Zero-Sum Game

If you’re the competitive type, you’ll love zero-sum games. A zero sum game is where one’s gain is another’s loss, whether it’s with two players or a zillion players.

Another way to think about it: the net benefit is zero. If someone wins a dollar, someone else loses a dollar. If there’s one piece of pie left, someone’s getting those delicious bites, and someone else at the table...isn’t. If someone wins the game, someone else loses the game. Checkmate, mate.

A crowd favorite example of zero-sum games: poker. Poker winners’ winnings are the same as the losers' losings. Don’t try this at home, kids.

Another example: options trading. If you know what that is, you are having an “a-ha!” moment right now. If you’ve heard of it, and maybe even looked it up, but have been too afraid to ask someone or never really got it, this will help. Options trading is basically hedging bets against something, kind of like insurance.

For instance, let’s say you bought some stocks and an option on those stocks (which is kind of like insurance for the stocks). If those stocks do well, you’ll have to pay some money to whoever sold you the option, let’s say $100. That’s $100 you would have kept if you didn’t buy the option. So...- $100 for you, and + $100 for them. When you have stocks and an options contract, if you win x amount, they lose x amount. If you lose x amount, they win x amount.