Simple, but not always easy. Generally, investors with a concentrated stock position need to take a variety of approaches to reducing their concentrated position. Sometimes it makes sense to simply sell a chunk of it. This is particularly true for individuals who have amassed a concentrated stock position, at least partially, in a 401(k) or IRA. Because the stock is now outside the qualified account, the net unrealized appreciation, or the difference between the basis and the current price, is taxed when it is sold at a long-term capital gain. STRATEGIES FOR HANDLING CONCENTRATED STOCK POSITIONS Hedge your position You may consider protecting yourself against a significant drop in

5 Jun 2017 Whenever owners of concentrated stock positions have obtained their An equity collar is a hedging technique designed to protect a stock  3 Sep 2017 Fund creates a low-cost strategy for hedging concentrated equity exposure. This the strike price of a long put protecting a stock position. 1 Mar 2017 The hidden dangers of concentrated equity positions. A new strategy, known as the Stock Protection Fund (SPF), was created recently by  5 May 2015 Concentrated Stock Positions: Considerations and Strategies. Whether you inherited a large holding, exercised options to buy your company's  30 Dec 2015 In the case of concentrated stock positions, this is usually (but not risk by hedging your concentrated position by buying puts to protect the  4 Ways to Diversify a Concentrated Stock Position 1. Equity Collars. The first approach is a very common hedging strategy and one 2. Variable Prepaid Forward. Another popular strategy that can achieve a similar effect as 3. Pool Shares Into an Exchange Fund. The first two methods described

25 Jun 2019 Owning too much stock concentrated in one company exposes an investor to significant risk. Learn four strategies to diversify and protect your 

Managing a concentrated stock position If you’re like many successful executives, you own a big chunk of stock in the company you work for. But staying so completely invested in one company might put your personal financial future at risk. A concentrated equity position is defined as a substantial portion of an investor’s wealth (10% - 15%, or more in some cases) tied in one stock. These highly concentrated positons can result from employer stock and option incentives, long-term employment at a single company, a large inheritance, etc. Protect yourself from losses by buying the right to sell the concentrated security at a certain price. Sell covered call options. Increase income from the security by agreeing to sell the security at a fixed price. This would, however, limit your ability to benefit from the stock's appreciation. Use an equity collar. Sell a call option to buy a put option to get downside protection. The most obvious way to reduce the risks of a concentrated position in a single stock is to sell most or all of the shares and reinvest in a safer, more diversified portfolio. The major impediment to this strategy is the capital gains taxes that will be triggered upon sale. By holding the concentrated position one can defer tax. That tax deferral represents leverage, because the deferred taxes can be viewed as money borrowed from the government without interest. However, the analogy of an Defining a Concentrated Position A concentrated position occurs when an investor owns shares of a stock (or other security type) that represent a large percentage of his or her overall portfolio. The investor’s wealth becomes concentrated in the single position. Depending on the volatility of the stock and the size of the client’s portfolio, a

1 May 2017 These funds take a non-traditional approach to concentrated stock risk a stock protection fund can be “married” to the retained stock position, 

Highly Concentrated Stock? PATRICK S. appeal of concentrated positions but emphasizing their if this same strategy is adopted to protect a stock position. Doing so would immediately protect the investor from the downside risk of the individual stock but could limit growth potential. Selling the entire position  OPTIONS-OVERLAY (for concentrated stock/ETF positions) OPTIONS- OVERLAY strategy to complement the positions, potentially helping to protect, diversify  No matter what the reason for maintaining a concentrated stock position, failure to recommend risk management strategies to protect concentrated position. 12 Jul 2018 Concentrated Stock Positions Blog, Polaris Greystone. Diversification does not ensure a profit or protect against a loss. Advisory services are  28 Mar 2018 Not because they held a concentrated stock investment that grew, but Jeff and Susan's portfolio might need to hold its larger “core” position in  10 May 2017 These concentrated stock positions are | Find, read and cite all entail a reduction in idiosyncratic risk by selling or protecting a. meaningful 

The buyer of a put has the right to sell a stock at a set price until the contract expires. If you own an underlying stock or other security, a protective put position  

Simple, but not always easy. Generally, investors with a concentrated stock position need to take a variety of approaches to reducing their concentrated position. Sometimes it makes sense to simply sell a chunk of it. This is particularly true for individuals who have amassed a concentrated stock position, at least partially, in a 401(k) or IRA. Because the stock is now outside the qualified account, the net unrealized appreciation, or the difference between the basis and the current price, is taxed when it is sold at a long-term capital gain. STRATEGIES FOR HANDLING CONCENTRATED STOCK POSITIONS Hedge your position You may consider protecting yourself against a significant drop in In the recent past, we've witnessed large companies like Bank of America, GM and Netflix all suffer sharp declines in their stock prices. For example, between December 2007 and March 2009, Bank of America's stock dropped 92% — a loss that would've been catastrophic for an investor overly concentrated in that position.

19 May 2014 However, building a large position in your company's stock isn't the end of the that large stock position, known as a concentrated equity position? you sell calls and use the proceeds from the calls to buy puts for protection.

A concentrated equity position is defined as a substantial portion of an investor’s wealth (10% - 15%, or more in some cases) tied in one stock. These highly concentrated positons can result from employer stock and option incentives, long-term employment at a single company, a large inheritance, etc.

Family wealth created by holding a single stock that appreciates Why diversification can help to protect wealth. By Baird's concentrated stock position , Baird. Or, your investing focus may simply have shifted from growing your net worth to protecting what you've accumulated. How much is too much? There's no firm,  18 Dec 2018 If you have a highly appreciated, concentrated stock position, you have likely invested in, or inherited, one or two stocks that have done  Why concentrated stock positions tend to disappoint much more often than reward Hedging via prepaid variable forwards or collars can offer protection, tax. 6 Dec 2018 StockShield establishes and maintains a “Stock Protection Trust,” designed to limit the downside risk of company stock holdings while