Part 5/11:
Where Spitznagel's philosophy transforms into actionable strategy is in his use of convexity in investment—specifically through out-of-the-money put options. Options serve as a form of insurance that can explode in value during market downturns, offsetting losses in other areas of a portfolio. By constructing a carefully diversified investment portfolio that includes alternatives such as precious metals and real estate, Spitznagel seeks to benefit from market corrections while stabilizing his investments during volatile times.