Why Options Strategies Belong in Portfolios with Concentrated Positions
In today’s unpredictable market environment, traditional portfolio strategies are being put to the test. With persistent volatility, inflation pressures, and questions about the future of interest rates, many advisors are searching for tools that provide more control, risk mitigation, and flexibility for their clients.
One area where this need is especially acute is with clients who hold concentrated stock positions. Whether accumulated through years of employment, a business sale, or simply successful investing, concentrated holdings can create significant risk exposure—and options strategies are one of the most effective ways to address it.
The Hidden Risk of Concentrated Positions
Clients with large single-stock exposures often feel conflicted. On one hand, the stock may have created substantial wealth; on the other, it represents an outsized risk that can destabilize long-term plans. Standard diversification advice—“just sell and reinvest”—isn’t always practical due to taxes, legacy considerations, or emotional attachment.
This is where options provide a middle ground. Instead of all-or-nothing decisions, advisors can use overlays to gradually reduce risk, create income, or lock in protection without forcing immediate liquidation.
Modern Applications of Options for Concentrated Positions
At Exceed Investments, we believe options shouldn’t be treated as an exotic niche, but as a core tool for managing concentrated wealth. Here’s how advisors can apply them:
- Managing Downside Risk
Protective puts or collars can establish a floor under a concentrated position, giving clients peace of mind that a sharp downturn won’t erase years of gains. This is particularly valuable during volatile markets or around key liquidity events. - Generating Income from Idle Assets
Covered calls may allow clients to earn incremental income on stocks they already own. For investors unwilling—or unable—to sell, this creates tangible cash flow without adding credit risk. - Tax-Sensitive Diversification
Options overlays can help bridge the gap between holding and selling. Instead of realizing a large taxable event all at once, advisors can use collars and spreads to gradually unwind exposure while still providing meaningful downside protection.
All these strategies come with a level of risk – with the aforementioned strategies all limiting upside to a degree in addition to execution risk given the complexity of options (though a professional can mitigate this second risk)
Overcoming the Complexity Concern
Yes, options strategies involve moving parts. But so do fixed income ladders, tax-loss harvesting, or alternative allocations. The key is thoughtful design and clear implementation.
At Exceed, we’ve packaged our overlay strategies so advisors don’t have to manage individual options trades themselves. Our goal is to make sophisticated risk management accessible, transparent, and easy to integrate into client portfolios.
What Clients Really Want
Clients with concentrated positions aren’t usually asking for abstract metrics like “beta” or “Sharpe ratios.” They want to preserve wealth, reduce single-stock risk, and maintain flexibility in how and when they diversify. Option overlays align directly with those goals—helping advisors deliver solutions that meet real-world needs.
The Future of Wealth Management
We believe the next decade will see more clients needing specialized solutions for concentrated holdings. Advisors who embrace tools like options—delivered in advisor-friendly formats—will be better positioned in providing solutions that may protect client wealth, create income, and differentiate their practices.
If you’re advising clients with concentrated stock positions, it may be time to explore what options strategies can do to protect and grow their wealth—without forcing difficult all-or-nothing decisions.
IMPORTANT DISCLOSURE: The information in this blog is intended to be educational and does not constitute investment advice. Exceed Advisory offers investment advice only after entering into an advisory agreement and only after obtaining detailed information about the client’s individual needs and objectives. No strategy can prevent all losses or guarantee positive returns. Options trading involves risk and does not guarantee any specific return or provide a guarantee against all loss. Clients must be approved for options trading at the custodian holding their assets, and not all retirement accounts are permitted to trade options. Transaction costs and advisory fees apply to all solutions implemented through Exceed and will reduce returns. Specific securities discussed are intended to illustrate the concepts covered and do not constitute a recommendation of any security and do not purport to represent the performance or holdings of any Exceed portfolio.
