John Williams wrote: > >> Imagine that you, me, and a few other stupid guys believe that >> some stock prices will go up tomorrow by 10%. What should we do? > > Not enough information. What probability will they go up by 10%. What > are other possible outcomes and probabilities? How much money do > we have to risk? > It should be implicit, by what I wrote next, that those stupid guys knew for sure that prices would raise by 10% - and they are wrong. After all, what's the point calling them stupid?
>> Now suppose that some smart guy _knows_ that there's a 50% chance >> that tomorrow's price will raise by 100% and there's a 50% chance >> that tomorrow's price will get back to 0%, and that whenever he >> puts money in that, the g*vernment steals 1% from him. > > That is straightforward to profit from with any number of options > strategies. Look up "long straddle" and "long strangle" for example. > I am making it simple. There ain't no options. Just buy or (short) sell. >> Would s/he be wise to put his/her money into this lottery just >> to prove that we are fools? Alberto Monteiro _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
