# Can a Kelly Criterion Percent be very high?

This is my personal record trading options (selling spreads) over a certain time period:

• Win Rate: 83.94%
• Average Win: $299 • Average Loss:$1,181.40

The formula for the Kelly Criterion is: $$f=\frac{p(b+1)-1}{b}$$

where $f$ is a percentage of how much capital to place on a bet, $p$ is the probability of success, and $b$ is the payout odds (eg. 3 dollars for ever 1 dollar bet).

So if I put in my numbers: $$f=\frac{0.8394(\frac{299}{1181.4}+1)-1}{\frac{299}{1181.4}}$$

Which equals 20.48%

That seems really high. Accordingly to this, I should put up 20% of my portfolio per trade. What am I not understanding?

• Your reaction is very common. Many people bet less than the full Kelly for 2 reasons: (1) The strategy is optimal in the long run (or for a log utility investor) but quite volatile in the short run, (2) You cannot be sure that 299/1181.40 are the true odds, they may be overstated due to recent good luck or other reasons. Sep 20, 2017 at 15:35