Transition
VOLT™ Sidecar
The hedge runs in a separate account. We never trade the client’s shares.
Where issuer policy bars employees from trading derivatives on their own stock, a collar on a permitted proxy floors the economic exposure from a separate account, while the shares are sold down on schedule. Hedges on correlated instruments carry basis risk.
Illustrative example
restricted company stock → protected on the way out, via permitted proxy exposure held separately
Drawn from a priced proposal, not an engagement. Indicative as of its run date.
The problem
Plenty of concentrated positions cannot be hedged directly. Insider status, blackout windows, or a flat policy prohibition on derivatives over company stock takes the obvious structure off the table. The client is left holding the risk with no permitted way to reduce it, and the compliance desk has no way to verify that a proposed structure stays clear of the shares.
How it works
Confirm the constraint
What the issuer policy actually prohibits is established and recorded first. The strategy only exists because a direct hedge is unavailable.
Collar a permitted proxy, in its own account
A correlated instrument the policy permits carries the collar, held in an account separate from the client’s shares. No derivative is written on the restricted stock and the share account is not traded.
Migrate out, funded by the structure
Shares are sold down on a schedule through the client’s own channels while the proxy collar holds the floor, and the collar’s own output funds the transition.
What’s inside
Issuer-policy analysis
What is permitted, documented before pricing.
Separate hedge account
Where the proxy collar is held, segregated from the account holding the shares.
Proxy collar
Floor and ceiling on a correlated permitted instrument.
Funded sell-down
The scheduled migration out of the restricted position.
Who it’s for
- Employees and insiders barred from trading derivatives on their own stock.
- Clients under a policy that prohibits derivatives on company shares.
- Participants accumulating stock through an ESPP who cannot hedge what they buy.
- Advisors who have been told the position simply cannot be protected.
Common questions
How is this permitted when a direct hedge is not?
The collar sits on a correlated instrument the issuer policy allows, held in a separate account, not on the restricted stock. The client’s own counsel and compliance function should confirm the approach against their policy before anything is executed.
Does YAM ever trade the client’s company shares?
No. The mandate covers the hedge account. The shares stay where they are and are sold through the client’s own channels on their schedule.
What is the trade-off versus a direct collar?
Basis risk. Hedges on correlated instruments can diverge from the stock — the proxy and the position will not move identically, and that gap is real risk the client carries.
Does this work with an ESPP?
It can. An ESPP keeps adding to the same single-name exposure the client already cannot hedge, which is the case for sizing the proxy against the position as it grows. Plan terms and issuer policy govern, and both are read before anything is priced.
Does the client still end up diversified?
That is the objective: the position migrates out on a schedule while the proxy collar holds the floor during the transition.
Request a proposal on VOLT™ Sidecar.
Position-specific analysis and an executable proposal in days. For investment advisers — your client, your custodian, your portfolio.
Partner with us →Also in Transition
VOLT™ Accelerate
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Exit the position tax-aware, on a schedule.
VOLT™ Shield
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The same exit, with a floor the whole way down.
VOLT™ Shield + Diversify Now
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Diversified on day one. The sale, and its tax, happen later.
Elsewhere in the suite
Tax-Aware Equity Strategies
Protect & Monetize
Keep the position and the grants. Put the option book to work, tax-aware.
Box-Spread Borrowing
Financing
Borrow against portfolio margin capacity — managed so it does not become a margin problem.
Keep reading
Yayati Asset Management, LLC is a state-registered investment adviser. This material is for investment advisers only; it is illustrative, not an offer, and not tax or legal advice. Examples are drawn from priced proposals, not engagements; figures are indicative as of their run dates and tax outcomes are client-specific. Options involve substantial risk and are not suitable for all investors — read “Characteristics and Risks of Standardized Options.” “Zero cost” means zero net option premium; transaction costs and advisory fees are separate and disclosed. Hedges on correlated funds carry basis risk: fund and stock can diverge. Employee stock options are issuer-governed; monetization is subject to plan terms. Liquidity strategies involve margin and financing risk, and terms depend on the custodian. PLASMA™ is an investment technology platform operated by Yayati LLC; it is not an investment adviser.