Client Situation
Concentrated Stock & Employer Stock
A large single-stock position, whether from a long-term holding or vested employer shares, can become a major source of wealth, and a major concentration risk.
When a large share of your client's investments or net worth depends on one company, a single earnings report, product issue, or market move can have an outsized impact.
One stock may already be your client's biggest exposure.
Illustrative portfolio
45% of this portfolio depends on the performance of a single company.
For employees, that concentration can be even more significant because the same company may also be the source of salary, bonuses, and future equity compensation.
Why concentration matters
Single-stock risk
One company-specific event can materially affect a large portion of your client's wealth.
Limited diversification
A large single-stock position can overwhelm the diversification provided by the rest of a portfolio.
Income + investment exposure
Your client's paycheck and a significant investment position may depend on the same company at the same time.
Why not just sell?
Selling appreciated shares may trigger capital gains taxes and reduces your client's exposure to a company they may still want to own.
Why options?
Options can change the risk around an existing investment without requiring an upfront stock sale.
Why Parity?
Compare protection, income, and upside tradeoffs in plain English, choose the outcome your client wants, and take the trade to their brokerage.
What Parity lets you compare
Choices for vested, tradable shares.
Hold the shares unprotected
Retain full upside and downside.
Collar
Define a maximum loss in exchange for capped upside.
Buffer
Absorb the first portion of a decline while retaining some upside.
Covered call
Generate income in exchange for capped upside, with full downside still remaining.
Example: 100 vested shares of a single stock · 1 year
Illustrative 1-year comparison using one 100-share position.
| Approach | Downside | Upside |
|---|---|---|
| Hold vested shares | Full market downside | Uncapped |
| Collar | Defined maximum loss | Capped |
| Buffer | First losses absorbed | Capped |
| Covered call | Initial downside cushion | Capped + income |
Illustrative only. Actual outcomes depend on live option pricing, the chosen expiration, and holding the position through the outcome period.
Important limitations
- These strategies apply to vested, tradable shares, not unvested RSUs.
- Selling, hedging, or exercising company stock may have tax consequences.
- Some employer plans restrict option transactions involving company stock.
- Listed equity option strategies are typically modeled in 100-share increments.
Model your concentrated stock
Enter a stock you own and the number of shares you hold to see how different protection choices change the modeled downside, upside, income, and cost.