In general, there are couple of 'hard-and-fast' guidelines for flying a US 50-star as yacht ensign.
1. The US flag always flies with the stripes end in free, clear area. Never fetter the stripes end. Hang it vertically from the stars end or fly it horizontally from the stars end. Any obstacle with which the stripes end could come into contact has to be avoided by the set of the flag. At the masthead of a gaff-rigged vessel, the flag, in theory, could tangle with the gaff; therefore, the clearest place is at the gaff. This carries to flagpoles as well.
2. Regarding the flag as being viewed from the port side of the boat, fly no flags further astern (see rule above). The US flag always flies in the freest air; that means others go forward (to its left) and below it. In theory if a loosened halyard from some other flag could droop and tangle it, the US 50-star is not high enough or the other one is too close or low. Also, counter wind (blowing from other than the flag's own left) doesn't count; but consider it anyway.
3. On modern yachts with no gaff, fly the flag where the gaff would be if your sternmost mast had a gaff. This usually means about 2/3 to 3/4 up the backstay. You can put a stopper ball on the halyard to stop it there. This is not considered 'half mast'; this is considered proper (same height as where the gaff would be). It is not improper to have a personal ensign at the masthead (above it) as the personal flag cannot possibly foul the US 50-star from there. Below, the yacht's own ensign may fly at the taffrail (this really means only the 13-star fouled-anchor flag, which otherwise is falling out of favor with US boats traveling offshore.
4. The US 50-star is made visible for the longest period-- goes up first, gets struck last. Make it easy to respect that.
Most of this is, at least in gist, is verifiable in Rousmaniere's book(s). A lot of it renders the pre-2000s etiquette sort of obsolete.
One more thing, while I am at it:
Pirate flags have no place on seagoing yachts. The black crossed-bones or crossed-swords flags essentially mean, 'Flag? We don't need no stinking flag!' and constitute, under international rules, a non-flagged vessel, subject to boarding and seizure by any vessel flying a recognized flag. Read the story of Paul Watson to see real-world (legal if a bit unexpected) implications. Here in NJ after 9/11 we had stories of people (sportfishermen mostly) coming in from 12+ miles out flying just pirate flags and getting stopped by the CG and other concerned mariners. Without exception (the stories I heard personally) they all argued rudely about it-- not the best tactic when HSA is looking for militant illegals. Pirates aren't cool or funny in the real world. They are the bad guys. We responsible yachtsmen are cooler and better than that. Don't emulate the losers.
