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To narrow the focus down to the risk point of view for this casino
example:
The gambler and the casino have a completely different situation.
Generally you have relatively small edges in casino games. Speaking
of edge you probably remember that this is a longterm thing. Even
when a gambler plays 10 hours a day for 7 days straight with x games
per hour, (gambling) mathematicians would never consider this
longterm.
Bottom line: volatility and skew are much more important for the
(short term) gambler than his edge. This is called trip risk. There
is a chance of losing money as well as making money when your vol
dominates massively over your edge... depending on your utility
function the drinks and goodies might not be so bad after all... ;)
The casino on the other hand has enough gamblers coming in and
playing to focus more on edge, while keeping an eye on vol and skew.
However, big players can mean serious trouble for casinos as the
distribution changes dramatically.
It happened in London that a casino had to report its investors some
bad news about the trip risk it had to face with few big players over
one weekend... I think they effectively posted an L instead of a P
for the year.
In other words: only selling gamma, even as the edge whiz kid on the
block, might get you hosed when you don't keep your other
distribution parameters in check... (and maybe buy some gamma back
before the big boys hurt you with their trip risk)
Soeren
> IT> Naked premium selling is a disaster waiting to happen.
>
> GOOD SPREAD THAT RUMOR FAR AND WIDE!
>
> remember the guy asking about the casino's ??? they give you
food
> drinks and other goodies like private gambling lessons ect.
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