Personal Finance & Money Asked on July 8, 2021
What is the practical difference in terms of gambling between wagering on the future score of a sporting match and wagering on stock market derivatives based on indices, such as the future value of the SPX (by trading call and put options on the SPX) or the future value of the VIX (by trading VIX futures)? The SPX and the VIX are both metrics; there are no underlying assets other than the price of the option or future itself. Like sports gambling, when one trades SPX options and VIX futures there is only an exchange of money on whether the prediction was right or wrong.
If not, what am I misunderstanding?
The differences are purely cultural and arbitrary distinctions. These are necessary in some cultures and belief systems.
Not all cultures or individuals require a distinction between investing or gambling for any reason. Whether that is feelings of personal responsibility, religion, or maintaining respect in their community.
Not all cultures or individuals require a distinction between a negative expected value financial game, and a positive expected value financial game. Gambling is typically considered to be negative expected value financial games, whereas "not-gambling" is typically considered to be positive expected value financial games. Sports betting has been argued to fit somewhere on the positive expected value side, purely for regulatory reasons. Typically these arguments become pedantic and semantical as the root of arguing a distinction is for feelings of personal responsibility, religion, maintaining respect in a community, and for regulatory purposes.
In the United States, uniquely, "gambling" is regulated at the state level and ignored by the Federal government except to restrict banking of gambling services using interstate systems (the internet - as such, online gambling services that are not reliant on licensed banking systems have no prohibitions). While the federal government regulates securities and the derivatives of commodities (but not the trading of spot commodities). This causes the fairly arbitrary cognitive dissonance to be put at the forefront. As any one individual can play any money game at the state level and lose it all, but be presented with a paternal limiting relationship in positive expected value games such as daytrading and investing.
In other countries, these can be the same or different regulatory agencies, at the same level of government. Instead of dual overlapping governments.
But ultimately the venn diagram of financial games significantly overlaps such that it is almost a circle.
Correct answer by CQM on July 8, 2021
Sure, they are logically and mathematically exactly the same.
Answered by Fattie on July 8, 2021
Day trading derivatives is similar to sports wagering in that the house takes a cut.
Over the long haul (not a short lucky streak), they both require an edge to succeed though I'm not sure that you can find much of an edge with sports betting.
However, derivatives are more complex and they offer you many more ways to hedge as well as offset risk, at the outset and during the bet.
If you extend the time frame from day trading to swing trading (days to weeks or even longer), some uses allow you to mimic longer term investing with less risk but I suspect that's not what you're after.
Answered by Bob Baerker on July 8, 2021
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