Risk to Reward Ratio

Last night's World Cup game between Colombia and Japan was a shocker to say the least. I don't think many people were expecting the Japan team to put up much of a fight, let alone with the match. More interesting for me though, was the red card in the third minute, when Carlos Sanchez stuck his hand out to prevent a goal.

Risk to Reward

By using his hand to prevent the goal, he ought to know that the most likely outcome is a sending off and a penalty kick for the opponents. This means that they're still almost guaranteed to be a goal down, and even worse, a man down as well. That's a bad trade.

Options

I found this whole incident interesting because you see it all the time in the options market. People buying far out of the money options in the hope that the price will either miraculously skyrocket or plummet.

While nobody can predict the future, if you're betting on outcomes that have less than a 10% chance of happening before you break even, there's a high chance your capital will disappear before you start to see that 'expected' profit.