This Options Jive segment discusses how option portfolios provide more diversification than stock portfolios.
Diversification is important because the more diversification we have, the less risk we have. Yet, when it comes to stocks, people can really only diversify their portfolios with stocks from different sectors.
Option portfolios, on the other hand, are affected by directional movement, time decay, changes in implied volatility, and delta. Therefore, option portfolios provide significantly more diversification than stock portfolios. This means option portfolios can have less risk than only using equities.