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A losing stock position can fall only to zero.
Mr. Zander cautioned against holding any concentrated stock position, which many retired executives have in the companies where they worked.
They are most useful if you are in or near retirement and you need to hedge a large stock position.
Nearing Retirement Ideally, you should have started to slowly shrink your stock position over your working career.
"We inherited a limited and unbalanced stock position, with a particularly severe lack of stocks in many high-performing lines," he said.
These allowed people to put an asset in a trust — usually a concentrated stock position — and receive an annuity from it.
"We have been in a low-stock position for several days," said Geoffrey Fenton, a spokesman for Cardinal Health Inc., another big drug wholesaler.
Once a stock position is collared, it becomes a (relatively) fixed asset against which investment banks are willing to lend money.
"Protective puts are one of the best ways to hedge a stock position while retaining the opportunity for substantial profit," Mr. Schwartz said.
Board representation would make the firm a so-called insider under federal securities rules, and limit its ability to sell or increase its stock position.
Instead of agreeing, Mr. Altfest suggested the client reallocate his portfolio back to 65 percent stocks and 35 percent bonds and then go back to that allocation whenever the stock position dropped below 63 percent.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com