Mega Millions Lottery. Are you going to play?
Dylan Nolte
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If you're alive and reading this, you've heard about the Mega Millions jackpot. If you do not have a ticket yet, congratulations! You've knocked out the rest of us.
After nobody won a drawing on Friday, a drawing on Tuesday night can give a winning ticketholder $ 1.6 billion, or a "cash option" of $ 904 million in the Mega Millions lottery.
The New York Police Department tweeted October 19th that the odds of winning #MegaMillions are "1 to 303 million", which means that a person is "20,000 times more likely to be hit by lightning … or become a victim for a crime. " One of the Tips Tips to avoid fraud: "If it seems too good to be true, it's likely." Not always, NYPD!
Things Everyone Know About Buying Lottery Tickets: Lotteries tend to be a tax on the poor whose poverty closes them from investing in things like stocks and bonds but who also want money to work, And then buy things like this, which are kind of incredible alternatives.
Tickets usually expire worthless. But if you win, remember to make payments, not cash, and it may or will not make you marginally happier. But your life will probably be ruined.
Enter all that is aside: Hedge fund traders discuss whether a ticket has a positive expected value – a way to calculate the market value of an investment or business. Some say that EV on Tuesday night's jackpot is positive. It is good; That means you should buy a ticket.
However, according to the EV calculator built by the finance blog "Do not finish your day job", it's inaccurate. Their data indicate that Mega Millions is not and has not been a good deal and that over a certain advertised premium size around $ 450 million, the deal worsens when the premium gets bigger.
"Fancy it," they write.
Traders are (kind of joke) wonder at the expense of buying each number combination. With 302,575,350 possible combinations, at $ 2 per ticket in question, it would cost around $ 600 million.
But now the tickets are already in human hands across the United States, without a broker or central clearinghouse for secondary trading. Even if you can find and offer to buy each of these hands, even the smallest sophisticated investor will probably look at you sideways and charge you at least $ 3. This is America.
Even if you could do that, if your total payout was $ 1.6 billion, it would be a good return. But give taxes and take a lump sum – if you win, you pay tax but do not take the lump sum! Your profits will probably reach $ 600 million. So better not try.
An earlier version of this article referred to an error in the valuation method that someone used to view lottery drawings. It is expected value, not business value.
Write to Mary Childs at mary.childs@barrons.com
