Example: Mark Cuban used options to guarantee he would be set for life no matter what happened to Yahoo's stock after they bought Broadcast.com for $5 billion (in stock mostly).

Care to explain further, or point me to where I can read more?

Edit: I think the "equity collar" article linked below sorted me out.

"The basic worry that comes with having lots of money is no different from what worries everyone else. Whether you've got $100 or $100 million, you don't want to lose it. After we sold Broadcast.com, I hedged my stock with synthetic indexes, in case the market cratered in the six months before I could hedge my actual Yahoo shares. It cost me $20 million, but I protected what I had. Todd Wagner and I had a credo: "Pigs get fat; hogs get slaughtered.""

Also you have to remember that when options mature in the money they will be exercised resulting in transactions in the actual stock market which is more obviously not zero sum.

So suppose I think Yahoo is under-priced at the moment. I could 1. Purchase a share of Yahoo on the open market, exerting buy pressure on the stock driving up the price

2. Purchase a call on Yahoo; Yahoo's price appreciates some if I'm right putting my call option in the money. If the option writer was naked, they have to go to the open market to purchase a share for me to buy, resulting in buy pressure on the stock driving up the price.

Obviously the link in #2 is not as direct, but potentially prices in the actual stock market can move to incorporate information in the purchases and sales of option contracts as they are exercised. And one step further removed a long equities trader might use the size of the outstanding call and put options market on a stock to forecast price changes.