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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?

#121

Post by jokethrowaway »

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…

But I don't want to work in the office in a hcol or study algorithms for three months or get bogged down in performance reviews.

Tons of startups and mid sized companies give you an ok salary and some serious advantages.

Even ex fangs end up there because of those advantages.

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

#122

Post by rrdharan »

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?

If you get ISOs (not NQSOs) and you early-exercise them such that the spread is $0 (or at least negligible/low) and you correctly file an 83b and the IPO or exit is more than two years from date-of-grant and one year from date-of-exercise, then you can get the more favorable long term capital gains tax treatment on the generated income from the exit event.

That’s a lot of conditions, so IMO they don’t make all that much sense and I much prefer RSUs (maybe I’d think differently as a founder). Plus there are sharp edges like AMT. I’ve been an early employee multiple times at companies that had successful exits and never successfully had all conditions satisfied, and have ended up paying regular income tax rates but had more complicated taxes to file.

If joining a company as a non-founder I’d just take straight RSUs.

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

#124

Post by TimTheTinker »

PheonixPharts wrote: post #52
adamsmith143 wrote: post #21

Earlier quoted context omitted.

This always seems silly to me. You are making an assumption that your Income will inflate by the same amount. But I don't know anyone getting 8% raises each year in any industry.

It still make sense as long as the thing you're buying is something you'll eventually need to buy anyway. Say there is a 20k car you need to get to work that you should purchase within a year. Then assume, in a simplified scenario, you can either take out a 6% annual loan, or just save up the money for a year and then buy the car. Now say the car raised in cost with inflation at 10%. In one year the wait and save wil…

A car might be a bad example... prices have really taken off since early last year, unfortunately.

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

#125

Post by 8note »

sunsunsunsun wrote: post #116
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.

That sounds like either they didn't need you or you made a poor choice? Or you were paid in cash instead?

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

#126

Post by rrdharan »

bpodgursky wrote: post #118
bergenty wrote: post #109

Earlier quoted context omitted.

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 mo…

> 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).

Is this generally true? I’m not sure it applies for the typical engineer joining a larger company (a Databricks or Stripe, say) where you’re not really affecting the cap table all that much. Do companies really give out more options than RSUs?

My one personal piece of anecdata here is when considering an offer from a startup (that I didn’t take), they offered during negotiations to change the mix of RSU+options into just all RSUs (same total number).

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

#127

Post by twicetwice »

alfiedotwtf wrote: post #123

All these comments... Does anyone actually work at a company because they do interesting stuff, rather than option terms?

I do interesting stuff in my free time. I make money in my work time.

Not quite really—I do enjoy my work and my time at my job, and I would sacrifice some compensation to work at a more interesting/meaningful/fun company. I don't price the enjoyment of 50% of my waking hours at zero, of course. But my primary purpose in working a job is making money, and I don't think that's anything to be ashamed about. I want to buy a house one day.

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

#129

Post by bradlys »

ptmcc wrote: post #120
bradlys wrote: post #115

Earlier quoted context omitted.

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.

If you think they're lottery tickets - pick a better startup. Seriously. You shouldn't be joining startups unless you think they have a chance of liquidation for you.

If you really do think they're worthless THEN JOIN FAANG.

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

#130

Post by 8note »

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…

Valued at $0 because thats what theyll be treated as when the founders and moneyed investors get paid out first.

Sure, options are how you get rich from a startup, but you dont get rich at a startup by working for one, only by being a founder or an investor.

That's why I work at a FAANG:P startups exist to screw their employees

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