Sometimes an opportunity is so good it shouldn’t be missed.
Pundits call these can’t-miss opportunities “asymmetrical.” What is an asymmetrical opportunity exactly, and why are they not of the too-good-to-be-true variety?
Technically speaking, an asymmetrical opportunity exists when the risk of a trade is far exceeded by the potential profit of the trade. In other words, asymmetrical opportunities are wildly lopsided in your favor.
How do you know such an opportunity when you see one? Apply Mohnish Pabrai’s coin-tossing metaphor: “Heads, I win. Tails, I don’t lose much.”
Now, that’s an opportunity you shouldn’t miss.