Overtime: The Unconventional Decision to Kick

The following Wall Street Journal article does a pretty good job of explaining the Patriots coach Bill Belichick’s thought process: by kicking in this situation, Belichick believed the Patriots were actually maximizing their win probability. Given the many scenarios in which the Patriots could stop the Jets’ offense and receive the ball back with a short field, the team would then need only to kick a field goal in order to win the game. In making his decision, Bill Belichick considered the distribution of outcomes, something we apply at SIG quite frequently to help us calculate expected value.

The idea of expected value is very important for both an NFL coach and a trader at SIG. For example, when trading an option on a stock, we need to consider the distribution of outcomes in the price of the underlying stock. This is a difficult problem (often without a definitive answer!), which makes trading challenging and exciting. Check out this WSJ post where Belichick explains his strategy to maximize expected value of winning the game.

h/t to Scott, Equity Options Trader