By the way, if you are observant, this kind of betting proposition shows up at tables games, sports bets, live poker, and certain casino promotions. Namely, the bet pays even money, 1-to-1, even pot odds, but you have an edge due to an observation you have made and your opponent has not. Now, a 5% edge might seem like a lot, but it's not 100%, what I'm trying to say is it's still gambling. The Kelly number would be about 20 and the N0 number would be about 400, meaning even if your bankroll is over 20 bets and you can pull this trick off 400 times before your opponent catches on, you still have about a 16% chance of coming out a loser. As Kenny Rogers put it, don't count your winnings till the deal is done. Big EV is nice but it's only one part of gambling, you still have to know the Kelly and N0 numbers.
Kelly is about variance/edge
N0 is variance/edge/edge
variance is 1 for even money bets
Why is Kelly important? How can I answer that question? Read Poundstone's "Fortune's Formula" to find out.
Why is N0 important? Because the tax man taxes on a yearly basis and doesn't allow carry forward or backwards of gambling losses. You need to be able to run about N0 flips before the tax year is out or you're likely to get screwed on taxes. You might find a hot play in December, but it won't be a play till January if you consider taxes.
