Single-ticker concentration risk
Counting positions is not measuring diversification. In the book this series follows, six names looked spread out and two of them carried 70 percent of the money at work, because contract size decides your weights unless you decide them yourself. The fix is to weight by capital committed, not by ticker count.
Nobody sets out to put 40 percent of an account into one stock. It happens by arithmetic.
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 semis fell together, because they always do.
| 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 ran out of dry powder at the exact moment everything was cheap.
The fix, and what it costs
Weight by capital, cap by sector, and accept a worse book to get a survivable one.
- 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.
The cost is real and worth naming: AMD and MU paid $3,722 of the year's $4,598 in premium, because high implied volatility is what makes a name expensive to insure and lucrative to underwrite. Capping concentration means giving up most of the income. That trade is priced correctly, which is the problem.
So this is not a free improvement. It is choosing a smaller, duller book over one that pays more and occasionally hands you five assignments in a month.
OptionsKing scores every candidate strike on a deterministic 0 to 100 scale, blends that score with the return on the capital the trade ties up, and shows you the highest-ranked handful. There is no minimum score. How it works covers what the ranking does and does not tell you.
Questions people actually ask
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 no 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.