A mind game

[Josef K]

Quote from peilthetraveler:

In your scenario, I lost $50k by not betting your way. In my scenario, you lost $6 million by not betting my way. Which is worse?

To me the issue is time. Let's assume I lose on my first play of the game. In that case I'd only have $150,000 if I play your way, whereas I'd still have $300,000 if I play my way. My resulting net worth gets cut by 50% if I increase my bet to 70%, and I have to wait an entire year to get a chance to bet again. By limiting my bet to 40%, I'd have an additional $150,000 to make use of during that year.

Even though the odds are 5 in 6 that I'd win on my first play, I'd prefer keep my bet under 50% so that I'd have significantly more money available in case I lose.

 

[Swan Noir]

If I lose most or all of it does he top me off in year two with another $500,000 in year two and again in year three? If that is the case I bet $350,000 the first year so I can live reasonably well for the 12 months between my first play and my second.

 

[Swan Noir]

But that is why they are odds, probabilities and not certainties. We are talking about how often they fail and how lucrative this bet is when the huge overlay holds up.

In case you are in doubt it will hold up over 83% of the time.

Quote from relocate:

Let me tell you,even the most greatest 'odds' sometimes fail.

 

[abattia]

"Kelly Criterion ... a mathematical formula relating to the long-term growth of capital... currently used by gambers and investors to determine what percentage of their bankroll/capital should be used in each bet/trade to maximize long-term growth.

Kelly % = W - [(1-W)/R]

... there are two key components to the formula: the winning probability factor (W) and the win/loss raion (R)...
[Investopedia.com]

W = 5/6
R = 2

----> Kelly % = 75%

 

[dom993]

No matter how good the odds are, betting 70%+ is a gambler attitude, not a professional trader attitude.

 

[Swan Noir]

I disagree. If you can continue to get topped off every year and faded 70% is actually quite a conservative play.

Quote from dom993:

No matter how good the odds are, betting 70%+ is a gambler attitude, not a professional trader attitude.

 

[Josef K]

You don't get topped off, you start with $500,000 and receive no more after that except your winnings.

 

[Swan Noir]

My mistake. Then I bet less. I want to be able to take quite a few bites at the apple.

Quote from Josef K:

You don't get topped off, you start with $500,000 and receive no more after that except your winnings.

 

[relocate]

Quote from Swan Noir:

But that is why they are odds, probabilities and not certainties. We are talking about how often they fail and how lucrative this bet is when the huge overlay holds up.

In case you are in doubt it will hold up over 83% of the time.

Quote from relocate:

Let me tell you,even the most greatest 'odds' sometimes fail.

It is never lucrative,regardless if overlay.Its not even lucrative on a Jack Hershey level if trading!

 

[Swan Noir]

I guess that's a point of view.

Quote from relocate:

It is never lucrative,regardless if overlay.Its not even lucrative on a Jack Hershey level if trading!