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Market Measures - April 25, 2025 - Kelly's Criterion - The Growth Formula

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Manage episode 479026596 series 68544
Content provided by tastylive. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by tastylive or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://staging.podcastplayer.com/legal.
A market measure segment explores Kelly's Criterion, a mathematical formula developed in 1956 that determines optimal betting size when probability favors you. For options traders, this formula helps determine ideal capital allocation based on probability of profit and odds. Using an iron condor example with 85% success rate and 3% premium, the Kelly formula suggested a 10% capital allocation would maximize returns with zero ruin risk. Most professionals use a fraction of the full Kelly percentage to balance growth with preservation. Option strategies are particularly well-suited for Kelly applications since probability and payoff odds can be estimated before execution.
  continue reading

1525 episodes

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iconShare
 
Manage episode 479026596 series 68544
Content provided by tastylive. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by tastylive or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://staging.podcastplayer.com/legal.
A market measure segment explores Kelly's Criterion, a mathematical formula developed in 1956 that determines optimal betting size when probability favors you. For options traders, this formula helps determine ideal capital allocation based on probability of profit and odds. Using an iron condor example with 85% success rate and 3% premium, the Kelly formula suggested a 10% capital allocation would maximize returns with zero ruin risk. Most professionals use a fraction of the full Kelly percentage to balance growth with preservation. Option strategies are particularly well-suited for Kelly applications since probability and payoff odds can be estimated before execution.
  continue reading

1525 episodes

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