[7Figures2Commas]

> That said, you might do something like I did, which was e.g. pick a publicly traded company which would get shellacked if your sector got hit and buy deeply out-of-the-money puts on them. (I picked Salesforce and spent ~$500 on an options position which pays out only if they either have Enron-sized accounting issues or SaaS gets punched in the face. It expired valueless. I'd have re-upped it for another year but didn't anticipate my net worth and professional career to both be 90%+ SaaS-weighted for most of this year.)

This is not good advice. Buying options is a fool's game. The vast majority of retail options buyers lose money, which isn't surprising given that upwards of 70% of call and put options expire worthless. When it comes to losing money, buying deep OTM options is by far the best strategy.

If you want to play the options game, you are statistically far more likely to not lose money, and to make it, by selling options.

[patio11]

That's the point of an insurance policy: you want to say next year "Darn, I spent a small predictable amount of money and nothing bad happened so I got nothing for that money."

The more pertinent criticism of this strategy would be "Patrick, there are all sorts of ways for the value of your company to go to zero, including in the middle of a sectoral decline, without causing the options you purchased to be worth enough to meaningfully cushion the blow."

[7Figures2Commas]

A protective put against an equity position can function like an insurance policy. For example, if you owned a large position in CRM stock and were sitting on significant unrealized gains but didn't want to sell, you could buy CRM puts to protect your equity position. Of course, there are other strategies (like a collar) that are probably going to make more sense in many scenarios.

Buying a deep OTM put in a single company as an "insurance policy" for your privately-owned SaaS business is patently silly. The correlation, if any, is far too weak to be meaningful but even if you believed there was some correlation, to follow your own criticism of your strategy, I find it hard to believe that $500 worth of puts would provide protection unless you have a tiny business. Even if the value of your puts grew by, say, 3900%, an entirely unlikely scenario, your dollar gains would still only be $19,500.

So I'll repeat: folks should not consider buying puts (and deep OTM puts at that) as you suggested.