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What should you do with stock options during a recession?

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Re: What should you do with stock options during a recession?

#111

Post by bergenty »

shshshd wrote: post #60
johnchristopher wrote: post #2

I'd like to know what to do with ~10 000 euros, right now. Where should I put it so it doesn't lose its value and keep a bit with inflation ? edit for a bit of context: Western Europe, renting, unlikely to be able to buy/invest into a house/flat, looking at gold ingots, not the nerve for crypto.

10k is not that much money. I know it takes a lot of effort to save, but its small change. If you have somewhere to store it, buy consumable goods. - Several hundred dollars each of tuna, prosciutto, a wheel of Parmesan, jerky, rice, flour. - If you have an oil/wood heater fill up the tank. If gas buy plenty of wool sweaters. - If you have to drive to work, get a scooter. - If you live in Czechia, or Finland, (you're…

But why? Who wants to eat all that processed food when you can just have fresh food instead.

Re: What should you do with stock options during a recession?

#112

Post by anonymousiam »

danachow wrote: post #76
anonymousiam wrote: post #69

Earlier quoted context omitted.

Options are not shares -- they are an option to buy shares at a specified price.

> I gave my Wife money to exercise her ISO's Did you miss this part?

I did not miss it. My reply was to the parent post by s1artibartfast (nice HHGTTG reference), who said; "They are talking about the shares, which are already fully owned and liquid.

The question is to sell them and invest the cash somewhere better(??) or HODL."

Re: What should you do with stock options during a recession?

#113

Post by caseysoftware »

bergenty wrote: post #109
maerF0x0 wrote: post #55

> If you leave the company, your options will expire if you don’t exercise them. Let me repeat that: if you leave the company, your options will expire if you don’t exercise them. The exact timeline of how quickly they expire depends on option type and company policy, but the termination window is commonly as short as 90 days. So, exercising your options enables you to actually own what you helped build. This is why…

Can someone explain to me why stock options are better than RSUs?

Generally, stock options are granted before the company is liquid (aka pre-IPO) and you pay $X with the hope that they're worth more and liquid someday. As you hit vesting dates, you can purchase more of them up to your total grant. (There's also stuff around early exercise, don't worry about that.)

RSUs are just shares you don't own yet. When you hit your vesting dates, you don't have to DO anything, they just become yours. You don't have to pay anything to execute and often the company will sell some for you to pay the taxes on them.

I wouldn't say one is definitively better.. there are tradeoffs:

RSUs can be better because you don't have to spend money to get them and they're liquid immediately (or at least soon).

Stock options can be better because your pre-IPO price may be better than the public price but you have no guarantee they'll ever be liquid.

Re: What should you do with stock options during a recession?

#114

Post by kingnothing »

subsubzero wrote: post #35
ushakov wrote: post #30

Earlier quoted context omitted.

> holding cash at 0% as consumer prices are surging this no longer may be true my bet is on physical assets: guitars, gold, watches

Gold looks ok, I don't know about guitars but watches are plummeting just like the stockmarket.

Which watches are plummeting? I've had my eye on a couple of specifics for a while and they're still as expensive as ever.

Re: What should you do with stock options during a recession?

#115

Post by bradlys »

justin_oaks wrote: post #87
maerF0x0 wrote: post #55

> If you leave the company, your options will expire if you don’t exercise them. Let me repeat that: if you leave the company, your options will expire if you don’t exercise them. The exact timeline of how quickly they expire depends on option type and company policy, but the termination window is commonly as short as 90 days. So, exercising your options enables you to actually own what you helped build. This is why…

Any options a company offers me, I'll value at $0. That doesn't preclude my working for them if they have an otherwise compelling offer.

This is a bad take. If you truly value options at $0 then you’re often getting a garbage deal wherever you go. If you’re only negotiating over salary - you’re screwing yourself.

Options is how you actually make money at startups. The salary is only enough to make sure you can afford to exercise your options regularly and not starve to death in an extremely HCOL area.

If you value options at $0 - just join FAANG and never join a startup.

Re: What should you do with stock options during a recession?

#116

Post by sunsunsunsun »

maerF0x0 wrote: post #55

> If you leave the company, your options will expire if you don’t exercise them. Let me repeat that: if you leave the company, your options will expire if you don’t exercise them. The exact timeline of how quickly they expire depends on option type and company policy, but the termination window is commonly as short as 90 days. So, exercising your options enables you to actually own what you helped build. This is why…

That first article sure is funny. 10% to the first 10 employees... my current employer gave me roughly 0.001% in stock options and I'm employee #5.

Re: What should you do with stock options during a recession?

#117

Post by jazzkingrt »

lmeyerov wrote: post #66
subsubzero wrote: post #36

I gave my Wife money to exercise her ISO's(startup before IPO) for her first 1.75 years of shares when the company valuation hadn't changed. Her company went public and the stock jumped and then crashed, I think the current price per share is lower than her exercise price so she is underwater and the money I gave her is worth less as shares vs. cash I originally gave her. Really a huge bummer as this job up-ended our…

Most VCs liquidate most of their position around IPO except for really blowout exceptions, so that should tell you something about what the smart early money does on IPOs :) We were in an ipo just recently with same-but-different setup: - sold some immediately at the pop to recuperate the principal - ... Note this may count as a short-term capital gain ( - In retrospect, I should have examined the P/E ratio and sanit…

I don't think VC money is "smart money", it's just not designated for investment in public markets. The "expertise" of a VC is in private growth equity, not liquid public stocks.

Re: What should you do with stock options during a recession?

#118

Post by bpodgursky »

bergenty wrote: post #109
maerF0x0 wrote: post #55

> If you leave the company, your options will expire if you don’t exercise them. Let me repeat that: if you leave the company, your options will expire if you don’t exercise them. The exact timeline of how quickly they expire depends on option type and company policy, but the termination window is commonly as short as 90 days. So, exercising your options enables you to actually own what you helped build. This is why…

Can someone explain to me why stock options are better than RSUs?

- RSUs are taxable at vest, and if the shares aren't liquid, offloading enough of them to pay taxes is a huge headache (sometimes the company will help buy some back, but it's also a headache for a startup to do this, so they often don't)

- Stock options are "cheaper" for a startup to give out than RSUs, so you get more shares, ie your equity is higher-leverage. So if things go well, you end up with much much more money than had you gotten RSUs (and yes obviously if things go terribly, you get nothing).

Re: What should you do with stock options during a recession?

#119

Post by lmeyerov »

jazzkingrt wrote: post #117
lmeyerov wrote: post #66

Earlier quoted context omitted.

Most VCs liquidate most of their position around IPO except for really blowout exceptions, so that should tell you something about what the smart early money does on IPOs :) We were in an ipo just recently with same-but-different setup: - sold some immediately at the pop to recuperate the principal - ... Note this may count as a short-term capital gain ( - In retrospect, I should have examined the P/E ratio and sanit…

I don't think VC money is "smart money", it's just not designated for investment in public markets. The "expertise" of a VC is in private growth equity, not liquid public stocks.

Yes and no:

- Sure, some long island hedge fund genius is probably smarter at finance than some bay area VC for reasoning about most public companies

- But the professional VCs who have been in a specific company for 4-10 years, watching the team+category outperform 90% of the rest of their portfolio & their many competitors, and fighting for them round after round & pivot after pivot, have a much better sense of hold/sell vs some quant who doesn't know all that. That's a lot of insider knowledge for a finance professional.

Re: What should you do with stock options during a recession?

#120

Post by ptmcc »

bradlys wrote: post #115
justin_oaks wrote: post #87

Earlier quoted context omitted.

Any options a company offers me, I'll value at $0. That doesn't preclude my working for them if they have an otherwise compelling offer.

This is a bad take. If you truly value options at $0 then you’re often getting a garbage deal wherever you go. If you’re only negotiating over salary - you’re screwing yourself. Options is how you actually make money at startups. The salary is only enough to make sure you can afford to exercise your options regularly and not starve to death in an extremely HCOL area. If you value options at $0 - just join FAANG and n…

The vast, vast majority of startup options are worth less than toilet paper. To say nothing of the shenanigans like dilution and liquidation preferences that will screw you.

They are lottery tickets at best. Yes, sure, someone sometimes wins big, but the odds are not in your favor.

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