Using Defensive Stocks as Your Secret Weapon (video)
Why Cheap Put Options on Boring Stocks Might Be Your Best Hedge
“Black swan” events like the 2008 financial crisis or the 2020 COVID crash are always on the minds of investors. Protecting your investments from these rare events doesn’t have to be expensive.
That’s the core message from a fresh video by CI Volatility Investments, where host Ali Zandi breaks down an under-the-radar strategy that’s equal parts clever and cost-effective.
Diversification Protects You Least When You Need it Most
Zandi kicks off by debunking a common myth: Stock diversification only works in normal market conditions, it crumbles when you need it most. During big market crashes, correlations no longer matter because everything drops together, from tech darlings to “safe” stocks.
So, how do you hedge when stock diversification doesn’t work and paying for pricey S&P 500 puts or VIX calls is too expensive?
Defensive Stocks as Your Secret Weapon
Enter defensive stocks like Coca-Cola (KO). These low-volatility stocks barely budge in normal times (think: $5 swings annually), but they plummet 20-40% in black swans just like the broader market.
Zandi’s genius part? Their stability makes put options on them dirt cheap.
Markets don’t price in big moves for sleepy stocks, so protection costs pennies.
Zandi illustrates with KO’s February 2026 $60 puts, trading at a mere 19 cents when the stock’s at $70.
A 20% drop? That 19¢ option could balloon to $4—a 2,000% return.
A 30% plunge? You’re looking at ~$10, or a whopping 5,000% gain.
Important Considerations
Do your homework: Scan 20-30 slow moving stocks (e.g., Procter & Gamble) for the best deals: don’t just chase KO.
Use common sense on timing: There are obviously times when black swan events are less likely, for example major market crashes don’t tend to happen in back to back years.
This should be a complement to your core hedges, not a replacement.