I noticed that some financial instruments have lottery-like payoffs. If that is really the case, I am planning to play the "lottery" using financial instruments instead of the lotteries organized by the gambling industry. Reasons for doing so:
- Transaction costs for financial instruments appear to be smaller than the "house-take" ("vigorish") taken by lottery operators.
- There is a far larger selection of financial instruments than there are lotteries.
- Flexibility: I can easily mix and match instruments, and choose the time I receive my payoffs.
- Associating with the financial industry is more respectable than associating with the gambling industry.
By "lottery-like payoffs", I mean:
- If I lose, I lose only the small amount I bet;
- If I win, I win big.
I do not care about the direction of the market; I just want lottery-like payoffs that can replace the lotteries organized by the gambling industry.
At the moment, I have identified far out-of-the-money options as having lottery-like payoffs. Am I correct? If so, I need to make an informed judgement on whether to favor puts or calls. Is there any significant difference between the payoff distributions of far OTM puts and far OTM calls?
Besides far OTM options, are there any other easily-accessible financial instruments with lottery-like payoffs?