Derivative Strategies for Portfolio Protection in Market Crises
Financial storms demand more than diversification. When correlations converge during black swan events, traditional asset allocation fails. The smart money turns to hedging—paying premiums today to avoid catastrophic losses tomorrow.
Derivatives function like insurance policies: costly but indispensable. Investors pay for puts, volatility instruments, or tail-risk hedges precisely when they seem least necessary. This premium represents the unavoidable cost of capital preservation.
Sophisticated players understand hedging's golden rule—it's loss mitigation, not profit generation. Every basis point of risk reduction comes at the expense of potential upside. The calculus differs for crypto portfolios, where 24/7 volatility and asymmetric risks require specialized instruments.
