Private wealth - managing concentrated stock positions

Could someone pls explain the short sale against the box?

Moreover, short sale against the box & equity forward sale contract are included under risk hedging of monetization stategies, i.e. avoiding a sale & avoiding triggering tax. But how can this be, since the short sale and equity forward sale both involve a sale?

many thanks!

In a short sale against the box you borrow shares and sell those, then use the proceeds to invest in a more diversified portfolio. Because you are not selling shares that you own, there is no taxable event.

In a forward sale, the sale occurs far in the future, but today you have a risk-free portfolio against which you can borrow, then invest the borrowed funds in a more diversified portfolio. If the sale ultimately goes through, you have at least postponed the taxable event. Another possibility is that on the sale date you could agree to settle in cash based on the market price of the stock, thereby avoiding the sale altogether.

Thank you very much!

Is my understanding correct: you borrow shares from a lender, sell them (immediately) -> you avoid risk price? Another advantage is avoiding tax, since you are selling shares you do not own.

Short sale against the box is a tool for managing concentrated stock positions. In what way? Since you do not own the shares, how can you manage a concentrated stock position? Thanks a lot.

It’s a way of monetizing the concentrated position. When you sell the borrowed stock, you have cash that you can invest in a more diversified portfolio. You have also eliminated the price risk on your concentrated position: long + short = zero.