I am not sure why people are viewing gambling in a negative light here. Investing is absolutely gambling but that does not imply investing is a bad thing. The reality is that there is no such thing as reward without any risk, you need
to willing to lose something to gain something else.
This is essential to option pricing, it is why low delta options are cheap and high delta options are expensive. A high delta option will have a high probability of success but will demand the investor to risk more on the position.
If there wasn’t a gambling aspect to capital markets, there would be zero liquidity as nobody would deliberately take the negative expected value side of the trade.
This is essential to option pricing, it is why low delta options are cheap and high delta options are expensive. A high delta option will have a high probability of success but will demand the investor to risk more on the position.
If there wasn’t a gambling aspect to capital markets, there would be zero liquidity as nobody would deliberately take the negative expected value side of the trade.