The man who predicted the crash missed it. He won anyway.
Own an Umbrella Before the Storm
He missed the crash, but he did not lose. His insurance was already active.
You cannot time the storm. You can always own the umbrella.
Buy your umbrella in the sunshine, because the storm never sends a warning. For most people that umbrella is cash, lower exposure, diversification, position limits, and no margin — options are advanced insurance, not a beginner shortcut. For most people that umbrella is cash, smaller sizing, and lower leverage. Options are only one kind of insurance, and they are not free.
Story
“I have a colleague who made good money during COVID playing with options trading (short selling). He said he would retire if another COVID-like market situation resurfaces. So I asked him - how he is doing in the current situation. He said - I missed the train this time. He could not anticipate a tariff shock would do this much damage. But overall he did not lose as he has few short-selling options always active as insurance. I don't trade options but I think maybe that's a good strategy for passive investors - have some options always active.”
A quiet friend told me this over coffee a few days after the April 2025 tariff crash. He trades for himself, no firm behind him, and he is the most disciplined person I know about risk. What made the story land was not a clever forecast. He had stopped relying on forecasts at all. He treats catastrophe protection the way the rest of us treat a smoke detector. It sits there, mostly silent, until the one day it earns back every dollar it ever cost.
A colleague of his made a small fortune shorting the COVID collapse in March 2020. He was waiting to retire on the next one, convinced he would see it coming. The next one came in April 2025, and he missed it.
It arrived from a direction he never watched: tariffs, not a virus. In that stretch the S&P 500 dropped about 10 percent in two days. The man who had spent years predicting the next crash could not see this one coming.
The part worth sitting with is that missing it cost him almost nothing. His standing insurance was active the entire time, as it always is. He did not see the rain coming.
He simply always owns the umbrella. The people who survive these stretches are rarely the ones who call the top. They are the ones who carry protection they never have to remember to buy.
Meaning
Plain English
Plain-English note: Short selling is betting a price will fall. You profit when it drops, which is how some traders made money in the 2020 and 2022 crashes. A put option is a contract that gains value when the market falls, so it acts like insurance on what you own. Index puts are puts on the whole market (like the S&P 500 or QQQ) rather than one stock.
A drawdown is the peak-to-trough fall in your account. A cash sleeve is the slice you deliberately keep in cash so a crash is an opportunity, not an emergency. Margin is borrowed money to buy more than you have. It amplifies both gains and ruin, which is why the umbrella here is mostly about owning less risk, not more cleverness.
Framework
Decide in advance what protection, if any, fits your experience level, rather than scrambling on the morning of the next scary headline.
- Most people: decide on a permanent 15 to 20 percent cash sleeve, and size the whole portfolio so it survives a 40 percent drawdown without forcing a sale.
- Trader level: set hard position limits in writing, and make the rule no margin.
- Advanced only: treat rolling index puts as a budgeted 1 to 3 percent annual premium you accept on purpose, not a market-timing call.