What Is a “Lotto Ticket” Trade in the Context of Options Trading?

A "lotto ticket" trade refers to buying very cheap, far out-of-the-money (OTM) options with a short time to expiration. The name comes from the trade's characteristics: a very low cost (like a lottery ticket), a very low probability of success, but an extremely high potential payout if a massive, unexpected price move occurs in the underlying asset.

These trades are highly speculative and traders should only risk capital they are fully prepared to lose, as the most likely outcome is the option expiring worthless.