For a deal involving several complex steps, his all-in price would reflect the cost of hedging his own position.

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Essentially, 20% is a large enough threshold that it reduces the cost of hedging but not so large that it precludes a recovery.

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Importantly, these bets provide a liquid market for credit risk, which lowers the cost of hedging for those with primary exposure, and provides the market with better information about whether Greece or General Electric is a good credit risk.

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The strategy came about during the meltdown of 2008, when correlations between different assets surged and Warren found that every effort he made to protect client assets had its own drawbacks, chief among them the cost of hedging by going short the market or jumping in and out of holdings.

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Alternatively, strategists could be hedging short positions in the stock, reducing the cost of protection by establishing call spreads rather than simply buying calls outright.

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But Hormel is hedging some of that risk on top of efforts to pare down the cost structure.

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