauty is in the eyes of the beholder!!
Last edited by Collector on June 4th, 2004, 10:00 pm, edited 1 time in total.

EarthwormGod
Posts: 51
Joined: September 8th, 2003, 12:10 pm

### what makes profit attainable ?

I'm not a professor, but I cannot imagine why anyone would ever need to use the term "zero-sum" in the course of teaching another person everything there is to know about financial markets.In fact, year after year students show up at Wilmott who not only have not learned anything from the term "zero-sum," but who in fact have become misled and confused by it!If derivatives are a "zero-sum game," then how come a second-tier derivatives trader makes more money than the Grand Champion of the World Series of Poker? If 2+2=5, then how come 5-2=3?Are terms like "asset transformation" and "counterparty risk rebranding" too much for math students? Dumbness is naturally occurring. Lately I think liberal arts students are actually further ahead.
Last edited by EarthwormGod on June 4th, 2004, 10:00 pm, edited 1 time in total.

farmer
Posts: 13462
Joined: December 16th, 2002, 7:09 am

### what makes profit attainable ?

QuoteOriginally posted by: President Ronald Reagan, Address to the University of South Carolina, Columbia, September 20, 1983There are no such things as limits to growth, because there are no limits on the human capacity for intelligence, imagination and wonder.QuoteOriginally posted by: ManuLondonBut in the market as you say if you manage to extract Oil then it's free and you can sell it, however there is a cost for the planet ... And we are going to feel it quite soon actually ; - )QuoteOriginally posted by: Senator Edward Kennedy (D-MA), New York Times, June 26, 1980A Democratic energy policy must oppose the decontrol of gas and oil prices.QuoteOriginally posted by: Representative Nick Mavroules (D-MA), February 5, 1981Last week President Reagan issued an Executive Order lifting price controls on domestic oil and gasoline... Energy prices in Massachusetts alone will escalate by 33 percent--the average household paying as much to heat itself as it does in Government taxes.QuoteOriginally posted by: Daniel Yergin, Sierra, July/August 1979Even with decontrol of oil prices, we can see a 30 percent to 40 percent decline in domestic oil production.QuoteOriginally posted by: Ulf Lantzke, Executive Director, International Energy Agency, The New Republic, Februrary 25, 1978All available evidence points to a serious risk of a serious energy crisis in the middle or late 1980s... Putting it simply, there is the very great likelihood of a major world depression.QuoteOriginally posted by: Kenneth Arrow, Professor of Economics, Stanford University, Forbes, February 4, 1980We're heading into a world of considerably higher prices. There will be a major impact on housing by 1983, and I'd be surprised if gasoline is less than $2 per gallon plus whatever inflation adds. Kenneth ArrowQuoteOriginally posted by: Representative John Dingell (D-MI), Chairman, Subcommittee on Energy and Power, Forbes, December 10, 1979It's obvious that gasoline could reach at least$2 a gallon after decontrol.QuoteOriginally posted by: Sheik Ahmed Zaki Yamani, Saudi Arabian Oil Minister, New York Times, June 21, 1979Irreversible physical shortfalls in supplies may take place as early as 1988. [The result] is likely to push market prices to levels three or four times the current one.QuoteOriginally posted by: John Mattill, Editor, Technology Review, December/January 1980World oil prices have only one way to go in the next decade--up, and probably sharply so.QuoteOriginally posted by: Lester Brown, Worldwatch Institute, Bulletin of Atomic Scientists, March 1980It would be prudent for any American contemplating the purchase of a new car to assume that gas will cost $2 per gallon with a few years and$3 per gallon during the vehicle's lifetime.QuoteOriginally posted by: Energy Action, March 24, 1979During 1980 and 1981, for each barrel of oil newly produced as a result of decontrol, the cost to the U.S. economy could range from at least $56 per barrel under the most optimistic assumptions, to about$870 per barrel under assumptions which many experts believe are realistic...Thus even if decontrol does in fact stimulate a few extra barrels of oil, the total cost to the economy of those few barrels is so high as to make decontrol the most nonsensical, irresponsible, and expensive energy supply strategy imaginable.QuoteOriginally posted by: New York Times, November 14, 1980Ronald Reagan brushed aside energy issues during the campaign, insisting the shortages could be overcome by unleashing private enterprise. But not even his most fervent supporters in the energy business share that optimism. Virtually all private forecasts predict declining domestic oil production and liquid fuel shortages in the next decade.QuoteOriginally posted by: President Jimmy Carter, March 31, 1979There is a dwindling supply of energy sources. The prices are going to rise in the future no matter who is President, no matter which party occupies the administration in Washington, no matter what we do.QuoteOriginally posted by: Alan Madian, Foreign Policy, Summer 1979A government role is crucial if the United States is to reduce its energy vulnerability... At present rates of exploitation, the United States will exhaust its own petroleum reserves in about 10 years... The only long-term solution to the liquid fuel problem is the production of substitutes.QuoteOriginally posted by: Ed Rothschild, Director, Energy Action, January 5, 1980[Because of decontrol,] the administration has placed the American economy, competition in the oil industry, and the public at the mercy of a handful of international oil companies and OPEC.QuoteOriginally posted by: Marshall Loeb, Time, July 9, 1979Decontrol would cause a political storm because prices would immediately rise. Some experts warn that gasoline prices would soar to $2 a gallon.QuoteOriginally posted by: U.S. Department of Energy, National Energy Plan II, May 1979Any surplus production capacity that individual OPEC countries may have developed in recent years will almost certainly vanish by the mid-1980s, perhaps sooner...In 1990 prices, adjusted for future inflation, oil could be selling for$42 to $55 a barrel.QuoteOriginally posted by: Lester Brown, Worldwatch Institute, Bulletin of Atomic Scientists, March 1980The day when a tankful of gasoline costs$50 is probably not far off.QuoteOriginally posted by: Leonard Silk, New York Times, June 29, 1979The present oil shortage looks like the start of a long siege. While the demand for oil keeps growing as world population and economies expand, supply slows and it is difficult to see where large amounts of additional oil will come from in the next several years.QuoteOriginally posted by: President Jimmy Carter, May 25, 1979It is obvious to anyone that looks at it [the oil crisis] that we've got a problem that's serious now. It's going to get more serious in the future. We're going to have less oil; we're going to have to pay more for it. Those are the facts. They are unpleasant facts. And so far, the American people...have refused to accept that simple fact.QuoteOriginally posted by: Robert Strobaugh and Daniel Yergin, Foreign Affairs, vol. 58, no. 3, 1979An already serious energy problem has now become an energy emergency, an emergency that will persist throughout the entire 1980s.QuoteOriginally posted by: Senator Howard Metzenbaum (D-OH), January 29, 1981Mr. President, I believe we will see $1.50 gas this spring, and maybe before. And it is just a matter of time until the oil companies and their associates, the OPEC nations, will be driving the gasoline pump prices up to$2 a gallon.QuoteOriginally posted by: Dan Lundberg, Gasoline price specialist, New York Times, February 27, 1980Estimating $1.50 [per gallon of gas] is totally, totally optimistic.QuoteOriginally posted by: Charles W. Duncan, Secretary of Energy, U.S. News and World Report, February 25, 1980One thing is for certain: prices will continue to rise. We're dealing with a scarce, finite commodity, one that will be running out in a couple of decades. Traditional criteria of supply and demand don't apply.QuoteOriginally posted by: Clifton C. Garvin, Jr., Chairman, Exxon Corp., Business Week, December 24, 1979We're going to be on the ragged edge for years.QuoteOriginally posted by: Paul Frankel, Petroleum Economics, Ltd., Dun's Review, April 1980With oil, surprises or changes can only go one way: against us.QuoteOriginally posted by: Business Week, December 31, 1979The price of oil now seems firmly locked into a steep upward spiral for the foreseeable future.QuoteOriginally posted by: Newsweek, July 16, 1979At present rates of consumption, America's oil and gas will be gone within a decade.QuoteOriginally posted by: Senator Dale Bumpers (D-AR), U.S. News and World Report, July 9, 1979Without rationing, gasoline will soon go to$3 a gallon.QuoteOriginally posted by: International Energy Agency, Energy Conservation, 1981In moving towards 1990, the industrialized countries will be walking an `oil tightrope.'QuoteOriginally posted by: Daniel White, Professor of Finance, Georgia State University Business, May/June 1979Because of this estimated decline in future oil production, estimated oil imports in 1985 have risen from 6[million] to 11 million barrels per day.QuoteOriginally posted by: Walter J. Levy, Oil consultant, New York Times, January 4, 1979A conservative assessment would project the non-Communist world's oil consumption as likely to advance from 51 million barrels daily in 1977 to 62 million per day in 1985.QuoteOriginally posted by: Business Week, December 31, 1979Most industry observers, however, believe that this time OPEC will be successful in keeping oil prices from falling.QuoteOriginally posted by: Glyn Jones, New York Times, October 2, 1979America's oil system must be nationalized as are those of Libya, Nigeria, Mexico, and Venezuela. Since there is no free market in oil, it is idle to pretend otherwise. There is no way a nationalized industry can damage or endanger us more than the present monopolistic structure.QuoteOriginally posted by: Business Week, October 29, 1979Almost inevitably, therefore, OPEC's management of the world's oil supply will keep the world economy teetering on the brink of recession.QuoteOriginally posted by: Robert Stobaugh and Daniel Yergin, Foreign Affairs, vol. 58, no. 3, 1979Responses that might have been sufficient between 1974 and 1979 no longer suffice; today the United States and all the world's importers are caught in an accute and lasting energy emergency.QuoteOriginally posted by: Carter Henderson, Bulletin of Atomic Scientists, December 1978The tragic failure of U.S. energy planning is that it has doggedly promulgated futile market-oriented solutions to energy problems.QuoteOriginally posted by: Senator Dale Bumpers (D-AR), U.S. News and World Report, July 9, 1979Rationing is the fairest and most certain way to deal immediately with this country's oil shortage.QuoteOriginally posted by: Senator Edward Kennedy (D-MA), New York Times, January 28, 1980We must adopt a system of gasoline rationing without delay...in a way that demands a fair sacrifice from all Americans.QuoteOriginally posted by: Representative Edward Markey (D-MA), New York Times, January 9, 1981I believe that decontrol as a cure will prove to be worse than the disease of oil addiction.QuoteOriginally posted by: Richard N. Cooper,Undersecretary for Economic Affairs, Department of State Bulletin, December 1980The price mechanism must be supplemented... by governmental action and guidelines encouraging or requiring conservation of oil... It is not sufficient to rely exclusively on the price mechanism.QuoteOriginally posted by: President Jimmy Carter, New York Times, February 11, 1979I think it [OPEC] has now become such an institutionalized structure that it would be very doubtful that anyone could break it down.

RFMontraz
Posts: 246
Joined: December 4th, 2002, 8:55 am

### what makes profit attainable ?

MP it seems you have a lot of different names, first Abumazen, then Earthwormgod, Farmer....

NeroTulip
Posts: 367
Joined: May 25th, 2003, 1:54 pm

### what makes profit attainable ?

sorry you are wrong, me and NeroTulip went out with 4 spanish girls and they actually gave us free tapas, there is may be no-free-lunch, but free tapas all night long is a reality! or actually we ended up buying them drinks later on, but the exchange rate was in our favor as i can remember They had a lot of convexity, so we provided liquidity. I don't remember about the exchange rate, I was so high I could have sold options at a negative implied vol on that night. But I think it was a good trade, too bad the frenchmen weren't around to help us with some excess capacity. Ahhh, next time...C'mon MP, chill out a bit, take your blue pills and be nice with the people in white, they are your friends.
Last edited by NeroTulip on June 7th, 2004, 10:00 pm, edited 1 time in total.