So I'm thinking through a detailed reply, and samclem comes up with that 'succinct' thing that I'm so bad at!
Oh well, I'll go anyway
RockOn, I admire you for thinking through these concerns and searching for solutions. I've done some of it myself, and I seemed to learn that it all boils down to samclem's acronym.
Look at it this way - if you are trying to buy something that can limit risk, there is someone on the other side very willing to sell it to you - at a premium. It really is that simple - they are not going to take on
your risk w/o charging you a price that they think is fair. Otherwise, they would find another place to invest their funds.
So, as HaHa says - there are products out there. I'd bet that if you spent years evaluating them you would discover one thing - the market has priced them fairly accurately.
I remember reading through (OK, I skimmed a great deal of it) McMillan's book on options shortly after I RE'd. There are an almost unlimited number of ways to structure options and the underlying investment. You can 'engineer' your risk profile for any shape you want. But it all comes down to one thing (and samclam said it).
You seem bright, so I think you already know that. So yes, you can limit risk - at a price. That price is not going to vary much, unless you get into some snake oil 'promise', and that price will vary to the high side.
For example, you can buy Puts to limit risk. Except for special circumstances (holding for long term cap gains vs short term, protecting an employee stock option position, or just wanting to hold during a volatile period that you *think* is over reaction), I think that just owning less equities is a better way to hedge risk than buying puts on those equities. No one charges a premium for that.
Full disclosure: I tend to sell puts for the premium - I am a seller of risk.
Fuller disclosure: It's only working out so-so
.
But hey, the day you stop looking for a way to squeak out a little extra from life is probably the day you die a little. I try to keep my mind open to new ideas, but I also have a long history of seeing the ideas wither down to...
T A N S T A A F L T
-ERD50