It should be noted (and is below) that the trades are not fail proof and do come with a cost, but have teh benefit of reducing "catastrophic" risk.
Protect your entire portfolio with one trade Lawrence G. McMillan - MarketWatch:
"There are several ways that an investor can hedge a large portfolio of stocks with derivatives, but there are really only two ways that make much sense. 'Macro' protection means that you buy broad-based index options as a hedge to your long stock portfolio. You can thus protect your entire portfolio with just one option trade. The biggest risk in this approach is 'tracking error' -- that your portfolio might not perform the same as the index does.
Sometimes, simplest is best, and that is probably the case here. There are two approaches that one could take: either buy puts on the Standard & Poor's 500 Index or buy calls on the volatility (VIX)."