The Lottery-fication of Everything(dopaminemarkets.com)
dopaminemarkets.com
The Lottery-fication of Everything
https://www.dopaminemarkets.com/p/the-lottery-fication-of-everything
65 comments
If you're winning, play it safe. If you're losing, take risks, even with poor EV. That's not just strategy, it's practically instinct.
The popularity of lotteries suggests to me that many people feel they're losing, and they're probably mostly right in some sense.
The popularity of lotteries suggests to me that many people feel they're losing, and they're probably mostly right in some sense.
has this author heard of a mortgage before
There may be some truth to it but to me gambling issues definitely do exists independently of the ability for someone to escape or not its class.
One of my friend has a real gambling issue and yet he was one of the highest paid person I knew. Then at some point he created a company, got funding and had 30+ employees. He was doing very well. But he was a degenerate gambler. On the weekends he'd ask me to accompany him to casinos (real ones) and he'd just burn money (his own money btw, not company money). I've seen him destroy something like $60 K in one bet in some (probably rigged) only crypto casino. His utter disrespect for money shocked me. The crazy thing is that over the years he lost it all (not just those $60K) and to this day he'll post-fact rationalize his actions. He literally burned so much money he could have FIRE'd. Maybe not mega FatFIRE, but still FIRE.
Last time he called me he asked me to lend him... 300 EUR to pay bills. He's a real friend, he could have asked 3 000 EUR, I'd have helped him pay his bills. But it's the amount that saddened me: how can you go from having so much, from earning so much, to asking for 300 EUR? (which he paid me back a few days later). How does that even happen?
Now he's literally a genius so maybe he'll come up with something. But meanwhile I'm worried and there's nothing I can do.
A friend of my great-grandmother (I knew my great-grandmother very well) lost all her family's inherited wealth because she was a degenerate gambler. Not online casinos, obviously.
I've read the book "The Player" by Dostoievsky. Twice, once when I was a teenager then once I don't remember when. To make sure I'd never end up like the people he describes in his book. He was a degenerate gambler and it's basically its most auto-biographic book (FWIW I've read Crime and Punishment too but The Player does it for me).
I'm sure half of the people who are degenerate gamblers do not do it because they have no way to get "rich". No. Half of people who are degenerate gamblers are the self-destructive types who subconsciously want to harm themselves. Who want to feel bad about themselves.
I'm sure there's truth to what I wrote too.
One of my friend has a real gambling issue and yet he was one of the highest paid person I knew. Then at some point he created a company, got funding and had 30+ employees. He was doing very well. But he was a degenerate gambler. On the weekends he'd ask me to accompany him to casinos (real ones) and he'd just burn money (his own money btw, not company money). I've seen him destroy something like $60 K in one bet in some (probably rigged) only crypto casino. His utter disrespect for money shocked me. The crazy thing is that over the years he lost it all (not just those $60K) and to this day he'll post-fact rationalize his actions. He literally burned so much money he could have FIRE'd. Maybe not mega FatFIRE, but still FIRE.
Last time he called me he asked me to lend him... 300 EUR to pay bills. He's a real friend, he could have asked 3 000 EUR, I'd have helped him pay his bills. But it's the amount that saddened me: how can you go from having so much, from earning so much, to asking for 300 EUR? (which he paid me back a few days later). How does that even happen?
Now he's literally a genius so maybe he'll come up with something. But meanwhile I'm worried and there's nothing I can do.
A friend of my great-grandmother (I knew my great-grandmother very well) lost all her family's inherited wealth because she was a degenerate gambler. Not online casinos, obviously.
I've read the book "The Player" by Dostoievsky. Twice, once when I was a teenager then once I don't remember when. To make sure I'd never end up like the people he describes in his book. He was a degenerate gambler and it's basically its most auto-biographic book (FWIW I've read Crime and Punishment too but The Player does it for me).
I'm sure half of the people who are degenerate gamblers do not do it because they have no way to get "rich". No. Half of people who are degenerate gamblers are the self-destructive types who subconsciously want to harm themselves. Who want to feel bad about themselves.
I'm sure there's truth to what I wrote too.
It can outright just be an addiction. Forever chasing the thrill of the wins even as the losses wipe them out.
Most people are highly conscious about their losses, not like this degenerate. When the losses stop hurting, that's when the degeneracy begins. I wouldn't actually consider it a sign of high intelligence to be insensitive to the pain of financial loss. Also, one has to follow strict capital limits, and actually develop an edge that sustains and compounds the account.
> 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%.
> 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%.
"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.
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.
It is not a good idea for retail investors to get heavily involved in zero-sum derivatives trading against much more sophisticated algorithmic trading models.
It's just not for you to judge. Those with sophisticated models usually have a lot more capital to manage. Also, it's not a zero sum game because alignment with the underlying's price drives it. Long term share holders are the foundation that makes it not be zero sum. As a retail account grows, its approach too can become slightly sophisticated over time.
It's not a good idea for punters to go to the casino and bet it all on black. Some percentage of the population is always going to be degenerate gamblers. We can try to reduce the harm a bit but ultimately this is just a reality we need to accept.
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?
edit: Perhaps it's largely profit. Seems https://public.com/invest/options-trading is trying to undercut on price.
Does this reflect brokers' cost of technology (many tickers to keep track of)? Regulatory fees? Lack of competition?
edit: Perhaps it's largely profit. Seems https://public.com/invest/options-trading is trying to undercut on price.
Regulatory fees for options is negligible. Even with $1 or $2 per contract, the quality of fill that you get matters a lot more. Robinhood has “no commission” but they have terrible fills that are a hidden cost, taking this into account the $1 or $2 charge makes more sense. You’re also paying indirectly for the UI, real time data, margin, and API, none of which are free for the brokerage. Robinhood again skimps in this regard by offering no API (except for crypto…) and a terrible UI (but at least it has confetti!).
Thanks, I found some evidence for poor fill quality here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4951825
Profit and settlement risk
Robinhood's advertised fee per contract is 4c to buy and the same to sell.
> The world is getting stranger.
The world is obscenely strange if you look hard enough. It's just that we used to do a better job of regulating those who operated in it for profit.
The world is obscenely strange if you look hard enough. It's just that we used to do a better job of regulating those who operated in it for profit.
> 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.
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.
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.
And that's how you get a Paddy Power next to a William Hill while the rest of the high street is shuttered.
And Betfred just threatened to close 1,300 high street betting shops if Reeves increases gambling taxes in the budget next month.
https://www.ft.com/content/3641f944-38cc-4ed5-853a-03fab3ac4...
https://www.ft.com/content/3641f944-38cc-4ed5-853a-03fab3ac4...
How is that a threat?
Do you think that's better or worse than an entirely shuttered high street? Why?
Those are the choices? I hope not.
The forces that made those shops appear and made the greengrocers disappear are not natural, inevitable, and foolish to resist. They are just laws, laws that permitted some things and discouraged others, taxed some things and subsidized others.
The forces that made those shops appear and made the greengrocers disappear are not natural, inevitable, and foolish to resist. They are just laws, laws that permitted some things and discouraged others, taxed some things and subsidized others.
Because the gambling industry is a parasite.
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Speaking of, when are they gonna let tontines be a thing again?!?
> 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?
I don't see how this is risk-free - surely it involves some opinion on the correlation between the assets?
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.
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.
It's the fact that's easy to sell that makes it attractive, not that it's easy to price.
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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
Edit: I don't really know how pricing these things usually works but I could see taking some risk on to price these attractively
I get that Robinhood's business model is stealing from the poor and giving to themselves, and their customers are mostly unsophisticated, but why wouldn't the customers just buy the underlying call options if the price to buy the parlay is the sum of the underlying options?
Because, to quote your comment, "their customers are mostly unsophisticated."
And, part of the appeal of the product, is they only pay out if *all of them are in the money. Hence the "lotto-like" return profile.
And, part of the appeal of the product, is they only pay out if *all of them are in the money. Hence the "lotto-like" return profile.
While Robinhood users are unsophisticated (seriously use another brokerage…) I think that they would see through this.
Why would anyone ever take that bet? It has to be leveraged, which is where the risk comes from.
I’m against internet gambling, but the value of prediction markets in predicting world events is very important.
If you’ve ever read James Suroweicki’s “The Wisdom of Crowds”, he talks about a lot of research showing that this is more accurate than the news or any single person.
I hope it continues and they don’t introduce crazy things like leverage.
If you’ve ever read James Suroweicki’s “The Wisdom of Crowds”, he talks about a lot of research showing that this is more accurate than the news or any single person.
I hope it continues and they don’t introduce crazy things like leverage.
what is the value of that, as you see it?
It provides an independent fact check on the media and propaganda. The media exaggreated the likelihood of dramatic events constantly so that you keep watching, but this approach aligns the incentives of the predictions with reality not your attention.
It offers actionable intelligence that is difficult to manipulate over time. When probabilities become misaligned with reality, others can take the opposite position to profit from the discrepancy. Maintaining an obviously high percentage inaccurate prediction of 80-90% would be extremely cost prohibitive.
For example according to polymarket right now, Mamdani will be the next mayor of NY, no one really knows with any certainty when the shutdown will end, the risk of a major war with China and Taiwan remains low. The chances of a Ukraine ceasefire are also extremely low.
Contrast this with YouTubers talking about Ukraine who’ve been discussing some game changing war technology that’s going to end the Ukraine war soon for the past years. If you followed them, you might have thought the war was about to end for the past few years.
It offers actionable intelligence that is difficult to manipulate over time. When probabilities become misaligned with reality, others can take the opposite position to profit from the discrepancy. Maintaining an obviously high percentage inaccurate prediction of 80-90% would be extremely cost prohibitive.
For example according to polymarket right now, Mamdani will be the next mayor of NY, no one really knows with any certainty when the shutdown will end, the risk of a major war with China and Taiwan remains low. The chances of a Ukraine ceasefire are also extremely low.
Contrast this with YouTubers talking about Ukraine who’ve been discussing some game changing war technology that’s going to end the Ukraine war soon for the past years. If you followed them, you might have thought the war was about to end for the past few years.
Are you curious about GPs opinions specifically, or do you struggle to see how knowing the future with greater accuracy is useful?
They dont allow us to see future wuth greater accuracy
Maybe that can be quibbled, but they certainly don't neutrally allow us to see the future with greater accuracy. They interfere with what they're predicting.
There's no prediction market which will let you bet on Trump's assassination, and for good reason. But a lot of lower-profile pernicious bets slip under the radar.
There's no prediction market which will let you bet on Trump's assassination, and for good reason. But a lot of lower-profile pernicious bets slip under the radar.
While it’s true that there is an observer effect to prediction markets, that phenomenon isn’t unique to them. It applies to most systems.
The news media routinely makes predictions. When enough people believe and act on those forecasts, the prediction itself can influence the outcome. In that sense, collective expectation becomes a causal force and I would argue that there are many different people who aim to harness propanda or the media to change behavior.
There are legitimate concerns. As South Park humorously suggested this season, that some might try to manipulate prediction markets for profit. However, overall, these markets remain an extraordinary tool for generating accurate forecasts across a wide range of global events.
It’s difficult to imagine scenarios like China invading Taiwan or the war in Ukraine ending because the participants were motivated by their market positions. There are many topics where the reality reaches far beyond the reach of monetary speculation.
On the other side, it’s also possible that people who have priviledged information are using that information to place bets against inaccurate predictions and we’re benefiting from that information in the prediction market. It’s not necessarily fair to the participants as it’s insider trading, but it gets a better outcome for the observer seeking the information.
The news media routinely makes predictions. When enough people believe and act on those forecasts, the prediction itself can influence the outcome. In that sense, collective expectation becomes a causal force and I would argue that there are many different people who aim to harness propanda or the media to change behavior.
There are legitimate concerns. As South Park humorously suggested this season, that some might try to manipulate prediction markets for profit. However, overall, these markets remain an extraordinary tool for generating accurate forecasts across a wide range of global events.
It’s difficult to imagine scenarios like China invading Taiwan or the war in Ukraine ending because the participants were motivated by their market positions. There are many topics where the reality reaches far beyond the reach of monetary speculation.
On the other side, it’s also possible that people who have priviledged information are using that information to place bets against inaccurate predictions and we’re benefiting from that information in the prediction market. It’s not necessarily fair to the participants as it’s insider trading, but it gets a better outcome for the observer seeking the information.
I'm speaking mostly for Gen Z but often sense this general, concerning goal of trying to get financially independent as fast as possible (gambling, AI slop, becoming an influencer, startup) where the ends justify the means.
same as any generation, you just described "pulling yourself up by your bootstraps" in Gen Z language haha
"where the ends justify the means" does not equal "pulling yourself up by your bootstraps" in any language or previous generations
That is not what it was originally suppose to represent, but in practice that is exactly the same behavior they are encouraging.
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.
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.
Zero day options rose from 5% of total options volume in 2016 to 61% by May 2025
Zero-day SPY options are now the only thing I trade. It saves me from the risk of a big move against me overnight. Over several months I have refined a strategy, although I probably have things left to discover. The real learning won't be done until experience is gained with their fully automated execution.
Yeah, all strategies with things like that work very well until they don't.
Odte situation reminds me of retail investors discovering $XIV, having a good time using "safe" strategies and then getting wiped clean by the volatility spike in 2018
Odte situation reminds me of retail investors discovering $XIV, having a good time using "safe" strategies and then getting wiped clean by the volatility spike in 2018
If it didn't work, of course I wouldn't use it. Duh.
The only way to survive in the long term is to become a part of the ecosystem that delivers more value more than it extracts. This is not impossible.
Moreover, the analogy with XIV is 100% bogus. There is nothing safe about 0DTEs. If you knew the first thing about 0DTE, you would know that it is held very selectively, not like XIV. A good number of the 0DTEs get wiped to $0 every day, not once in ten years. XIV was unforgiving just once; 0DTEs are unforgiving as a routine. Also, the logic behind inverse volatility offerings has been updated to mitigate the risk of what happened, not that it holds any relevance to this discussion.
The only way to survive in the long term is to become a part of the ecosystem that delivers more value more than it extracts. This is not impossible.
Moreover, the analogy with XIV is 100% bogus. There is nothing safe about 0DTEs. If you knew the first thing about 0DTE, you would know that it is held very selectively, not like XIV. A good number of the 0DTEs get wiped to $0 every day, not once in ten years. XIV was unforgiving just once; 0DTEs are unforgiving as a routine. Also, the logic behind inverse volatility offerings has been updated to mitigate the risk of what happened, not that it holds any relevance to this discussion.
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Why would one choose to be long an inverse volatility instrument? How is that in any world safe?
Look at the total returns of VXX and you'll see why it's tempting to take the opposite position.
There are plenty of reasonable arguments to short vol, eg: https://www.nomura.com/events/9th-annual-global-quantitative...
There are plenty of reasonable arguments to short vol, eg: https://www.nomura.com/events/9th-annual-global-quantitative...
Until a Trump tweet causes a big move against you during the day? I’m interested in your strategy, pray tell.
You are absolutely right. Trump has done this many times this year, resulting in a loss for me each of those times. I have used it as an opportunity to refine my strategy to limit the damage from the loss so it doesn't undo all my gains or worse.
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...when your business plan is based on attracting users who failed the marshmallow test but think they are above average at doing so.
https://oldcoinbad.com/p/long-degeneracy