![]() ![]() Puts give the buyer the right, but not the obligation, to sell a stock at a certain price. ![]() As the Fool has discussed in the past, options are contracts composed of either puts or calls. Before I explain the connection between casinos and stock options, a quick refresher course in options is called for. What does this casino talk have to do with stocks? Nothing, but it actually does have quite a bit to do with stock options. In fact, the decks are so stacked against gamblers that if they actually start winning, casinos will accuse them of cheating. In other words, over the long term, a casino knows, with mathematical certainty, that it will collect a profit of $0.0526 per dollar wagered. This $2 deficit is what is known as the "house edge" and amounts to 5.26% of every dollar bet. Does a bettor at a casino actually receive $38 for a winning number? Noooooooo. Based on the odds, a gambler who bets $1 on a number should receive $38 back if her number comes up on the wheel. ![]() The odds of the ivory ball falling on the number chosen are 37 to 1, or, put another way, a 1-in-38 chance. A bettor has 38 numbers to choose from: 0, 00, and 1 through 36. Casinos know that they will make a profit from their gaming operations (they don't like to use the word gambling) because the odds are always in their favor. It is the only industry I know of that has a business model based on mathematical certainty (life insurance is a close second). Sure, I enjoy the lush hotels, the waterfall pools, the Cirque du Soleil acrobatics, and the all-you-can-eat buffets, but that is not what I mean. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |