Obviously they believe they are getting more alpha then simply buying puts. For example, these guys made money this year with the market going higher because of the moves in commodities. The put buyer would have lost that money vs being up 8%.
ETA: I am looking at a managed fund that does something similar. It really helps to almost eliminate the downside risk. Their annualized return since inception (just over 3 years) is over 8%, S&P500 -0.01%. And their portfolio beta is usually less than .5.
Agreed... Although from the article I don't really quite get how they come up with the secret sauce, which is to say how they pick the strike. Moreover, I am not at all sure about the VIX, but in the world of rates when all these price-insensitive real money types start getting into these types of structures en masse, it's occasionally a great opportunity to fade it and sell skew (i.e. buy 1x2s). Anyways, I see your point, but I am sure there's all sorts of nuances that the article doesn't dwell on.
after thinking about this a bit I think you should figure out how much $ you're willing to bet on a black swan event and then buy LEAPS on whatever you want to bet against... I suggest LEAPS because I think interest rates are going up and that way you get a little bit of rho edge...
dont you only get a rho edge if you buy calls? when rates go up, forwards go up and calls become more in the money on a forward basis.
My strategy is based on Positive Black Swans. Most of people speak only about down trends, bubbles bursting and short selling them, but the Negative Black Swans are only half the story of the Black Swan. The strategy is long term and I don't think it is suitable for small accounts.