[HN Gopher] Lottery-fication of Everything: 0 day options, perps...
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Lottery-fication of Everything: 0 day options, perps, parlays are
now mainstream
Author : _1729
Score : 41 points
Date : 2025-10-21 21:05 UTC (1 hours ago)
(HTM) web link (www.dopaminemarkets.com)
(TXT) w3m dump (www.dopaminemarkets.com)
| decimalenough wrote:
| > Sportsbook hold has doubled from 6% when parlays were just
| introduced to over 12% today.
|
| > Options were 26% of Robinhood's revenue in 2024 with an implied
| gross margin of over 90%.
|
| Wow. For comparison, slot machine RTP (payout ratio) usually
| hovers around 91-93%, meaning a "hold" of 7-9%.
| dmurray wrote:
| "Gross margin" is not the same as "hold" here.
|
| Options pricing is reasonably competitive. Even a gambly thing
| like a Tesla zero day option has a spread of 1-2%, so someone
| trading it at random loses 0.5-1% per trade. And Robinhood is a
| brokerage, not an options market maker, so it doesn't capture
| all of that 0.5-1%.
|
| You'd have to read Robinhood's financials to see what they mean
| by gross margin. Possibly it means if a customer deposits
| $1,000 and trades options, the customer eventually on average
| loses $900 of it? Even that seems too much TBH.
| verteu wrote:
| Does anyone know why options broker fees are so high? A typical
| cost is ~$0.25/contract for a $1.00 SPY 0DTE, eg:
| https://www.interactivebrokers.com/en/pricing/commissions-op...
|
| Does this reflect brokers' cost of technology (many tickers to
| keep track of)? Regulatory fees? Lack of competition?
| codeulike wrote:
| _Zero day options rose from 5% of total options volume in 2016 to
| 61% by May 2025_
| Bjartr wrote:
| This article mentions describes financial instruments that were
| niche a few years ago that now dominate. I wonder what
| instruments are niche today that might have a similar trajectory.
| codeulike wrote:
| Bartering for food
| jbjbjbjb wrote:
| > The world is getting stranger
|
| In the U.K. I was betting 5 minute binary options back in 2008
| and parlays or accumulators as we call them (accys for short)
| have been popular for a while too.
| giobox wrote:
| Rightly or wrongly, The Gambling Act 2005 put the UK literally
| decades ahead of places like the US in terms of creating a
| legal framework for sports betting/gambling in general.
| verteu wrote:
| > I had an absolutely disgusting thought today: Robinhood should
| offer parlays. Sell customers a call option on multiple assets.
| For example a call option to buy Apple at $250, NVDA at $190,
| GameStop at $25 and Bitcoin at $120k, but only if ALL of them are
| in the money. Robinhood could buy offsetting calls on each
| individual asset, then sell the parlay "bundle" to retail. Risk-
| free profit for Robinhood, and their customers would love it.
|
| I don't see how this is risk-free - surely it involves some
| opinion on the correlation between the assets?
| lordnacho wrote:
| It requires the correlation if you are going to price it
| accurately. But with a parlay people just look at the high
| payout and estimate the chances wrong. By like, a lot.
|
| It's the fact that's easy to sell that makes it attractive, not
| that it's easy to price.
| alasarmas wrote:
| I think you're correct. There is a saying something like: in a
| crisis, all correlations go to 1. I believe it's likely one of
| those things that's okay most of the time and then, every once
| in a while, causes extreme and systemic problems. Therefore,
| Robinhood will probably do it because the incentives are
| aligned.
| muxl wrote:
| It is truly risk free. You always buy the call using the
| customer's money but you only give them the call if every part
| of the parlay is correct. Assuming they charge a commission in
| addition to the asset price to cover transaction processing
| they shouldn't lose money
|
| Edit: I don't really know how pricing these things usually
| works but I could see taking some risk on to price these
| attractively
| lordnacho wrote:
| Parlays: the problem is really just spread. For every leg, you
| are going to get a shitty spread, meaning you lose a bit from the
| "real value" of the trade. Say you are flipping two coins (eg two
| very evenly matched games) and so the outcomes should be 50-50.
| Well, if the market ends up showing 48-52, you are losing two
| points in edge. Compound it and you are losing even more.
|
| The great thing about parlays is that when people win, they win
| by a big multiple. So they feel they have won. But when they win,
| they are actually getting less than they should have gotten on
| their winner. The example above should 4x your money since the
| real chance is 25%. You punter might end up with say 3.5x, so
| even though he feels great when he wins, he isn't winning enough
| to make up the loss the other times.
|
| Perps: Traditional markets have futures that settle on a specific
| date. For instance, S&P futures. This presents a couple of issues
| for the uninformed.
|
| First, the settlement means your bet ends on a certain date.
| People want to avoid having to sell their position and put it on
| again in the next expiry. It also just seems like a fee grab by
| the exchange.
|
| Second, the futures price differs from the index, due to
| financing rates being different between the assets. Remember a
| future is a promise to exchange at a later date, so you have to
| take into account the time value of money, aka interest rates.
| Well, early crypto didn't have a bitcoin interest rate, and so
| any gap between the future and the index would be an implied rate
| that you were punting, which nobody would understand if they
| didn't work in finance. In any case, there would be questions to
| the customer service desk about the deviation. Much better to
| hide the financing rate inside the perp rate adjustment that
| happens every 8 hours, and presents the price of the perp as more
| or less equal to the price of the underlying bitcoins. Early
| Bitmex also had the entertaining wrinkle of not being able to
| trade against a stablecoin, so actually you had inverse perps
| that settle against the crypto in kind. This creates a weird non-
| linearity vs the dollar, but meh whatever, number go up. These
| are things that the market maker understands, but the public
| doesn't.
|
| Third, the automatic settlement and liquidation system is
| actually pretty innovative. You can give people massive leverage
| because you know exactly who has what position at the exchange
| level, in real time. Traditional markets still settle on a daily
| cadence (often T+2/3), meaning you could do funny shit that your
| PB would have to build a system to look at.
|
| 0 days: Just another way to get fleeced on spreads. There are
| models that estimate how likely some price is to be over a line
| at the settlement time. You definitely want to use statistics to
| determine this kind of thing, but people think they are smarter.
| The market maker isn't going to care terribly much, as long as he
| is reasonably hedged. There are well-known ways to spread your
| risk across options, and that's what the market maker does.
|
| Leverage is the common denominator here. These are all bets where
| you can make a lot of money with a little bit of capital. It's an
| age-old story that people will blow themselves up with leverage.
| After paying fees to put on a bad bet.
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