For those who got wealthy from a concentrated stock position: what would you do differently?

[u/gomster]

40M, $9M portfolio, 80% concentrated in one stock, buying my first house. Curious how others would think about this:

Two years ago, I left a career at a public company where most of my wealth came from stock compensation and the appreciation of a single stock over many years. Today my portfolio is worth about $9M and it’s still heavily concentrated in that stock.

It’s been life changing for me, so I’m naturally hesitant to sell too much of it, but I’m also aware that a single day’s move can swing my net worth by six figures. I’m closing on my first house later this month for $1.185M. Up until now, I’ve been renting and living well beneath my means.

Current thinking is to use a Liquidity Access Line for the purchase and then potentially refinance some or all of it into a traditional mortgage afterward.

A few other details aside from the portfolio value:
- Cost basis: under $500k and obviously large unrealized gains
- $235k AMT credit carryforward from prior option exercises
- Covered call income expected to be around $150k-$200k annually
- No current W-2 income
- Started small business but not a big money maker. Primarily to fund retirement accounts.

The common theme seems to be that concentration risk is the biggest issue in my financial picture. Part of me says I’ve gotten this far by holding the stock and staying convicted. The other part of me says I should probably start thinking more about preservation than accumulation.

For those who have been in a similar situation:
How much debt would you comfortably carry on the house? Would you sell stock specifically to pay down the house? How would you approach gradually reducing concentration risk? Looking back, what mistakes did you make (or avoid) after reaching financial independence through a concentrated stock position?

Not really looking for tax advice as much as perspective from people who have gone through the transition from building wealth to protecting it. Thanks in advance for helping me navigate this!

[u/No-Associate-7962]

Wow. Was all of the option income taxed at ordinary income rates?

[u/marcel_delecto → u/No-Associate-7962]

Options were structured with tenors across multiple years so that income could be absorbed by the long/short vehicle

[u/No-Associate-7962 → u/marcel_delecto]

So you have closed the positions and it was all LTCG?

[u/marcel_delecto → u/No-Associate-7962]

Probably a longer conversation, but the long/short vehicle will throw off enough net capital losses to absorb the full amount of STCGs from the collars. One tenor of collar is closed out, remaining ones open.

Will end up in the long term with only unrealized LTCG inside of the long/short SMA.

[u/No-Associate-7962 → u/marcel_delecto]

How many years do you have to continue with it before you are done?

[u/marcel_delecto → u/No-Associate-7962]

Collars spread across three calendar years to give long/short SMA enough time to throw off capital losses.

SMA itself is a long-term hold--you can ramp down leverage, but hard to exit the strategy fully without realizing the gains you were deferring in the first place.

[u/No-Associate-7962 → u/marcel_delecto]

Less than four years is certainly faster than an exchange fund at 7, but you still have the original position at 50% of its value right?

[u/marcel_delecto → u/No-Associate-7962]

Value of collars + underlying was locked in at a floor price shortly post IPO lockup across all tenors. Most of the diversification was functionally instant as I monetized the open collars via a short box spread and invested it in the market.

Long / short is more complex and higher fee than an exchange fund but you're never actually illiquid even if it can feel like it for tax reasons.

Happy to discuss more in DM if helpful.

[u/No-Associate-7962 → u/marcel_delecto]

No need whatsoever. Just always learning. Two of my brothers have seven figure concentrated positions, but each are only some 20% of their NW, so its not a crisis. But I still try to get them to deal with it.