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Matt Levine, Columnist

Everything Is an ETF Now

Autocallables, Microsoft Strips, BNB treasury strategy and on-cycle recruiting.

There is a market for insurance against stock market crashes. Most investors are more or less long the stock market — they own diversified portfolios of stocks — and some of them worry that they will lose money if the stock market goes down. They would like to buy long-term black-swan-type insurance against a disastrous market crash.

But who wants to sell that insurance? Well, Warren Buffett, occasionally.1 But in general, this sort of insurance is not that appealing for the seller: The trade is “you get paid a little bit each year when times are good, but you lose a ton of money when the stock market crashes.” That’s the worst time to lose a ton of money! Also, if you are the buyer of that insurance, you might worry about credit risk: If you are buying insurance that pays off if the market crashes, how can you trust that the seller will pay you? Again, most investors are long the stock market, so if you buy crash insurance from some investor, and then the market crashes, she will probably have lost a ton of money herself and might be unable to pay you.