Smart consumers do not put themselves at risk by allowing their lives, health, and property to remain uninsured. Yet surprisingly investors are often unaware of or ignore the need for insuring their concentrated stock holdings. Investors who hold a substantial portion of assets in a single stock may be subject to 100% loss of principal, lack of diversification, and sole reliance on positive price movements to generate returns. Selling a portion of a concentrated equity position to purchase broader investments may hold negative consequences such as adverse tax implications, the inability to realize the full upside potential of the equity, and diminished voting rights.

Our risk management approaches are intended to allow investors to participate in the upside potential of their concentrated asset holdings while attempting to reduce the negative consequences, by:

	Protecting the downside by purchase of puts
	Generating income through the sale of calls
	Extracting cash through the use of leverage or margin

In a traditional equity collar, the investor can protect against downside risk by purchasing a put option, which by itself may be too expensive. To defray the cost of the put, “the floor,” a call option is sold, thereby becoming a “cap” on the upside. This strategy sets a “floor” and “cap,” establishing a collar on the value of the underlying holding. This hedges the risk for a specified amount of time. These collars are fixed, generally have a long-term structure and are viewed by some investors as price prohibitive. Our “dynamic collars” provide a flexible alternative that does not intend to cap the upside potential and attempts to increase the probability of positive returns.