Portfolio Overlays for Concentrated Stock Positions

Author: Marc Odo, CFA®, FRM®, CAIA®, CIPM®, CFP®

Client Portfolio Manager, Swan Global Investments

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Diversification is classic and valid advice for investing and risk management. However, some investors, for one reason or another, have a large portion of their investments in a single stock.

A concentrated stock position creates a distinct scope of risks and challenges.

Custom option overlays can fit into a comprehensive plan to address risks, pursue long-term objectives, and optimize the benefits of concentrated positions over time. Executing and managing overlays involves option strategy selection, market and technical expertise, as well as tax and legal considerations.

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