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response

Posted By: ricky
Date: 20 May 02, 9:58 am

In Response To: issues and answers (Dunbar)

I agree with you about using the same example throughout the post. I didn't think it out like a paper, most of it was just a streaming thought process.

re : the math correction - you are right. thank you.

I wrote : "The more I think and type this, the more I realize that when I make that $1000 futures wager that nets me $1000 theoretical, that I am in fact winning that $1000 theoretical, if I know with 100% certainty that I will hedge away all but $5000 of the risk, and I know that I can get out better than -160 vs -150, then its a no brainer to me. "

You wrote : "I don't know how you came to this conclusion. You can whittle down that $462 loss of ev by (1) hedging less, and (2) doing better than -160, but you cannot get full value for your original bet. (Unless you can get -150 or better on your hedge, in which case the hedge becomes a good bet in its own right!) "

You're right, I used my incorrect math above to assume $1000 bet = $1000 theoretical win. In fact you have point out that the win is not $1000, but roughly $538 (let's disregard the other elements to make this easier).

But would I still be happy to bet $1000 in that case rather than bet an amount that will never make me feel the itch to hedge? Yes. Since my risk tolerance is risking $5000 per event, that means that I won't need to ever hedge this futures bet if I bet roughly less than $250 (I get that by simply saying that my risk is roughly $19K with a $1000 bet in the championship game, so to get thr risk down to $5K, which is roughly 25% of 19K, that brings down the $1000 bet down to $250). If I don't hedge a $250 bet, I make $250. If I bet $1000, I made twice that much. And again, this is all assuming no other issues. So I still have the conclusion of betting a significant amount more than the "never have to hedge" level.

Messages In This Thread

Belmont questions -- ricky -- 19 May 02, 2:38 am

Answers to the easy ones.. -- Sluicebox -- 19 May 02, 8:10 am

a few more answers -- Dunbar -- 19 May 02, 8:32 am

Bid got hurt though... -- StevieY -- 19 May 02, 11:41 am

yep -- Dunbar -- 20 May 02, 3:14 am

added question -- ricky -- 19 May 02, 11:28 am

No -- Rusty Starfish -- 19 May 02, 11:36 am

thanks smartass. (nt) -- ricky -- 19 May 02, 12:26 pm

Not your most important question, but -- Gladstone -- 19 May 02, 1:26 pm

A week isn't enough for horses... -- Burnt Card -- 19 May 02, 1:56 pm

Ricky, the dark cloulds gather around, but we aren't dead yet. -- Fezzik -- 19 May 02, 12:42 pm

don't worry about me -- ricky -- 19 May 02, 1:13 pm

Hedging( War Emblem) futures -- D -- 19 May 02, 4:18 pm

2 & 3 -- ricky -- 19 May 02, 4:38 pm

Reponse -- D -- 19 May 02, 4:47 pm

here we go again :) -- ricky -- 19 May 02, 5:12 pm

Im not the one- -- D -- 19 May 02, 5:39 pm

if you disagree, please respond to this post -- ricky -- 19 May 02, 6:19 pm

Nothing to worry about yet -- patrick -- 20 May 02, 8:20 am

issues and answers -- Dunbar -- 20 May 02, 8:35 am

response -- ricky -- 20 May 02, 9:58 am

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