lets say a stock dropped more than 20%, and I would stop out...
does MV portfolio handle that?
The question is the Value At Risk in each time horizon and the likelihood that a correlation breakdown will push this still higher.
If you know where your stop is, then barring scenarios of limit-up/limit-down, I would think it reasonable to cap the position Value At Risk as the OTM loss plus the slippage from a robust execution model.
I haven't seen this written about.