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To: chic_hearne who wrote (36637)	11/12/2000 9:36:49 PM
From: GraceZ	Read Replies (2) \| Respond to of 436258

I assume you are talking about time decay in premiums on options No, that is not what I'm taking about. Here is an example of an activity with a negative expected return. For example, everyday individuals at casinos willingly place bets on red or black at a roulette wheel. If you bet on red and it comes up you receive your original bet back plus an additional amount equal to your bet, if black comes up you lose your bet. In addition, if (under French roulette) zero comes up you also lose your bet. For the case of American roulette you lose your bet if either zero or double zero comes up! As a result, in French roulette if you bet $100 on red you have a 18/37 chances of winning an even money bet, and 19/37 chances of losing your bet. What is the expected return from this bet? The expected terminal payoff from this bet is 0.4865200 + 0.51350 = $97.30 from an initial outlay of $100. As a result, your expected return is negative (E(return) = ($97.30 - $100)/$100 = -0.027). ftsweb.com