This story appears in the August 6, 2012 edition of Forbes magazine.

Note: Prices reflect trading on a day when the SPDR closed at $134.

How would you like to go into the insurance business, collecting premiums for insuring people against catastrophes? The product in question is crash insurance, which pays out if stocks take a dive. Your potential buyers are worried bulls—people who want to be in the market but don’t want all the risk that goes with it.

You don’t need a license for this underwriting work, just some loose cash and a steady nerve. One product you could sell: a put option on the SPDR S&P 500 fund, exercisable until December 2014 at a strike price of $125. The buyer of the option obtains the right to sell you a share for $125.

This option is out of the money—meaning it can’t be cashed in immediately for profit. The SPDR is trading at $134. The SPDR would have to fall by nine points for the buyer of the option to want to use it.

In return for promising to buy under adverse circumstances, you collect a premium. In this case it’s around $18.

Why be a seller of puts? Because there’s a lot of demand for them. European banks are falling apart, our own economy remains sickly, and memories of the crash of 2008–09 are still fresh. So products that protect against market crashes are richly priced, says Gregory Peterson, a mathematician at Ballentine Partners who helps wealthy families manage risks.

As a seller of crash insurance, you’d have distinguished company: Through Berkshire Hathaway, Warren Buffett has sold several billion dollars’ worth of this stuff.

The Berkshire puts are custom-designed contracts originally maturing over 15 to 20 years. You’d be doing options traded on the Chicago Board Options Exchange, where maturities stretch out only to the end of 2014. But in essence your bet would be the same as the ones Berkshire made.

Before playing this high-risk game, ask whether you have the right personality for it. Your willingness to own stocks should go up as their prices fall. Value investors like Buffett are of this sort.

A lot of investors are emotionally wired in the opposite way. While they may behave in a predictably rational fashion when buying gasoline or airline tickets—a lower price makes them more willing to buy—they get turned around when they go to Wall Street. There, a fall in prices makes them want to sell. They sell because other people are selling. As a vendor of puts, you will be insuring these lemmings.