General Forum

Agree

Posted By: Don Schlesinger
Date: 14 Aug 01, 1:11 pm

In Response To: Risk-averse betting? (John May)

This discussion is not being carried out on the right level. There is more to the question than simply the EV. Those not recommending a hedge wouldn't last five minutes on Wall Street, where the age-old adage is: No one ever went broke taking a profit.

It's foolish to debate whether the hedge has positive EV or not. That's NOT the main point, no matter what you guys say. The main point is that a CERTAIN payout can be established, with NO RISK, and that the certainty equivalent (CE) for a risky payoff is only half of the EV. So, if you promise me $10,000 with CERTAINTY (not to even mention the incredible opportunity of a middle!!), as opposed to a decent chance that I will lose the wager, I have to consider a hedge as making perfect sense.

Since the teaser points change the odds of winning to better than 50%, the positive EV and hedge amount need to be carefully calculated, but to dismiss any hedge at all as being irrational is just plain wrong. Reducing variance while still receiving profits is not a cowardly act; on the contrary, it is the CORRECT thing to do.

I've seen people fired on Wall Street for having enormous paper profits and being stupid enough to not take any of the money "off the table," as we say.

Don

Messages In This Thread

How to handle the "huge exposure game" -- Fezzik -- 12 Aug 01, 11:53 pm

So, will you be hedging against the Mariners in October? -- James -- 13 Aug 01, 12:33 am

Difference between A's and Eagles -- StevieY -- 13 Aug 01, 11:35 am

that's not a hedge -- docriver -- 13 Aug 01, 12:10 pm

Yes and no -- StevieY -- 13 Aug 01, 12:33 pm

risk -- docriver -- 13 Aug 01, 1:04 pm

Hedging -- StevieY -- 13 Aug 01, 1:38 pm

Example please? -- docriver -- 13 Aug 01, 1:56 pm

Example -- StevieY -- 13 Aug 01, 5:36 pm

because you have 40x in equity now -- docriver -- 13 Aug 01, 6:01 pm

above title should read : 18x, not 40x (nt) -- docriver -- 13 Aug 01, 6:08 pm

You aren't wagering 18,000+ -- StevieY -- 13 Aug 01, 6:11 pm

Agree to disagree -- docriver -- 13 Aug 01, 6:20 pm

You are both right, even disagreeing -- Fezzik -- 15 Aug 01, 1:32 am

Size your bets according the payoff, not the bet size. -- Stanford Wong -- 13 Aug 01, 6:39 pm

he really has found some arbitrage -- Math Boy -- 13 Aug 01, 8:21 pm

You can always overbet if the marginal EV from betting more is less than th -- docriver -- 13 Aug 01, 8:41 pm

Practical issues -- James -- 14 Aug 01, 11:27 am

i'm the minority -- docriver -- 13 Aug 01, 8:38 pm

hedging futures bets -- rainmandon -- 21 Aug 01, 7:51 pm

I understand the bet... -- StevieY -- 21 Aug 01, 7:58 pm

hedging futures -- rainmandon -- 21 Aug 01, 9:22 pm

I understand the bet... -- StevieY -- 22 Aug 01, 6:40 pm

Sea hedge -- Fezzik -- 15 Aug 01, 1:34 am

Oops.......I showed my Sea Bias -- Fezzik -- 15 Aug 01, 1:36 am

I'm in the same boat. I won't hedge. -- Stanford Wong -- 13 Aug 01, 8:57 am

Risk-averse betting? -- John May -- 13 Aug 01, 9:14 am

Agree -- Don Schlesinger -- 14 Aug 01, 1:11 pm

1 investment question -- Fezzik -- 15 Aug 01, 2:29 am

Attempt at some answers -- Don Schlesinger -- 15 Aug 01, 8:13 am

how much does money mean to you? -- docriver -- 15 Aug 01, 8:39 am

In-the-money options -- Jaeger -- 23 Aug 01, 6:44 pm

No -- Don Schlesinger -- 23 Aug 01, 8:55 pm

Risk-averse betting? -- lepto -- 14 Aug 01, 1:33 pm

Your bet suffered turf toe -- McNabb#1 -- 14 Aug 01, 4:24 am

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