This is only true if you assign no value to risk mitigation or liquidity.

In dollar terms and with futures described in the article, one parties losses is the gains of another party. Risk mitigation or liquidity are parts of the portfolio management, not the trade itself. I sell you the future, you buy it. Difference of price is my loss and your gain or the other way around.

Thats an extremely restrictive definition of zero sum. If that were the normal definition most transactions would be considered zero sum.

But its not. Zero sum has to do with the utility provided to each side of the transaction. I may have a completely different desire to own a future than you. Perhaps my portfolio needs less risk or my predicted oil needs have changed. In those cases I gain a lot of utility by being able to move out of the future into cash, even if later you make more than I would have by selling it.

> risk mitigation

Is that still an argument after the housing collapse of 2008? Far from mitigating risk it seems that risk was increased.

I’m sorry can you explain how you are connecting bespoke mortgage backed securities and their derivatives to commodities trading?

It's positive sum in utility but zero sum in dollars. People get caught up on the latter when all that matters is the former.

Think of a pawn shop on a street corner. They trade by making markets, engaging in a zero dollar sum game. But it's absolutely positive sum in utility.

The pawn shop is the exchange and yes, they provide utility. But one person sells a contract, another buys the contract. One loses money, the other gains money. The exchange isn’t part of the equation. It’s zero-sum between contract parties.

The pawn shop is the market maker (ie trader) since they hold inventory and provide a bid ask spread. Exchanges don't provide this service.

I could make the same claim that you've made about pawn shops as a reductio ad absurdum. That individual with second hand jewellery gained X dollars when they sold it to the pawn shop and the pawn shop lost X dollars. So it's zero sum. Although it isn't except in the most myopic sense (that of dollars). Transactions (on financial markets or otherwise) are always subjectively positively sum in utility and that's what matters.

Here's some examples. Suppose someone gets a terminal illness and needs to sell all their stocks to a willing buyer in order to get cash. It's zero sum dollars (just like every material transaction in the economy) but utility was gained, the person that needed the liquidity got it immediately and with near zero slippage. Other examples: The farmer that needs to hedge their crop yields, the airliner that needs to hedge oil prices, the gold miner that needs to hedge gold prices. The supply side and demand side of this equation gains utility from engaging.

Good examples and yes, that makes the utility clear. But it's still zero-sum in dollar terms. So, if there is a big story about "The boys who made 600 million dollars with oil futures contracts", that is strictly in terms of dollar value and their gain (a good trade), is someone else's loss. That is what I'm talking about in response to my parent poster, who claimed:

> "There are limited resources and society have decided that these people deserve a big chunk of that resources."

As if society decided collectively to pay an unfair amount to a good/lucky trader. They took it from other market participants and not from average joe. My intention with my initial comment was to point out that it simply doesn't matter if one market participant has 600 million more than before, because others in the market lost it.

I think we agree with that statement of fact that it's zero sum in dollar terms. I would only object if we were to take that further as a commentary on the goodness or badness of such an occurrence, since the nature of every transaction is that it's zero sum in dollars.

It's only zero sum if the things being traded are in fixed supply. You can always pull more oil out of the ground and you can always create new fiat currency.

But not within a few hours or days. For the type of trade described in the article, someone was at the other end of the futures contract. Their loss is Vegas gains. There is nothing else to it. Zero-sum. I don’t talk about long-term investing.