Should tech workers consider buying deep out of the money puts on tech ETFs as a form of insurance?
Unless you can time the crunch exactly, put options are a mug's game. They bleed value over time (negative theta in industry parliance).
If you really want to protect yourself, just plan your finances as if your high income was temporary rather than permanent.
It's been a while since I've done the maths, but I'm pretty sure it'd be cheaper to buy shorter dated puts and roll them over on expiry. Which would still be very expensive.
This is the best advice I've heard all week. I wish someone had told me this when I was 21 (even though I wouldn't have listened)
A better idea would be to go long short, 30% short, and 100% long has always been popular. The leverage from the shorts lets you juice the long side while also giving you the 30% short protection. This should allow you to achieve a better Sharpe ratio than the market.
If you can’t get the leverage, consider buying a S&P ETF that has downside protection in exchange for capped returns.
Risk parity is probably a better idea and should give you recent returns with some downside protection. The problem is that rebalancing could be costly, you probably would only want to on a yearly basis.
But if you have access to leverage via shorts, I still think that’s the better play.
My personal investments do nothing of the sort though: I just go with a 3x leveraged S&P ETF. Annualized returns of around 20% year over year. Of course, I have massive exposure to volatility and market crashes. But in the five years of investing all of my money in this strategy, I’ve outperformed the S&P by over 80% :)