Single-ticker concentration risk in an options portfolio
Count exposure in dollars and shared factors, not just ticker symbols. Whole option lots can create unintended portfolio weights.
By OptionsKing. Publisher and editorial methods.
What you will learn
By the end of this lesson, you should be able to:
- Calculate company and sector weights.
- Use account and deployed-capital denominators.
- Aggregate shares and puts across expirations.
Calculate secured capital by company and sector, then express it both as a share of the account and of deployed capital. The two denominators reveal different concentrations. One contract per ticker is not equal economic exposure when the purchase obligations differ greatly.
Six positions, weighted
| Ticker | Sector | Stock | Put strike | Credit | Cash secured | Share of the account |
|---|---|---|---|---|---|---|
| AMD | Semiconductors | $118.00 | $106 | $252 | $10,600 | 21.2% |
| MU | Semiconductors | $92.00 | $83 | $177 | $8,300 | 16.6% |
| INTC | Semiconductors | $23.40 | $21.50 | $46 | $2,150 | 4.3% |
| KMI | Energy | $27.60 | $26 | $35 | $2,600 | 5.2% |
| T | Telecom | $22.50 | $21 | $20 | $2,100 | 4.2% |
| WBD | Media | $11.40 | $10.50 | $16 | $1,050 | 2.1% |
| Total | 6 names | $546 | $26,800 | 53.6% |
Now divide by what is actually deployed rather than by the whole account.
| Ticker | Cash secured | Share of capital at work | Share of the account |
|---|---|---|---|
| AMD | $10,600 | 39.6% | 21.2% |
| MU | $8,300 | 31.0% | 16.6% |
| KMI | $2,600 | 9.7% | 5.2% |
| INTC | $2,150 | 8.0% | 4.3% |
| T | $2,100 | 7.8% | 4.2% |
| WBD | $1,050 | 3.9% | 2.1% |
Two names are 70.6 percent of the money at work. Six positions, two bets.
Where the weights came from
Not from a view. From share prices.
One contract is 100 shares, so a $118 stock commits $10,600 at a $106 strike and an $11 stock commits $1,050. Sell one contract on each of six names and you have built a price-weighted portfolio, which is a portfolio nobody would choose on purpose. The most expensive stock on your list gets the most money by construction.
This is the single most common structural mistake in a retail premium book, and it is invisible if you count positions instead of dollars.
The sector layer, which is worse
AMD, MU and INTC are the same trade. Three tickers, one industry, one demand cycle.
Together they are $21,050, which is 78.5 percent of the capital at work and 42.1 percent of the whole account. A 25 percent decline in semiconductors alone costs $3,070, or 6.1 percent of the account, with the other three names untouched.
What happened in cycle 3
The three semiconductor positions fell together in this illustrative cycle. Shared sector exposure made diversification weaker than ticker count suggested; it does not mean they always move identically.
| Ticker | Strike | Stock, open to settle | Move | Credit | Outcome |
|---|---|---|---|---|---|
| AMD | $113 | $126.00 to $96.00 | -23.8% | $278 | assigned, basis $110.22 |
| MU | $89 | $98.00 to $75.00 | -23.5% | $215 | assigned, basis $86.85 |
| INTC | $22.50 | $24.80 to $19.60 | -21.0% | $43 | assigned, basis $22.07 |
| WBD | $10 | $11.10 to $9.40 | -15.3% | $12 | assigned, basis $9.88 |
| KMI | $25 | $26.40 to $24.60 | -6.8% | $40 | assigned, basis $24.60 |
| T | $22 | $23.40 to $22.80 | -2.6% | $24 | expired worthless |
Five assignments out of six, in one 46-day cycle, on a book whose puts each had roughly a 73 percent chance of expiring worthless.
The paper loss was $2,902 and the cash position went from $50,000 to under $24,000 in six weeks, because assignment converts collateral into stock. That is the part that surprises people: the account did not just lose money, it lost more than half its dry powder at the exact moment everything was cheap.
The fix, and what it costs
Position and sector caps are chosen constraints. Apply them to the entire account, including owned shares and obligations across expiries. Reducing premium to keep exposure within those limits can be deliberate; a high-credit company's past success does not invalidate the limit.
Measure both the whole-account allocation and the share of capital already committed. Then compare alternative sizes and holdings without assuming that maximizing premium maximizes total return.
- No single name above 20 percent of capital at work. AMD and MU both fail. Dropping AMD and running two contracts of a cheaper name instead gets you there.
- No sector above 35 percent. The semis are at 78.5. You keep one of the three, not all three.
- Count the sector, not the ticker. Three semis are one position with three ticker symbols and three sets of commissions.
AMD and MU supplied $3,722 of the ledger's $4,598 premium. Reducing those positions would reduce their credits, but the effect on total return also depends on stock P/L, other trades and costs. This historical concentration does not prove the contracts were fairly priced or that a different portfolio must earn less.
Concentration limits exchange some opportunities for less dependence on a few outcomes. Assess the exposure behind large credits, then choose limits you can continue to apply when markets change.
Check your understanding
Why can six one-contract positions behave like two dominant bets?
Show the explanation
The higher-strike contracts commit much more capital, and several companies can share industry exposure. Count dollars and common factors rather than treating each ticker as one equal unit of diversification.
Common questions
How do I measure concentration in an options book?
By capital committed, not by position count. In the worked book six positions looked diversified while one ticker held 39.6 percent of the money at work and two held 70.6 percent between them.
Why does one stock end up dominating my put selling?
Because one contract is 100 shares. A $118 stock commits $10,600 of collateral at a $106 strike and an $11 stock commits $1,050, so selling one contract on each name builds a price-weighted portfolio you never chose.
Is holding three stocks in the same sector diversified?
No. In the worked book AMD, MU and INTC were 78.5 percent of the capital at work, the sector fell about 22 percent in six weeks, and all three assigned in the same cycle. Three tickers, one bet.
What happens to my cash when several puts assign at once?
It becomes stock. Five assignments took the worked account from $50,000 in cash to under $24,000, so the book had less than half its capital left to sell new puts at exactly the moment premiums were richest.
Sources
Rules and thresholds above were checked against these documents on August 4, 2026. Exchange and broker rules change. Confirm anything you are about to act on with your own broker.
Keep reading
Do the math on your own trade
Every price in this article is an illustrative worked example, not a quote. Read Running the book for the rest of the series, and the disclaimer before you act on any of it. Selling options carries real risk of loss, and the loss can be far larger than the premium you collected.