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My 2 wheel analogy isn't correct. With 2 wheels, you could win on both wheels, with one wheel you can only win one bet and lose the other. NeverthelessI just did a monte carlo sim, definitely better by miles to do both bets.

It should be obvious. Let's say you go into the casino as described in the OP but there are two of these special wheels. You can only play either red 14 or red 16 on each. If you play r16 on table 1, you are only allowed to play r14 on the other wheel. Would you just play r16 on table 1 and...

I don't think that is true.

the nazzz has taken out last Thursday's lows

U better go back in, ammo! I'm gonna think the unthinkable....is this the end of the bull market?

v nice!

we all know it's gonna turn back...so the question is, where do we cover our shorts?

yep. if you just play r16 though, you have a 289% advantage over the house. :D We're looking for the optimal allocation. I think it is what i said in my previous post.

short tf 80.5

You guys will not believe me, but i worked out r16, r14, red yesterday v simply. Consider a bet on red alone, the kelly fraction comes to 24.32%. We know the Kelly fraction for r16 and r14 is 8.26% and 5.48%, respectively. If these three bets were mutually exclusive, the problem is...

long 100.08, stop 99.08

very good. It's the big moves that will make you the big money... just a suggestion, have a look at bigger stops

Ok, what's the solution then? And why are you taking a log? Trying to find the first derivative?

Actually, i see where u are coming from. So let's say we bet $10 on both r16 and on red. We work out the payout if it lands on r16 as $350+$10=$450 with a probability of 4/37. We can work out the payout if it lands on red but not on r16, $10-$10=0, probability of 19/37, anything else is -$10...

you have 4 chances out of 37 of r16 coming up and 3 out of 37 for r14, 23 out of 37 for red to come up

But the bets in our scenario aren't mutually exclusive...If the ball goes on either red14 or red16, RED is also a winner.

Must correct you there. Soros used to trade his own personal account in his thirties. Was wiped out at at least once...

apols for late post, was stopped out at 1850 on this couple of days ago

The average hedge fund probably loses money. Bearing that in mind, what a n institution does is a bit moot.

Regarding root 2 increase in variance, assume a random variable X has a normal distribution with mean y and variance z. What's the mean and variance of 2X? Use basic to intermediate statistics to figure it out. As for the second part, the optimal " risk adjusted kelly fraction", a...