Worst-case protection

Rank options by how bad their worst plausible outcome is, then pick the one whose bad case is least bad. Averages and upside get ignored on purpose. Use it when a single bad scenario would end the game, and say out loud whose bad case you are protecting.

Rank options by how bad their worst plausible outcome is, then pick the one whose bad case is least bad. Averages and upside get ignored on purpose. Use it when a single bad scenario would end the game, and say out loud whose bad case you are protecting.

Example

For the portfolio, you stop comparing expected returns and ask what each mix does in a 40% drawdown while one of you is out of work. The all-equity option leaves 11 months of runway; the mixed one leaves 26. You take the mix.