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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?

#131

Post by ptmcc »

bradlys wrote: post #129
ptmcc wrote: post #120

Earlier quoted context omitted.

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.

I wish I had your unimpeachable knowledge and foresight of which small fraction of startups will not only succeed, but succeed so much that your options will actually be worth something meaningful.

I would wish you the best of luck, but sounds like you don't need it.

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

#132

Post by kqr »

atombender wrote: post #34
FinanceAnon wrote: post #22

Earlier quoted context omitted.

I would just hold it - I have sold most of my index fund holdings in the past 6-9 months and been just holding cash. I don't think stocks have reached the bottom yet, so holding cash at 0% return is still better than negative returns from stocks. Right now, it's about not taking losses. I also don't see the market and economy rebounding quickly after reaching bottom - they will stay flat for a while IMHO

As a counterpoint, I would quote the great John C Bogle: "Never, never get out of the market." [1] Knowing when the market has reached the bottom is not really possible. During the dot com crash in 2000-2001, investors sold all the way down to the bottom (and lots of them sold at the very bottom), and then they eventually sold all the way up to the peak, when instead they could have just held onto their shares. Rebal…

> Rebalancing doesn't really work. That's another thing Bogle showed us.

Wait, what? Rebalancing has worked very well in my backtesting, assuming the fairly generous trading fees I get, at least.

What are you referring to?

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

#133

Post by kqr »

notch656a wrote: post #41
atombender wrote: post #34

Earlier quoted context omitted.

As a counterpoint, I would quote the great John C Bogle: "Never, never get out of the market." [1] Knowing when the market has reached the bottom is not really possible. During the dot com crash in 2000-2001, investors sold all the way down to the bottom (and lots of them sold at the very bottom), and then they eventually sold all the way up to the peak, when instead they could have just held onto their shares. Rebal…

>"Never, never get out of the market." Cash is a market though, just a different market. If you hold cash you're in a particular market, one that has earned significant returns measured against equities this year. (of course, depending on timespan you may want to pick _which_ market you think best) It's been strange indeed. My highest yielding investment the past couple years was buying a new vehicle. Conventional wi…

So the refinement of the statement might be "never, never move your allocation to 100 % of a single asset."

(But since you speak of a diverse basket, you probably know this already.)

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

#134

Post by jjeaff »

bradlys wrote: post #129
ptmcc wrote: post #120

Earlier quoted context omitted.

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.

If you think your lottery tickets are worthless, then pick better lottery numbers!

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

#135

Post by whakim »

bradlys wrote: post #129
ptmcc wrote: post #120

Earlier quoted context omitted.

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.

The average time to exit is something like 8-10 years right now. Are you suggesting you can pick the startups founded over the last year or two that are going to have a big IPO in 2030?

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

#136

Post by ggm »

lumost wrote: post #62
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…

I only had options at one firm which was Series D and had ~300 employees. The company issued them at a price which was rich, then steadily issued new options at lower price points. The management made it a practice to have periodic calls which would talk about how they were 12-18 months away from IPO and the price target was going to be ~5x the rich price. Then there would be talks where engineering management would…

long-term average is 6-7% in the big picture. 12% is good, even if it not S&P good.

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

#137

Post by alfiedotwtf »

twicetwice wrote: post #127
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 b…

Ok, that's a good take. To be honest, I've never thought about it like that. Thanks for the perspective.

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

#139

Post by sbf501 »

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…

One step further: Options are just a way for companies to get out of paying you a salary. (I got them from Microsoft, and from Intel before they were offered to all employees.)

Options = salary

In other words: exercise them as SOON as they vest. I had two financial planners tell me that over 15 years (I fired the first one), and both were 100% correct in hindsight.

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

#140

Post by jjav »

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…

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

Basically, yes.

Most (large majority) of startups can't pay market rate salaries. So if you value options literally at $0, then a startup is only an underpaid overworked job, so skip it.

So to even consider a startup job, you need to mentally give some expected value (probability * value) to those options. The probability is going to be very low, so the potential value needs to be high, i.e. don't join without a significant option grant.

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