Comment by fny

Many here are correct that the Kelly criterion is relatively useless compared to standard portfolio management techniques for a basket of assets.

However... I will say that it's incredible useful when deciding on more high risk bets based on binary outcomes which is not something portfolio managers would dream of doing for their clients. Consider a long dated call spread on the SPY that goes out to 12/2023.

Say you think the SPY will be over $600. Today, for $140 of risk, you stand to make $1,860 if you're right if you buy a $570 call and sell a $590.

This is exactly what Kelly was made for.

The proper strategy, IMO, is to find a comfortable allocation for trades of this sort as a portion of an overall portfolio (Say 1-2%), then of that percentage use Kelly to allocate capital to different bets of this nature to lower the variance.

So sure, Kelly isn't useful for portfolio management writ large, but for managing a portfolio of binary trades, it's a useful metric.