cover your tail
Article in Forbes on Spitznagel’s fund (Universa), which buys extreme out of the money options. These are cheap, so he can afford to have many of them go bad. But also, because they are cheap, when they go well, they go really, really well.
“With Santa Monica’s trendy beaches a block away, Mark Spitznagel and three fellow traders spend their days placing a couple dozen bets that a disastrous event will rock equity markets or cause inflation to soar. On roughly 95 trades out of 100 they lose money”