[pjc50]

The trouble with this is that you need to have enough of a black swan to trigger the options but not enough that it prevents them paying out, e.g. due to counterparty risk or some kind of systemic collapse.

And "the market can stay irrational longer than you can stay solvent" - by definition this produces few, rare payouts.

Far better to employ the LTCM strategy and write a lot of out of the money options: https://en.wikipedia.org/wiki/Long-Term_Capital_Management

The trick is to do that with other people's money, on which you initially get huge returns. You can then collect large managment fees. The collapse takes out the fund, but it's an LLC so the staff get to keep their bonuses from previous years.