- The main idea behind modern portfolio theory is to maximize your expected return per unit of risk taken.
- Critics sometimes dislike this approach, arguing that due to the amount of leverage in the system, market crashes are far more common than would be expected by random chance.
- Some high-profile investors, like Paul Tudor Jones, Nassim Nicholas Taleb, and Taleb's former NYU student, Mark Spitznagel, have gotten rich from buying cheap put options that profit from a market crash.
- Is buying OTM puts now cheaper and more effective than putting money in bonds? Some investors think so.
- Some notes on game theory and ETFs to implement this strategy.
For further details see:
Post-Modern Portfolio Theory: Are Put Options More Useful Than Bonds?