Imagine you have a very diversified portfolio of stocks. You are concerned with a very real possibility of a big market drop. Sure, you could start selling of

Imagine you have a very diversified portfolio of stocks. You are concerned with a very real possibility of a big market drop. Sure, you could start selling off stocks from your portfolio, incurring various transaction fees, capital gains taxes, plus you know have to reoptimize your portfolio on the fly because since you sold off some stocks, it's now probably out of balance. Or, you could just buy puts on S&P 500 and you don't have to deal with any of those issues. It's much more convenient and efficient to do that. It's really the same thing as going to a supermarket and seeing a wide variety of products instead of just bread, meat and apples. Is it a must have? no. Is it useful, though? yes