What Is the Impact of a ‘Black Swan’ Event on a Protective Put Strategy?

A 'Black Swan' event, an unpredictable and severe market shock, would cause a sharp, sudden drop in the underlying cryptocurrency's price. This event would be highly beneficial for a Protective Put strategy.

The Put Option would instantly move deep 'in-the-money,' dramatically increasing its value. The investor's loss on the spot position would be offset by the large gain on the Put Option, effectively limiting the maximum loss to the insured level (the strike price) plus the premium paid.