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Vineer Bhansali in his book Tail Risk Hedging makes some claims regarding portfolio protection:

  1. For losses of 0% to -5%, just diversification
  2. For losses of -5% to -15%, alternative betas (momentum)
  3. For losses of -15% to -25%, explicit put options
  4. For losses of -25% and bigger, cash

However, he doesn't clarify how exactly cash protects a portfolio against losses. What he meant to say was just to buy the stock when the price is low? I just can't see how this could protect against the loss. Any help would be appreciated.

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    His description makes no sense because you can't know the size of the down move in advance. The only thing in that list that hedges is long puts and you can't wait until the market is down 5% to 15% top buy them. Each year I buy SPY put LEAPs 10% out-of-the money and I leg in and out of verticals as the market moves down and up, lowering the annual cost. There's always some amount of protection in place. This year's leftover long puts have saved my bacon. I've rolled them down once and will do so again if tonigh'ts DJIA drop holds overnight.
    – Bob Baerker
    Commented Mar 23, 2020 at 3:23

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