Introduction

Upside and downside are terms used for communicating the potential reward & risk a trader can take on when entering a position on a security.

Upside reflects the potential gains/rewards from the position whereas downside is the inverse loss/risk.

They should both be taken into consideration by a trader before entering a position in order to evaluate the returns possible on capital & the potential losses on the security in order to quantify the exposure the position will have on a portfolio.

Conclusion