Profitability of Profit

In this video, Mike Khouw introduces the concept of probability of profit and expected return in a dice game. Players roll two dice, aiming for a total of eight or higher to win a payout, with each roll costing $7. The probability of winning is calculated based on the number of favorable outcomes out of all possible outcomes (15 out of 36), resulting in just under 42%. Despite the probability of winning is less than 50/50, there's an expected profit per roll of $0.78, calculated by multiplying the probability of each outcome by its respective payout and summing the results. This expected profit arises from the fact that the profits from winning exceed the losses from not winning. Mike emphasizes the importance of understanding these concepts in trading and investing, as they help assess risks and potential returns accurately.