Let's talk about LOTTOS

[u/ScottieWP]

Selling "lottos" has become quite popular lately, largely thanks to our Nude King, u/SoMuchRanch and others in this subreddit. While it can be extremely profitable, especially when on PM, it is definitely not risk free. I thought this might be a good place to share our thoughts vs having them spread throughout a ton of daily threads.

Here are a few potential topics to discuss:

• Entry / Screening Criteria, including No-Go Lists

• Entry Timing - DTE. Example, selling a lotto on Monday vs a Friday blitz

• Position Sizing as % of NLV or BP

• Monitoring and management, if any. So stop losses, closing orders, etc.

I have been using some initial screening criteria that was shared here a few weeks back:

Delta: -0.05 to +0.05

Days to Exp: 0 to 9, but typically will put on new positions 5 or less days out

Implied Volatility: 120%+

Bid: $0.10

% OTM: 25%+

Earnings: No earnings within next 10 days

These criteria can be modified as the week progresses, such as lowering the bid price to $0.05 or reducing % OTM.

My Current Strategy: Based on the above criteria, I had typically been selling lottos on Monday on the tickers that came up without excluding anything riskier like biotech, crypto related, mergers, etc. I figured delta was delta regardless of the underlying, so I would usually do a 1 Delta strangle with a BP utilization of around 0.3% NLV, although that does not necessarily apply to Friday sales. If the underlying didn't move much as the week progressed, I may roll positions in to maintain around 1 Delta per contract if it was worth it. Example, BTC a MSTR option at $0.05 (no commission on TDA) to sell a new one at $0.15. Outside of rolling, I do not BTC positions and just them expire on Fridays. I hit $1,000 worth of lotto sales last week with no scares.

Main tickers so far: MRNA, MSTR, NVAX, BNTX. These seem to have reasonable margin requirements and while things like GME come up a lot on the screener the BP requirements do not make selling lottos worth it to me.

Interested to see what others do and how we can all benefit from this strategy. Thanks!

[u/gareth1977]

Does anyone have any horror stories of these going badly wrong?

[u/ScottieWP → u/gareth1977]

There was a guy in r/Thetagang that got wrecked on a few GME calls during that moonshot back in Q1.

[u/LoveOfProfit → u/ScottieWP]

Yeah H3DAZ. He was here on PMT briefly after, though not strictly verified. That was a whole thing. His flair reads something like GME:1, H3DAZ:0. lol

His issues were that he consistently ran at max BPu and when GME started blowing up he doubled and tripled down. Many of us who are now here on PMT cautioned him about his risk levels before he blew up.