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Theoretically, is this idea possible? 1) Make a casino with slot machines/etc. Connect slot machines to a stock market day trading system that acts at random o

by cm2012 11y ago

Theoretically, is this idea possible? 1) Make a casino with slot machines/etc. Connect slot machines to a stock market day trading system that acts at random on each lever pull (I.E. buying and then selling 10 seconds later, when the price is a bit different) 2) Gamblers will gamble as they usually do, but since the stock market grows on average by 7% a year, they should theoretically come out ahead. 3) Casino can take 3.5% for setting everything up. What would make this impossible?

ddp26 11y ago
The gamblers will not come out ahead. The 7% return you mention requires buying and holding.
- lotyrin 11y ago
  You'd have to run it as a sort of recurring scheme where the current players are earning an expected value based on the investments of the previous years' players - start with a negative expected value until the backing fund achieves a decent annuity, then trend it toward positive.
fastbetshenry 11y ago
A slot machine based on this principle exists and was presented at ICE last year (forgot the name). However keep in mind that the stock market grows at single digit percentage points per year. Slots machines only run for a couple of seconds, so there's no real profit made in that time frame. (As far as I can recall the rational for this system was of legal nature).
justzisguyuknow 11y ago
The whole appeal of a slot machine is that you might put in a dollar and get back a thousand. The prospect of a huge payoff is what keep s people pulling the lever. Since that would essentially never happen on a 10-second buy/sell action on a real stock, I doubt any actual gambler would care to participate.
- mason55 11y ago
  You can make payout tables similar to what they are now but instead of having a 1% house edge there's actually a small player edge. The house then covers the player edge and makes money by the stock investment. The issues would be 1) If you assume a 7% annual return, the return on the 10 second investment would be extremely small. 7 percent / 250 working days per year / 8 market hours per day / 60 minutes per hour / 6 ten second periods per minute = 9.7e-6 percent return every 10 seconds. On a billion dollars play through in a year you'd be looking at a $97 return. 2) I don't know what commissions are like on the volume of small, short trades you'd be doing but I imagine they would be more than $0.0000001 cents per trade which means you're losing money.
  - bduerst 11y ago
    You would have to be your own broker and/or build your own HFT system. It's been a while since I used it, but API trading for laymen was somewhere between $1-2/trade at the bulk packaging.
- p0ckets 11y ago
  You can use some form of leverage to allow the possibility of 1000x jackpots by using leverage - options, leveraged ETFs etc.
eru 11y ago
Look up how insurance companies (like Warren Buffett's!) use `float'. The mechanics are similar.

by cm2012 11y ago

ddp26 11y ago

The gamblers will not come out ahead. The 7% return you mention requires buying and holding.

lotyrin 11y ago
You'd have to run it as a sort of recurring scheme where the current players are earning an expected value based on the investments of the previous years' players - start with a negative expected value until the backing fund achieves a decent annuity, then trend it toward positive.

fastbetshenry 11y ago

A slot machine based on this principle exists and was presented at ICE last year (forgot the name). However keep in mind that the stock market grows at single digit percentage points per year. Slots machines only run for a couple of seconds, so there's no real profit made in that time frame. (As far as I can recall the rational for this system was of legal nature).

justzisguyuknow 11y ago

The whole appeal of a slot machine is that you might put in a dollar and get back a thousand. The prospect of a huge payoff is what keep s people pulling the lever. Since that would essentially never happen on a 10-second buy/sell action on a real stock, I doubt any actual gambler would care to participate.

mason55 11y ago
You can make payout tables similar to what they are now but instead of having a 1% house edge there's actually a small player edge. The house then covers the player edge and makes money by the stock investment. The issues would be 1) If you assume a 7% annual return, the return on the 10 second investment would be extremely small. 7 percent / 250 working days per year / 8 market hours per day / 60 minutes per hour / 6 ten second periods per minute = 9.7e-6 percent return every 10 seconds. On a billion dollars play through in a year you'd be looking at a $97 return. 2) I don't know what commissions are like on the volume of small, short trades you'd be doing but I imagine they would be more than $0.0000001 cents per trade which means you're losing money.
- bduerst 11y ago
  You would have to be your own broker and/or build your own HFT system. It's been a while since I used it, but API trading for laymen was somewhere between $1-2/trade at the bulk packaging.
p0ckets 11y ago
You can use some form of leverage to allow the possibility of 1000x jackpots by using leverage - options, leveraged ETFs etc.

eru 11y ago

Look up how insurance companies (like Warren Buffett's!) use `float'. The mechanics are similar.