Let's say one day an eccentric billionaire comes to you with the following mind-game (and backs it up with a suitcase full of cash): He'll give you double or nothing on the roll of a single die. If it comes up a 'six' you lose the entire amount wagered. If it comes up one through five, you win double your money. In this hypothetical situation, your current net worth is first adjusted to exactly $500,000, and you have no choice on that matter even if this would be an adjustment in the wrong direction in your case. You won't be cheated- the game is not rigged in any way. Another thing is that your insane potential benefactor has put aside millions in trust/escrow so that you will have the opportunity to play this one in six game, once a year, every year, for the rest of your life. <b>Question: How much of your net worth do you risk this time/this year?</b> ----- This question came up in a discussion between traders on how much to push into the pot when you finally find that special once-a-year market scenario where you get that maximum-conviction, 'perfect setup' type of trading opportunity. So it's not all that hypothetical after all...
Only an idiot would do that because the odds are skewed so heavily... Do you hate money or are you just really stupid?
Yes, 0% wagered counts as "10% or less". Your net worth has already been adjusted to $500K, and only now do you begin to have choices. ____ "In this hypothetical situation, your current net worth is first adjusted to exactly $500,000, and you have no choice on that matter even if this would be an adjustment in the wrong direction in your case." --->The entire reason I added that part, was because if everyone were to start the game with their own current net worth as it really is, this would be a major factor skewing the results. The guy with a $10,000 total net worth is in a very different situation than the guy with millions.