It's possible to hedge portfolio against the crisis by buying put-options. One thing that worrying me - what if insurers will be bankrupt when you need them the most.

This crisis insurance (put-options) will be activated when banks, brokers and economy having very bad time. It could be quite possible that option writers will just went bankrupt and you got nothing.

I recently watched Mark Spitznagel talk that says similar things:

  • ... my solution to this I don't take a single entity counterparty risks ...
  • ... It's like a buying Titanic insurance from someone who's on Titanic, that's not a great idea ....

So, as far as I understand he buys put options from multiple different providers. How he does that - where can you find different put options writers? And ideally how he owns those contracts directly, bypassing the broker (to avoid broker bankruptcy risk)?

Usually you transact such things via broker and don't even know who's the put options writers. Is there other way to buy put options for a small investor? When you knowing who's the put option writer and diversify by having multiple different writers?

  • What markets are you trading? U.S.? Regulation may vary. Nov 22, 2019 at 19:32
  • @ChrisW.Rea yes, U.S. because it's easier. But other developed countries could be also an option Europe, Japan, Canada.
    – Alex Craft
    Nov 22, 2019 at 19:37

2 Answers 2


It is guaranteed by OCC, if the seller does not full fill the requirement, then OCC will full fill the requirement.

OCC becomes the buyer for every seller and the seller for every buyer, protecting its members from counterparty risk.


Brokers are not involved in this equation. They are just intermediaries connecting buyers and sellers. It's the option sellers who bear the risk of naked options.

Short options require about 20% margin. If breached, brokers will automatically BTC to cover naked positions (covered puts are not the problem). This scenario assumes that all option sellers are operating on minimal margin and that's not the case. Many are fully capitalized and can absorb the losses.

Keep in mind that if there's a massive down move, market circuit breakers will kick in, giving market participants time to adjust. In the final analysis, the OCC guarantees all trades.

I have no clue what Mark Spitznagel is doing but looking for other counter parties ("other way to buy put options for a small investor?) implies OTC and that has far more risk.

And when all else fails, there's the government (see Fannie Mae rampantly selling credit default swaps leading up to 2008).

  • Mark Spitznagel strategy is to hedge stock portfolio with cheap out of the money options against major crash.
    – Alex Craft
    Nov 22, 2019 at 15:54
  • So he's a tail risk guy, eh? Even lottery tickets win once in awhile. Nov 22, 2019 at 15:56
  • @BobBarker about the lottery tickets. As far as I understand betting on tails is not the main part of the strategy but a small proportion of a portfolio.
    – Alex Craft
    Nov 22, 2019 at 16:13
  • Yeh, I realize that it's cheap Black Swan protection rather than a leveraged bet on a long shot. Nov 22, 2019 at 16:34

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