This is not exactly about trading but I encountered this on P. 43-
44 of "Option Volatility and Pricing Strategies" The question
under consideration is simply what is the value of a dollar bet on a roulette wheel that has numbers 1-36 plus zero and double zero and pays off 35-1 if you pick the right number. In other words it pays 35-1 on a 37-1 shot. He concludes that a dollar bet is worth about 92 cents and arrives at this figure by multiplying the 35 dollar return by the chance of winning which is 1/38 thus (35) (1/38)= a little more then .92 So he gets a dollar bet being worth 92 cents or put differently an %8 disadvantage to the player. This number seemed higher then what I had always read so I considered the problem myself. Over 38 trials we win 35 bucks once and loose one dollar 37 times so we are minus 2 dollars after every 38 spins. 2 dollars / 38 = 5.26 cents or so. So I have the player loosing 5.26 cents for every spin or a 5.26 % disadvantage for the player. So he thinks the fare price for the dollar bet is a little more then 92 cents and I think its a little less then 95 cents. who is right? If it turns out that I am retarded I would like to apologize in advance for this. If I am right should I still read the rest of the book?
The Casinos edge in a double 00 wheel is 5.26%, so your calculations on this front are correct