Asymmetric Payoff
An asymmetric payoff occurs when the potential gain and potential loss on a trade are materially different.
Why it matters to you
Suppose a binary YES contract costs: $0.20 If it resolves YES at $1: potential gross gain: $0.80 If it resolves NO at $0: potential loss: $0.20 The upside is four times the amount initially paid. But that does not automatically make it a good trade. The outcome may only have a very low probability of occurring. Payoff and probability must always be considered together.
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