# Asymmetrical Payoff Function

# Asymmetric Payoff Function

Let’s first define a function. In mathematics, a function is a relation between a set of inputs and a set of permissible outputs with the property that each input is related to exactly one output. An example is the function that relates each real number x to its square x².

A function *f* takes an input *x*, and returns a single output *f*(*x*). One metaphor describes the function as a “machine” or “black box” that for each input returns a corresponding output.

Asymmetric is imbalance.

Payoff is the outcome, or output of the function.

Asymmetrical payoff function is a function graph that shows a positive asymmetric payoff. It could also be a negative asymmetric payoff, but we mostly use the term “asymmetric payoff” to speak of positive asymmetry.

**a linear increase or decrease. It is a non-linear increase or decrease. Options are common instruments with asymmetric payoff. A call option has a limited risk of the premium paid for the option, but unlimited upside profit potential. Some options strategies have negative asymmetrical payoffs. For example, selling a put has a limited profit but unlimited loss. Forwards, on the other hand, generally have symmetric payoff.**

*other**than***Asymmetric Payoff is more profit than loss. **

Asymmetry of a trade (asymmetric payoff) is when the downside is limited, but the upside is unlimited.

What is an asymmetric payoff or asymmetric investing?

An asymmetric payoff may refer to the * probability* or

*or*

**potential***of a trade or the*

**expected outcome****of the trade of investment.**

*actual**outcome***Asymmetric payoff **is the upside potential is greater than the downside loss.

**Asymmetric payoff **is the upside potential is greater than the downside ** risked**. For example, you risked $1, but earned $2. Or, you expect to earn $2 when you risked $1.

**Asymmetric payoff **is the upside probability (a mathematical calculation) is greater than the downside loss or risk.

**Asymmetric payoff **is the outcome of a trade has more profit than loss .

As you can see in the graph below, asymmetry is preferred over symmetry: (symmetry is when your risk and reward is balanced, so the outcome for profit is the same as the outcome for loss.