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# math and probability geniuses... i need help

Discussion in 'Trading' started by daytr8r, Nov 5, 2002.

1. ### daytr8r

here's the probability question:

lets say you place a trade which has a 50/50 chance of being favorable. if it is unfavorable you lose \$100. if it is favorable, you have 60% chance of making \$100, 20% chance of making \$240, and a 20% chance of losing \$30 (commissions).

should you place the trade, and what is your probability of each level of profit or loss? since there are four possible outcomes, what are the chances of each?

2. ### ddefina

30% x 100 = 30
10% x 240 = 24
10% x (30) = (3)

50% x (100) = (50)

Total = 1

3. ### acrary

Expectation = (prob. of win * size of win) - (prob. of loss * size of loss)

In this case the size of win is a distribution:

.6*100 = 60
.2* 240 = 48
.2* -30 = -6

The size of win is 60+48-6 = 102

Solving for expectancy:

E = (.5*102) - (.5*-100)
E = 51 - 50
E = 1

I wouldn't waste my time trading this low of an expectation, but a scalper might love it.

I'll take it. Enlighten us, what is the trade?

5. ### nusrat

You include "20% chance of losing \$30 (commissions)" as one of the "favorable" cases. One might *assume* that you mean "20% chance of a break-even [you call that "favorable"?] with \$30 lost to commissions."

Please be more explicit. Is a \$30 commission already factored into the other cases?

6. ### profitseer

Yeah really, for a guy like me who doesn't know how to program systems, I would buy a book of just easy to follow systems that should break even.

7. ### aphexcoil

That's better than one of the alternatives.

8. ### daytr8r

alright, i should've just asked my original question. however, it has nothing to do with trading, so i changed my question to suit this forum.

to understand the question, you need to have a decent knowledge of betting sports.

basically, i have a place that will offer a certain bet that i have not seen offered before. they will allow me to parlay the first half of a basketball or football game to the money line on the same team to win the game. since you have roughly a 50/50 chance of winning the first half bet, the chances of winning the second half of your parlay is significantly higher if it's a team that already has a lead.

i.e., last night i parlayed the first half of gb to gb to win the game. a \$20 bet to pay \$34.

the reason i posted the original question was to find out if i had an edge over this sports book. immediately after i posted my question, i realized the math was simple. i was just being lazy.

i realize that without any data, it is impossible to figure out if i have an edge.

nothing is impossible.

and its also improbable

10. ### RainMaker3000

expected return on win = \$57
expected loss = \$50

I think

#10     Nov 5, 2002
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