Lottery Options

I do not recommend entering into any risky options contracts. But sometimes when you are expecting a really big price move off of economic data then you can find very cheap options contracts that have the probability of making very high profit. Some people call these asymmetrical options. I call them lottery options because when they hit it feels like winning the lottery.

The chances that these lottery options plays will produce profit is very low which makes them very cheap. But the profit that results from risky, short-dated, far out-of-the-money options is massive due to the massive change in the implied volatility of the options contracts.

Never put too much capital into these risky lottery plays. More often than not you will lose money on these types of options. Theoretically you should only partake in the risky options plays like this when you expect a major move in price from a big market catalyst like the release of an earnings report or economic data.

It is safe to minimize risk when investing, especially in a bear market. But the profit gained from asymmetrical options plays just cannot be ignored. Just check out the major gains in the RH account.