Derivative use is one of a few ways that an investor can actually "insure" their investment portfolio after a period of strong appreciation, whether for the long-term or for the short-term.
For example, a market that runs up 10% over the course of one week without underlying fundamentals to support the gain will likely result in a correction at some point in the near future.
In anticipation of the correction, an investor might buy put options (the right to sell) on the broad market or index, (which protects them against a broad market correction) or put options on specific securities held in their portfolio.
As an alternative to put options, investors can also purchase any number of Exchange Traded Funds that may act as a put option on their own, allowing them to protect against specific sectors, the market as a whole, or even specific currencies, rates and commodities.
Ultimately, the list on ETF's that will behave like put options is endless.
A final option the investor has is to sell those securities and secure the gain.
Where one of the protective strategies above comes into play is in cost (it is generally cheaper to buy one or two options that can protect an entire portfolio than it is to sell the whole portfolio), scope (some ETF's can protect against specific sectors whereas an investor might only hold one security and wishes to have broader protection) and in ease (with an option or ETF, the owner can sell the derivative or security at a gain whenever he or she wants).
Investors might want to choose a protective strategy like put options or bear-ETFs when they want to maintain ownership of the shares in their portfolio (selling them would result in their giving up ownership rights as well as any schedule dividends).
This is ideal when it is believed the shares will continues to rise in the long-term but are set to experience a short-term correction or set back.
Where a put option becomes more attractive than buying an ETF is in the cost.
Options are usually very inexpensive (like a term insurance policy) whereas an ETF will be more expensive (like a whole life insurance policy).
An ETF may be more attractive if the investor wants to take a bearish position for an unknown amount of time; unlike options that expire, an ETF can be held indefinitely.
Obviously using these two types of securities to protect a portfolio makes good sense as an investment strategy.
The decision, however, lies in which strategy to use.