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Apple Inc. |
> i absolutely agree and am happy with the odds. I personally think
> that AAPL will close below $110 at end of June with less than 1 in 10
> chance, and with a 25% payoff with that chance, my expected payoff is
> 2.5% return.
> but i'd say an expected value of 2.5% return is a bit too low for a
> 260k investment, for me anyways. so i'll probably be doing just that
> but with 2% of the amount you've invested in :p
dnl, as for your calculation of a return of 2.5%, I'm just not sure
where you're getting that. According to your estimate that there's a
10% chance of AAPL being below $110, he has a 90% chance of making a
25% return (in less than a month). And he has a 10% chance of making
less than that, all the way down to -100%. Sticking with your
estimates, even if it was a 10% chance of a -100% return, I believe
he's left with a 12.5% expected return (paid $4/share; expected value
= 0.9 * $5 + 0.1 * $0 = $4.5; $4.5/$4 = 112.5%)... again, in less than
a month.
If I'm messing something up here, let me know.
Jon