Why Are Deep OTM Options Often Called “Lottery Tickets”?
Deep OTM options are called "lottery tickets" because they have a very low cost (low premium) and a very low probability of success (low Delta). However, if a massive, unexpected price move occurs, they offer the potential for a massive, outsized return (high leverage).
This risk profile mirrors a lottery ticket: high risk of total loss for a small investment, with a tiny chance of a huge payoff.
Glossar
Deep Otm Options
Derivatives ⎊ Deep Out-of-the-Money (OTM) options within cryptocurrency represent a specialized segment of derivatives markets, characterized by strike prices significantly distant from the current market price of the underlying asset.
Deep OTM
Valuation ⎊ Deep OTM options, within cryptocurrency derivatives, represent contracts with strike prices substantially below the current market price of the underlying asset, indicating a low probability of exercise at expiration.
Deep OTM Option
Exposure ⎊ A Deep OTM Option represents a position with a very low probability of finishing in-the-money at expiration, resulting in minimal immediate directional exposure.
Low Probability of Success
Metric ⎊ Low probability of success, in the context of options trading, is a metric that quantifies the statistical likelihood of an option expiring in-the-money, meaning the underlying cryptocurrency price surpasses the strike price.