Why Are Deep OTM Options Often Called "Lottery Tickets"? ▴ Learn

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.

Why Is Implied Volatility Often Called the ‘Fear Gauge’ of the Market?

What Is ‘Effective Leverage’ and Why Might It Differ from the Platform’s Stated Leverage?

Why Is the Delta of a Deep OTM Option Close to Zero?

Does High Leverage Increase or Decrease the Effective Transaction Cost of a Trade?