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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?

#181

Post by guessmyname »

astrange wrote: post #174
phendrenad2 wrote: post #156

Earlier quoted context omitted.

Dinosaurs won't hire me because I don't have a college degree. MAANGA won't hire me because I'm not good at leetcoding. That leaves startups.

Fairly sure maybe half of MANGA knows what leetcode even is. I for one don't know what it is.

> Fairly sure maybe half of MANGA knows what leetcode even is. I for one don't know what it is.

https://leetcode.com/ is a website famous for listing a repository of programming exercises that you can solve by implementing an algorithm categorized as Easy, Medium, or Hard depending on its complexity. Many technology companies, including, but not limited to, Facebook, Amazon, Apple, Netflix, and Google, (aka. FAANG) use the same type of problems during technical interviews to evaluate candidates’ problem solving skills.

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

#182

Post by kortilla »

astrange wrote: post #174
phendrenad2 wrote: post #156

Earlier quoted context omitted.

Dinosaurs won't hire me because I don't have a college degree. MAANGA won't hire me because I'm not good at leetcoding. That leaves startups.

Fairly sure maybe half of MANGA knows what leetcode even is. I for one don't know what it is.

It’s how the interview process works for all swe hires and MANGA. You just don’t know it name.

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

#183

Post by nly »

ericmay wrote: post #48
pishpash wrote: post #44

Earlier quoted context omitted.

I don't know, people seem pretty greedy still. VIX barely at 30, PE10 near pre-pandemic highs, real yields negative out to 3-4 years, and markets are orderly. If you get weeks and weeks of 4% daily drops, real yields at 5%, and hedge funds being force liquidated like 2008, then you know real fear. Look at how far behind the Fed has gotten: https://www.longtermtrends.net/real-interest-rate/

(This is not financial advice) Ignore the "be greedy"* part of the person you are replying to (although your hesitation is kind of proving their point a bit) but follow the advice of the Intelligent Investor. When markets go up, everyone is happy to continue to invest. When they go down? People stop investing. That's precisely what you shouldn't be doing. Staying the course and continuing to invest regularly is key.…

The stock market has 100 years of data behind it, as well as a munch of somewhat sound economic theory w.r.t capital allocation and earnings.

Bitcoin does not. There's no reason at all why Bitcoin can't go to zero in the next 10 years. The stock market (as a whole), not so much

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

#184

Post by dchftcs »

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.

If the company goes to a billion, you get 10000, and that's without dilution. Sounds like a really bad deal, unless you're already paid a lot of cash.

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

#185

Post by barrkel »

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 better but you can't get them before a company goes public. RSUs will have non-zero value. Options might never be exercisable but they're the normal way you get a stake of ownership at a startup (you don't get stock). So if you want to own part of a company before it goes public and you're not an investor, options are usually the only way on offer.

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

#186

Post by indemnity »

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.

Yep. Screw belief in the “mission”, convert it in to cash ASAP. Dollar cost averaging in away, I sold my tranches as soon as I could, every year.

Over 8 years this paid off my house in a HCOL area. Sure am glad I turned them into a real asset!

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

#187

Post by scarface74 »

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.

VCs are not able to “pick good startups”. They diversify and don’t care if nine out of 10 fail.

For every one person who got lucky and think it was because they chose well, there are nine you never hear about.

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

#188

Post by barrkel »

bergenty wrote: post #157
bpodgursky wrote: post #118

Earlier quoted context omitted.

- 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?

Cheaper by the strike price times the quantity, because the company gets that as capital when you exercise.

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

#189

Post by scarface74 »

highwaylights wrote: post #180
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…

I love the way your advice to people is just join FAANG like everyone gets to. Why not just become The Rock? Dude makes way better money than Google pays.

I would say until the last three months, it seems like with a few years of experience and “grinding leetcode” anyone could get into one of the BigTech public companies.

I got in by doing a slight pivot from software engineering. But I definitely tell a couple of younger relatives who just graduated to do the monkey dance.

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

#190

Post by JumpCrisscross »

ricardobeat wrote: post #169
JumpCrisscross wrote: post #145

Earlier quoted context omitted.

> you dont get rich at a startup by working for one, only by being a founder or an investor I’ve written small (<$50k) Series A cheques into companies where employee no. 20 made more than I did. That’s fine. They invested a hell of a lot more and put much more on the line. Options shouldn’t be counted on. They’re high risk. But no need to be that cynical. Plenty of people want the ones they were in the trenches with…

I bet that employee didn’t have 50k in cash to invest in extremely high risk equity. Even people making 200k/year wouldn’t consider 50k a small amount (it’s almost half of your net). A higher-than-average salary is quite different from “getting rich”.

> A higher-than-average salary

Sorry, I meant on exit. They built up more equity over the years through employment and cashed out. This wasn’t a blockbuster exit either.

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