* * *
And while the above information is great, and quite valuable, it does beg a simple question: if indeed everything were to crash tomorrow (or the day after) in a systemic collapse that drags down the entire asset universe, then while any of the above listed puts will clearly soar in value, just who will be there on the other side, either to sell them to or at exercise time? After all, the crashes envisioned above guarantee that no banks and counterparties would be left standing.
Which begs the question: is, paradoxically, the best crash hedge not buying but selling puts and collecting the premium now before it all goes to hell? After all if everything collapses, who will be there to enforce contracts and demand that you repay your counterparty, especially if the Fed - unlike in 2008 - does not come to bail you and everyone else out?
Finally, if and when contracts are no longer observed, the only "hedges" left, whether cheap or not, will not be of the paper variety but only the physical type.
