The 4th of July Lottery Option Setup

You’re at a party – or a backyard barbecue – someone will eventually ask you: “So what do you do?” Hmm. Eventually you’ll have to come up with a good answer. A good friend of mine and the author of this book, always says. “I’m a documentary film actor.” I’ve yet to come up with a better response…

If you’re courageous enough to reply, “I’m a trader”, I have an idea to help you get out of the follow up question. There will be one surely, because 75% of your neighbors will believe either; 1) you have a gambling problem or 2) it’s your fault their mortgage is under water and they will want to know which.

Follow up with this question: “Do you play the lottery?” There’s a 2 in 3 chance they say yes, and a 1 in 3 chance they believe it’s the only way to be financially secure in life. Really.

You have exactly 1 in 1,120,529,256 chances of winning a lottery with 6 numbers (if you can choose between 1-99). Webmath is a good site if you want to do the lottery math…

Lets say you’re a real lottery fan and play 10 dollars a day for 1 year, we’ll say 200 days. That’s 2000 dollars and each day you play your chances are the same 1 in 1,120,529,256. (You might try this arguement with smokers as well…)

If once a year, lets say 2 days before your 4th of July picnic… You buy 2000 dollars worth of high beta stock options. Let’s say $GOOG, that would have been 4 contracts of the 500 Calls on Thursday. Remember you bought these calls in simple anticipation of this conversation… Your chances would have been 1 in 2.475436 that you’ll come home with something better than you left with. Though, in this case if you will have switched out beer for champagne. Now your neighbors will really be curious… Maybe they’ll even leave 10 dollars a day with you?

You only have to figure out how to convince your neighbor that you have nothing to do with his mortgage.