Consider these 2 situations:1a You go long a binary option on a stock-index, and it costs you X -- it's a cash-or-nothing option. If the stock-index trades past your level by expiration, the broker/dealer/market-maker (say UBS) pays out Y to you. If not, there is no payout and you lose the entire premium X.1b You bet with a betting house (say William Hill) that by the end of the next English Premier League season, Arsenal will have won at least 60% of their games, and you pay X for the bet. At the end of next season, William Hill pays out Y to you if this is true, or nothing if this is false.2a You go long a double-barrier no-touch on USD/GBP, and it costs you X. If the FX touches either barrier during the life of the contract, you lose your bet. If the FX stays within the barriers by expiration, the payout is Y.2b You pay X on a bet that the final 2 teams competing for the next European Championships won't involve either Barcelona or AC Milan. You lose your bet if either team advances to the final 2, but the payout is Y if both lose during the semi-finals or earlier.Doesn't this prove that options-trading is mathematically/analytically equivalent gambling ? Are they morally equivalent, considering that William Hill is a "reputable" gambling firm ?Here's an idea: you diversify your capital among several "bets": USD/GBP, EUR/USD, FTSE100, S&P500, USD/JPY, crude oil, English Premier League, Italian Serie A, European Championship .... etc ... no correlation between FX and football matches ... no correlation between crude oil and AC Milan or Real Madrid ... you can use a variety of options including vanilla, single and double barrier .... portfolio diversification reduces risk ..... you either win or lose depending on FX and stock levels .... you either win or lose depending on how Arsenal or Inter perform .... I think I am in love with CAPM ... in love with portfolio diversification ... in love with exotic options ... with structured derivatives ... with human creativity in structuring bets for the clients ... and for myself or yourself .... and with the service-friendly William Hill ... what do you think ?? Let's hear it on this board !

isn't gambling legal anyway?

There's an FAQ thread on this, but personally I'd change your equal sign to "superset of" sign.Option trading certainly has a resemblence to gambling by being zero-sum, and traditional models pricing them on probabilities.The difference, mainly being what options can do and sports bets really can not, is provided natural hedges and exposures to risks and investments we'd have to bare nakedly without them. A typical long-term investor in stocks can sleep better at night knowing that a protective put position will limit losses in the case of a market crash. Companies can collar exposures to financial variables they can not control like oil prices and exchange rates. Options also enable the trading of volatility on these variables, where, for example, a brokerage house may wish to sell volatility which tends to be correlated with the volume of their commissions business. The counterparty in my option trades may be a speculator "gambling" that I am wrong about my worries, but I am happy to pay that premium to have that risk taken off my back.

Right Exotiq. The "acid test" comes down to utility. I've never heard anyone refer to automobile insurance as gambling.

"...simple and enjoyable like betting, reliable and fair like the options markets"SocGen is utilizing the familiarities between exotic options and betting on www.clickoptions.com Nice work.

My response to exotiq ....exotiq: The difference, mainly being what options can do and sports bets really can not, is provided natural hedges and exposures to risks and investments we'd have to bare nakedly without themGambling operations and casinos all over the world make money because of the laws of large numbers. If the number of bets is large enough, then the laws of statistics necessarily yield a steady-state arbitrage profit to the dealer. This "natural hedging" applies to any sports bet if there is enough bettors, i.e., if there is enough liquidity in the gambling system/industry/casino/operation. I noticed this during the 2002 World Cup in Korea/Japan, where my calculations showed an arbitrage of between 17-25 percent for group games and other related bets. My calculations assume a large number of bets equally placed on all given outcomes vs. William Hill's betting lines. This means their profit could be larger, much larger in fact, if the bettings were skewed toward a few teams such as France, Portugal and Argentina -- all eliminated in the 1st round. But on the other hand, their profits could have been heavily negative if too many people placed bets on teams such as Senegal, South Korea or Turkey. History seems to suggest that far too many people wagered on France, Portugal and Argentina.This is why there should be a deregulation of international gambling, so that competition would reduce the statistical steady-state arbitrage profit to the dealers, thus increasing the odds for the public. If this were the case, it would provide the public with an alternative technique for portfolio diversification.

I see three main differences between bets and options.1. You cannot go short with bets.2. Speculators provide liquidity directly to the market, while those, who bet, use casino and government as intermediary.3. You do not get free drink, when you buy an option.