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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?

#151

Post by ransom1538 »

d357r0y3r wrote: post #89
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.

All other things being held equal, a company choosing a longer exercise window says that they are employee-friendly in at least one respect. I know the conventional wisdom here is that options never matter, but the reality is that they sometimes do, especially for companies that are experiencing solid growth. I recently made several hundred thousand dollars off my options from a liquidity event, and I hadn't been at…

Agreed. You would be surprised how much companies are worth on the market. Private liquidity events can cause whacky things outside the original conventional stock contracts. EG. "The acquiring company can also accelerate the vesting of options or awards, choosing to pay cash or shares, in exchange for the cancellation of outstanding grants". That can be serious cash for someone somewhat new to the company - eg 1 year in.

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

#152

Post by jokethrowaway »

adamsmith143 wrote: post #21
JonChesterfield wrote: post #8

Earlier quoted context omitted.

Buy something you want for 20000 and watch the debt inflate away?

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.

You just need to job hop

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

#153

Post by jokethrowaway »

alfiedotwtf wrote: post #123

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

No, but occasionally you get something interesting at work.

Very rarely. 99% it's all implement this API route or implement this react component.

Waste of time, but pays well and will let you retire early.

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

#155

Post by peter422 »

indecisive_user wrote: post #141
whakim wrote: post #135

Earlier quoted context omitted.

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?

Even if you magically knew which startups could be viable 8 years down the road, there's tons of factors completely outside your control that could tank a startup in an instant; e.g. covid, a world war, regulation, etc. That "carpool as a service" startup might have had a great business strategy up until a pandemic showed up. And if you're spending 8-10 years waiting for a payoff, you only get ~3 shots to pick correc…

There is no reason to work anywhere for more than 4 years. Vest the options, which have a 7-10 year exercise window because you’d only take a job at a company that had them, then quit and get another job and take another shot.

Your lottery ticket remains whether you are working there or not. The only reason not to leave after 4 years is if you are a founder or the company is giving you extremely generous compensation.

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

#157

Post by bergenty »

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…

How much cheaper is it for a startup to give you options? Assuming the company is public is it like 20% more or much higher on average?

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

#158

Post by bmitc »

sbf501 wrote: post #139
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.

But how do you determine if (not when) you should exercise? I am trying to make this decision for a company I recently left. I don't know when they'll IPO. I know they wanted to, but the market is getting slammed, and they just announced layoffs. I don't have much confidence in the company, so I am having a hard time understanding the risk. I don't really even understand what happens if they don't ever IPO and I have purchased options.

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

#159

Post by iancmceachern »

kingnothing wrote: post #114
subsubzero wrote: post #35

Earlier quoted context omitted.

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.

Luxury collectable items typically suffer in a recession

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

#160

Post by bergenty »

rrdharan wrote: post #122
bergenty wrote: post #109

Earlier quoted context omitted.

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 m…

How much more favorable are the tax implications. I recall paying more than 40% on vesting my RSUs.
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