Parlays, zero day options, and perpetuals have gone mainstream. The world is getting stranger.
The breakout finance products of the past decade converge around a single design: a highly engineered lottery. Small, low probability bets with asymmetric upside. Narrative appeal so you can craft a story around your bet. Based on luck, but gives you an illusion of skill. Rapid feedback loops so you win or, more likely, lose money within hours.
In this post, I cover parlays, zero day options, and perpetuals: seemingly obscure products that have exploded in adoption to reach mainstream people.
Sports betting adoption didn’t take off until FanDuel designed a lottery inside it. The most important invention in modern betting is the same game parlay: a single bet that combines multiple independent bets within the same game. Parlays transformed the user experience for casual sports fans. Now, fans can achieve lottery-style outcomes within a few hours of a sports game by betting something as small as five dollars to win a thousand dollars. They can craft a story behind the bet, giving them the perception of skill. When Dallas Mavericks owner Mark Cuban said that Russel Westbrook was not a super star, a sports fan could build a parlay around his revenge: Westbrook will answer the insult by scoring over thirty five points, have at least ten assists, and take his team to victory. Sports is reality TV for men; parlays keep them glued to their screens because now they have a stake in the outcome.
$150 billion was wagered on sports in 2024. Parlays contribute to two-thirds of sportsbook revenue and to the significant increase in hold, which is sportsbooks’ profit margin on all bets. Sportsbook hold has doubled from 6% when parlays were just introduced to over 12% today.
Parlays allow players to place a small bet for life-changing upside. But each leg of the parlay must be won for the player to win the bet, which drastically shrinks the odds. You would have a far higher probability of winning money if you placed all bets individually rather than placing a single parlay bet, but then the user has to click through and submit individual bets and won’t receive lottery-like upside. A parlay bet triggers a bigger rush.
Zero day options are short-term options contracts that expire within the same day. They were first introduced by the CBOE in 2005 but limited trading to once a week on Fridays. It was only in 2022 that trading expanded to all five trading days, which unleashed a massive boom in short dated options trading.
Zero day options rose from 5% of total options volume in 2016 to 61% by May 2025. Retail share of zero day options volume is a staggering 54%. Zero day options have low premiums and provide a lottery-like payoff since small moves in the underlying asset produce outsized P&L. You can also tie your bet to specific catalysts or events, which are easy to digest on social media. Speculation on whether “Trump will announce a new round of tariffs on China” or “Powell will cut rates” can help people craft a story on why their lottery ticket is a sound investment.
Post COVID, there was a massive boom in retail participation in the stock market: 30 million new brokerage accounts were opened in 2020 and 2021. This is more than double the total number of new brokerage accounts opened the decade prior. Retail consumers love zero day options, and brokerages like Robinhood love them more. Options were 26% of Robinhood’s revenue in 2024 with an implied gross margin of over 90%.
My friend texted me an idea to make options even more addicting:
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.
Perpetuals, or perps, are futures contracts with no expiry dates. They were originally designed by Nobel laureate Robert Shiller in the early 1990s to enable traders to hedge against long term economic risks like housing prices or economic growth. Little did he know how degenerately they would be used a few decades later.
Technically, perps do not offer a lottery-like convex payoff, i.e. a small fixed cost for a chance at a huge windfall. Perps have linear payoffs: if the price of the asset rises 10% and you’re long with 10x leverage, your P&L is +100%; if it falls 10%, you’re liquidated (–100%). However, perps offer leverage up to 125x depending on the exchange. When you combine leverage with highly volatile underlying assets like crypto tokens, the distribution of outcomes ends up being lottery-shaped: most positions end in small losses or liquidations, a few end in abnormal gains.
Perps had minimal adoption until 2016, when the crypto exchange BitMEX introduced perps. Crypto made perps viable because it enabled 24/7 trading, so funding payments could run continuously. It required no physical delivery and it operated in a regulatory grey zone, side stepping CFTC constraints. But the most important reason for the growth was that crypto markets are highly volatile with high retail demand for leveraged exposure.
About half of all crypto trading volume today is perps. Perps are available on major exchanges for retail to trade including BitMEX, Binance, OKX, Bybit, Coinbase, and Kraken. They are also available on decentralized exchanges like Hyperliquid, the most successful decentralized perps exchange. Hyperliquid processes $6 trillion in monthly volume and generates over a billion dollars in annualized revenue, arguably the highest revenue per employee in startup history. Phantom wallet introduced perps trading in June and is already doing $10 billion in monthly volume.
South Korea is streaming live perps trading like it’s an esports competition.
Robinhood launched their crypto perps product for European customers. Perps are going mainstream, and they are soon going to be accessible to every retail customer to trade crypto assets with 20-100x leverage. Or as Gwart more eloquently put it:
We will see many more companies build a lottery-like experience into their product. Prediction markets, for example, may introduce perpetuals to trade bets with leverage or parlays that combine multiple predictions into a single bet. For a small amount of money but potentially massive upside, a user can bet that Mamdani will win the NYC mayoral election, the US will have a recesion, and the Fed cuts will cut rates by 25 bps. An even crazier idea for credit card points: invest a user’s credit card points into zero day options and randomly distribute a lottery-style winning of an enormous amount of points to a select few users. The world is getting stranger.
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Comments
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.
By vintermann 2025-10-228:18 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.
By hitarpetar 2025-10-225:50 has this author heard of a mortgage before
By TacticalCoder 2025-10-222:562 reply 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.
By rcxdude 2025-10-2211:37 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.
By cindyllm 2025-10-2214:19 [dead]
By decimalenough 2025-10-2122:262 reply > 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%.
"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.
By parodysbird 2025-10-220:372 reply 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.
By OutOfHere 2025-10-2211:51 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.
By nradov 2025-10-223:20 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.
By quamserena 2025-10-224:391 reply 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!).
By verteu 2025-10-2220:04 Thanks, I found some evidence for poor fill quality here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4951825
By boringg 2025-10-2123:11 Profit and settlement risk
By OutOfHere 2025-10-2211:45 Robinhood's advertised fee per contract is 4c to buy and the same to sell.
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.
By codeulike 2025-10-2122:34 Bartering for food
