Utilizing Derivatives for Risk Management in Equities

As a portfolio manager at a wealth management firm, you are tasked with managing a diversified portfolio for a high-net-worth client with a significant exposure to equities. The client is concerned about potential declines in the equity market and is looking for strategies to manage this risk while still seeking opportunities for capital appreciation.

Discuss how you would utilize derivatives in this context. Your answer should include an analysis of at least two types of derivatives you would consider, the potential benefits and risks associated with those instruments, and how you would integrate them into a broader risk management framework for the client's portfolio. Additionally, address the implications of market conditions and the client's investment horizon in your strategy.