Put spread ratios are similar to put spreads.

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However they involve an uneven number of puts. The ratio defines the number of put contracts sold compared to contracts in the long put, Henzen said. Put spread ratios are for investors who want to monetize the elevated implied volatility skew, Henzen said. They are less expensive than standard put spreads, but their protection can be an issue as it diminishes gradually as the asset price falls below the strike of the short puts. Advantages: Cheap, maintains upside participation and low, to no sensitivity of implied volatility. Disadvantages: Protection kicks in closer to expiry and high maximum loss potential.

Analyst comment: "In large sell-offs, put ratios can even generate additional losses and are therefore recommended to investors that have strong confidence the asset price will not fall below a certain level. Depending on ratio and strike levels, ratio put-spreads offer very low protection at inception, as their protection progressively rises during their life, reaching its maximum at expiry if the asset price is trading near the strike of the short puts".

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A butterfly spread consists of a long put, two short puts at a lower strike and then a further put at a lower strike. This strategy is similar to a ratio put spread but doesn't expose investors to extreme downside moves. Advantages: Relatively cheap, maintains upside participation and very low sensitivity of implied volatility. Analyst comment: "Although slightly more expensive than ratio put spreads, butterfly spreads offer better protection, which starts at inception and increases during the life of the option.

They also remove the risk of additional losses when the asset price declines well below the strike of the short puts. Similarly, maximum protection is reached at expire, when the asset price trades near the strike of the two short puts. A collar consists of a long put and a short call. Both of these options have different strikes but the same expiration date. But if the price of the underlying asset rises, the profit potential is limited to the strike price of the call.

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Advantages: Cheap, immediate protection, maximum loss potential is low and low to no sensitivity of implied volatility. Analyst comment: "Collars are particularly attractive when the asset price has experienced a positive run-up.

To protect a profit at little cost, the investor is willing to forgo some potential further gains by capping the upside participation. Barrier options are a sophisticated form of derivative.

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They tend to have a lower premium than a vanilla option and can be customized to investors' needs. These options tend to be for investors who have clear expectations on the path of an asset, Henzen said. A down-and-out put behaves like a traditional put, however, if the asset price crosses below the barrier, the investor gets zero pay out. The barrier is set well below the strike of the asset price, usually, however the closer the barrier is to the strike price then the cheaper the option. A down-and-in put option is activated once the asset price of the underlying asset falls below the barrier.

Once the barrier is reached, the option becomes a standard vanilla put.

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They also get more expensive when skew and implied volatility rise. Disadvantages: High-to-moderate maximum loss potential, depending on the type of barrier option. Analyst commentary: "Barrier options are a valid solution to reduce the premium of an option. Nevertheless, the barrier feature increases the complexity of the derivative instrument, which in turn may involve additional costs for the investor.

Furthermore, the conditionality linked to the barrier and the absence of a large listed market clearly make barrier options more suitable as buy-and-hold strategies than listed vanilla options. Read more: 4 heavyweight investing firms answer the 5 most burning bitcoin questions facing investors as the cryptocurrency sees unprecedented volatility. Its founder breaks down how to pick blank-check firms — and shares 3 to watch in Read more: This day trader just made the biggest trade of his career exploiting the momentum around bitcoin.

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