Just to clarify, the pay-off table above says nothing about the probabilities of each scenario. In reality, the players in the trade likely thought that strong market movement against their positions was remote. So, perhaps they assigned a very low probability to these adverse events. The important take-away is that given the behavior of the markets since the crisis first manifested itself in 2008, potentially big moves in assets previously thought of as safe stepped from unrealistic to realistic possibilities. And given that the cost of the adverse outcomes each resulted in failure of the firm, they should not have made a leveraged bet.