## What is the FatKelly?

The FatKelly answers the most important question for the Fractional Social Trader of today:

**How much should I buy?**It is simple, and provably makes betting/investing better. Don’t take just our word for it: Warren Buffett, Charlie Munger, Mohnish Pabrai, and Bill Gross, and other impressive financial types love it too.## How does it work?

The Kelly criterion is a time-tested formula for sizing bets or investments. The idea is simple, and has been called

*Fortune’s Formula*: Given a sum of money to invest, allocate it in proportion to your**edge/odds**(The edge is the*amount*of gain Vs loss. The odds, the*chances of*a gain Vs loss).The FatKelly, is our extension of the traditional Kelly criterion. With two modifications:

- We use Options data implied win/loss probabilities and expected returns, and
- Make fractional adjustment to preserve dry powder for opportunities ahead

## How do I use it in my trading?

It’s a three step process:

- Consider how much money you have to invest (the purse/cash you’re willing to risk without FDIC insurance)
- Source and screen available investments/bets on the basis of edge and odds (Surprise: Social-media and Options data do help)
- Pick the ones you like and use some type of modified Kelly to size the bet given your purse

Check out the 💎 Oracle if you like. It is a tool we made for ourselves and friends to make these steps easier.

## Where can I learn more? (References)

There is some math, but it is surprisingly simple. Examples and some simple formulas can be found in the references below and the others they cite.

- The Kelly Criterion: You Don’t Know the Half of It, CFA Institute
- Option Prices Imply A Probability Distribution, Global Capital
- Understanding the Kelly Capital Growth Investment Strategy, CAIA

## The 💎 Oracle Design Principles: SAVER

**S**imple - to understand and explain

**A**ctionable - to use and test

**V**alue - for users. Saves money/time/effort/pain

**E**nthusiastic - energize with exciting possibilities

**R**eliable - always works and signals are robust