I'm new to options and am interested in using them to goose performance and hedge risk, in combination with stock screeners that try to choose equities with a given direction, e.g. bullish. Three ideas are given below, feedback would be welcome. The stock screener I'm most familiar with is by Joel Greenblatt, who seems to be a reputable academic as well as an investor with street creds. His "Magic Formula Investing" stock screen (horrible name), when back-tested, performs very well in identifying value stocks that give excellent returns on average compared to the S&P on an annual basis. He web-publishes a free, ranked list of stocks. Interestingly, the better ranked stocks in this list performs very well as "value" stocks (in back tests), while the worst ranked stocks perform poorly. He recommends choosing from among the large number of best ranked stocks to form a small portfolio of about 30 stocks, hold them for a year, and then sell. He recently formed some mutual funds that implement his stock picking strategy. My goals are (a) market beating returns when averaged over a few years (somewhat less than Greenblatt's but more than the market is fine), (b) black swan protection, (c) not investing large amounts of time and effort. Feedback on the following three thoughts would be most appreciated! (1) The simplest idea is to just buy Greenblatt's mutual fund and also buy protective puts on say SPY (or another ETF?) to address black swan concerns. Due to the put purchase the return on this package will be lower than on his fund alone (in non-BlackSwan years) but conceivably could still handily beat the market. Buying simple puts for Black Swan protection over the span of a year on a long position is often too expensive, the idea here is that the claimed returns on his stock picks make the package of fund+puts a vehicle for high return but with downside protection. This plan in principle achieves two of my goals (market beating with downside protection, and is simple to implement), but doesn't goose performance by using options, and it also ties up money in stocks that he recommends only holding for one year. (2) Because Greenblatt lists his ranked stocks on his free website one could instead buy DITM calls on a choice of 30 of the best ranked stocks, instead of buying the individual stocks (or his fund). This takes less money than buying stocks and the DITM calls should have high delta and act similarly to stocks. Or, I suppose one could simply buy OTM calls (but at what strike?). Either way, one could also buy protective puts on some index ETF as in idea (1), or alternatively buy protective puts on the 30 individual stocks themselves, and in principle achieve market beating return on the whole package while having Black Swan protection. Viewed as a package, some of the upside of the "magic formula" is traded for protection when buying the puts, but one gains leverage by buying the calls instead of buying stock. The options need to span a year, so one possibility is to use LEAPs, but one might worry that sub-selecting from his list of better ranked stocks for those with LEAPS might screw up the claimed performance. If this is a worry, then presumably one could instead do a series of normal options to cover the one year span he advocates owning the stocks. 3) Ideas 1 and 2 don't goose performance. To try and do so using an options strategy, note that he ranks a large number of stocks and claims that back-testing shows that poorly ranked stocks perform poorly while the better ranked stocks beat the S&P (by a lot, on average). He mentions in his 2010 book that the idea of trying to goose performance by longing the top ranked stocks and shorting the bottom ranked stocks had been tried, but that in back-tests this strategy went bust. I assume that he actually shorted the stock, but wouldn't it be less risky to simply buy puts on a selection of the worst-ranked stocks? (Note that these puts are much different than the protective puts in ideas (1) and (2) above, those puts were either on an index or else protective puts on the better ranked stocks). Then instead of going long on stock, instead buy either DITM or OTM calls as per idea (2) on a selection of the best-ranked. If so, shouldn't this be a less risky alternative to the "long the top and short the bottom" strategy to goose performance? A disadvantage of ideas (2) and (3) is that they are a more active and time-consuming strategy than idea (1).