I think there's truth in the idea that if people think their only chance at a good life is to win the lottery, everything will become a lottery.

https://oldcoinbad.com/p/long-degeneracy

> 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%.

This article describes financial instruments that were niche a few years ago that now dominate. I wonder what are a few more instruments which are niche today that might have a similar trajectory.

> 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 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.

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’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.

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.

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.

Zero day options rose from 5% of total options volume in 2016 to 61% by May 2025

...when your business plan is based on attracting users who failed the marshmallow test but think they are above average at doing so.