Options as a lottery ticket

Quote from iprph90:

i will weigh in on this and say that buying deep otm puts or calls on major indexes may be lucrative as a legimate strategy.(by no means as a sole source of compensation) i will usually trade these lotto tickets after months and months of one way movement.
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This is the best lottery option strategy. To really double your fun, make it a long strangle and hope the market touches both of the options before cashing out.
 
Quote from billb2112:

I'm very familiar with option spreads and trying to minimize time decay, directional bias and basically trying to capitalize on what is probable versus what is not probable. But let's say you wanted to buy a lottery ticket. Something improbable, with a high likelihood of not panning out. It might pan out over time and it might not. I think Mr. Black Swan probably talked about this in his books, but let's put the theory into practice. He thinks far out of the money options are underpriced because they don't consider the black swan.

So let's assume this is true ...

If you had $100 or $1,000 month after month to put on red/black in Vegas vs. an option strategy month after month, what would you do? Would you put it on a roulette wheel? Or would you put it in options ... if in options what sort of strategy and where?

This is a very hypothetical question that is an attempt to stimulate constructive conversation, not to berate strategies or ideas. In other words, do you believe in Taleb's assertion and if so, how would you take advantage of this market inefficiency?

A spread? Outright puts/calls? Do this on a single stock, an index? Leverage it?
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Instead of buying lottery tickets monthly (which many people does)
you can buy OTM options every month (works best with OTM puts, as panic is too strong a psychological reaction).

You can get your lottery tickets (puts) for free if you buy them with the proceeds of bonds interests, or stock dividends.
 
Quote from crgarcia:

You can get your lottery tickets (puts) for free if you buy them with the proceeds of bonds interests, or stock dividends.
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Ha-ha, you're just full of absolute pearls of wisdom like this, aren't you?
 
Quote from billb2112:

I'm very familiar with option spreads and trying to minimize time decay, directional bias and basically trying to capitalize on what is probable versus what is not probable. But let's say you wanted to buy a lottery ticket. Something improbable, with a high likelihood of not panning out. It might pan out over time and it might not. I think Mr. Black Swan probably talked about this in his books, but let's put the theory into practice. He thinks far out of the money options are underpriced because they don't consider the black swan.

So let's assume this is true ...

If you had $100 or $1,000 month after month to put on red/black in Vegas vs. an option strategy month after month, what would you do? Would you put it on a roulette wheel? Or would you put it in options ... if in options what sort of strategy and where?

This is a very hypothetical question that is an attempt to stimulate constructive conversation, not to berate strategies or ideas. In other words, do you believe in Taleb's assertion and if so, how would you take advantage of this market inefficiency?

A spread? Outright puts/calls? Do this on a single stock, an index? Leverage it?
More...
As a broad generic approach, these strategies don't work. There's a whole plethora of research/data to support this conclusion. The most ironic bit of anecdotal evidence is Taleb's own performance during the years he traded (before he became a pundit).

This is not to say that outstrike options are never mis-priced. Occasionally, they are and money can be made buying the right lottery tix.
 
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