Time value of money

[fun160]

Yesterday Fezzik posted that the Total for the BCS Championship game was too high at 48.5. He was right, of course, and it is now down to 47.

Fezzik's call got me thinking about the time value of money. How big a perceived edge do you need to tie up your money for four weeks?

This isn't like the stock market, where you can sell at 48.5, buy it back at 47, close out your position, and put your money back to work. If you hedge your Under 48.5 with Over 47, you aren't flat, you have two bets and now twice as much money tied up. (Yes, I understand a non-arbitrage hedge is generally -EV and I'm not suggesting someone who has Under 48.5 do this.)

Is there a mathematical solution to my question or do you guys go by feel? (If someone is a crappy gambler, perhaps it's +EV for them to tie up their money for a month if they have a deep edge!)

[Utah]

The key is opportunity cost. Where else would your money have been? If it would have simply sat in your pinny account then the TVM = 0. If it would have paid down credit card debt then it is 15% annualized.

It all depends.

[Thremp]

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The key is opportunity cost. Where else would your money have been? If it would have simply sat in your pinny account then the TVM = 0. If it would have paid down credit card debt then it is 15% annualized.

It all depends.

[/ QUOTE ]

This is perfect. Vacation for weekend = taking 1c arbs on Sunday night football Thur night.

[B00T]

There is no mathematical solution unless you have a strict bankroll only for sportsbetting. It may be worth it for someone with a life savings of $500k to take a stance on what you described above, but not for someone with a net worth of $10k.

I suppose if you are on a very strict budget with regards to your sports bankroll, you can hypothetically figure out what your average return is for 3 weeks and if your perceived edge is higher than your previous activity in a similar 3 week span then yea, it's worth it.

I had about $7000 tied up for 3 months for some baseball futures that had an EV of ~4000. In my situation the $4000 return was greater than what I would of yielded with that specific $4000. If it was my only $7000 it would not of been worth it, but for the marginal utility (I think thats what its called, graduated with my econ degree 8 yrs ago [img]/images/graemlins/cool.gif[/img]) of that specific $7k it was worth investing for that long.

The short answer: it depends [img]/images/graemlins/crazy.gif[/img]

[beetman]

That's where credit accounts come in handy.

[domer2]

Or just having funds much larger than the maximum bets.

I have no problems tying up my money for as long as 12 months if I have a large perceived edge. Obviously the opportunity cost plays a role, but that's where economies of scale come into play.

Get a no interest credit card and get more funds into your accounts.

[fun160]

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Get a no interest credit card and get more funds into your accounts.

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You're not married, are you?

[LargeCents]

[ QUOTE ]
Yesterday Fezzik posted that the Total for the BCS Championship game was too high at 48.5. He was right, of course, and it is now down to 47.

[/ QUOTE ]

If this line move could have been reliably predicted, the extra edge advantage could be easily calculated. My gut says 1 1/2 pts on NCAAF total is worth > 1%.

[ QUOTE ]
Fezzik's call got me thinking about the time value of money. How big a perceived edge do you need to tie up your money for four weeks?

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Depends what else you're doing with the money. It isn't tough to get 5% annually on a one month CD right now. Again, easy to calculate your edge, but it's < 1%.

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Is there a mathematical solution to my question or do you guys go by feel? (If someone is a crappy gambler, perhaps it's +EV for them to tie up their money for a month if they have a deep edge!)

[/ QUOTE ]

If someone is a crappy gambler, something tells me they don't know when they've got a deep edge. They should invest their $$$ in the 1 month CD I mentioned above.