Thread: Risk Poll 1 - If I gave you $300...

If I gave you $300 and then gave you a choice:

I will give you another $100

or

I will flip a coin, heads you get nothing more, tails you get $200.

Which one would you take?

Ill take the gamble it is a good win but not so big a loss cause you still got the 300 as the guy next to you, he might get the 100 extra if he chooses so. but ill be sitting with the chance of getting 200 making me the winner of the two of us with a 50% chance.

short told:

200 win is better than 100 missed

I think you may have different results if you used larger numbers. For example, add 2 or 3 zeros. But to lose $300 I didn't already really have is no loss. But if I could lose $300,000, I may not be willing to take the risk.

as a stock trader it is a classic risk reward analysis. Since the first scenario is a sure thing, by entertaining the second option you are in fact risking the sure thing for the first option.

Option 2 then has a risk of $100 and a reward of $100 (200 - the sure thing from option 1).

At a 1 to 1 risk / reward, I'd pass on that trade.

Just as in your second poll, the results should be statistically equal.

In the first case, I'm 100% sure I'll make $100.

In the second, I have a 50% chance of getting nothing, and a 50% chance of making $200. That's an average of $100.

So it shouldn't matter. But in reality 50%/50% flips of a coin probably aren't really 50/50. One side of the coin is likely heavier than the other, and should land down more often than the other. So if you knew which side that was, you'd want to bet against it.

That's the case with dice, where the 1 and 6 are opposite each other. The additional dimples on the 6-side make that side of the die lighter. So, if the die is rolled a million times, that side will show slightly more often.

Boring data, I know...

You make a good point about the actual dollar amount. Maybe I should have made it 3,000 instead, but I hope that people aren't making a decision based on what $300 means to them. It's like how people who play poker at .05/.10 so it's only $0.10 so they play very loose.

I think that on this forum the results will be more skewed towards the flip. If I posted this on a Suze Orman forum I'm sure the majority would choose the sure thing.

This survey came up in a book that I'm reading and I thought it was interesting so I wanted to see what people on here thought. I'll post the results from the book later on.

Its all risk vs reward. If your not risking what you already have, why not go for the bigger reward?

Originally Posted by biophase

You make a good point about the actual dollar amount. Maybe I should have made it 3,000 instead, but I hope that people aren't making a decision based on what $300 means to them. It's like how people who play poker at .05/.10 so it's only $0.10 so they play very loose.

When's the last time you played micro limit? :P

It seems to me that whenever I jump down to .50 / 1.00 it's an unbearable grind with a bunch rocks only playing the top 5% of hands.

As I go up in limits, especially when I play $25/50 or greater... my opponents are typically looser and play a more quality game overall.

Anyway, as it applies to this thread. I rarely go for the "sure thing" unless it's far greater than the risky choice. But when does life ever present you with a "sure thing" that even comes close to being as rewarding the risky alternative?

Since both choices come out equal after, say, 10 goes, I chose the sure $100. Although, if it's just one go, then I choose the sure $100

For those who have voted in this poll, please vote in the second poll:

http://www.thefastlanetomillions.com...you-500-a.html

I will explain these two polls later tomorrow as it pertains to stock traders.

Well the official numbers of both polls came out to:

If you had $300,
10 - would take the extra $100
6 - would flip for the $200

If you had $500
4 - would give away $100
11 - would flip to keep it all

===============================
The purpose of this poll was to illustrate what the book I'm reading (What the Dog Saw) says about human emotion with regards to the stock market. I just wanted to see if the results here would be the same as the book. And they were if you took the numbers in a vacuum, but since the voters are public I can see that nobody chose change votes in the polls.

So anyway, this is want the book said. It said that most people would rather not risk money if they don't have it. Meaning that if you had $300 you would rather take the extra $100 to get to $400 than to try to get to $500 with a little risk.

It also said that most people would rather risk money that they have in order to keep their money. So if you have $500, you would take a risk to keep it rather than take a sure $100 loss.

In both cases, your chances of keeping $300, $400 or $500 is exactly the same.

With the above said...

This is why when people are in the stock market they sell with small gains and hold their losses. If you buy a stock for $10 and it goes to $12, you worry about it dropping back down to $11. They want to lock in profits so you sell some or all.

However, if you buy a stock for $10 and it drops to $9, you will risk the stock going down to $8 on the chance that it may come back to $10.