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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?

#191

Post by solumunus »

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.

Energy/renewables. They are highly resistant to inflation. In my opinion they're the best bet over the next 5-10 years with current macro conditions and the huge ongoing investment into renewable infrastructure.

Some good FTSE options paying nice dividends:

https://uk.finance.yahoo.com/quote/EGL.L https://uk.finance.yahoo.com/quote/TRIG.L https://uk.finance.yahoo.com/quote/UKW.L

Uranium spot price should also be stable/grow depending on many factors:

https://uk.finance.yahoo.com/quote/YCA.L

Disclaimer: far from an expert.

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

#192

Post by andrewaylett »

It's perhaps worth noting that this the article is very US-centric. I'm in the UK, and I've never had an opportunity to exercise options that didn't come alongside an offer from the company to buy the shares. And in my experience, it's rare to exercise and hold. Even if you do, you can sell enough shares to cover the tax and keep the rest.

My current employer has (and uses) the right to repurchase any shares I hold at the current "fair market value" if I leave the business. That's also fairly standard for privately-held companies, it seems.

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

#193

Post by atombender »

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…

In the context of Bogle's statement (and the parent's comment), it was the stock market, specifically index funds.

It goes back to the realization that no investor can predict the peaks or troughs of the market, so getting out of the market is effectively trying to time it. One may be lucky and get out at the peak and then buy back in at the bottom, but on average you will lose money this way.

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

#194

Post by matwood »

8note wrote: post #130
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…

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

I mostly agree with you, but I would just add 'on average' to your comment. There are exceptions, but the most surefire way to reach financial security is to get a job in big tech.

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

#195

Post by kelnos »

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…

I think there are plenty of valid reasons to want to work for a startup (rather than a FAANG) that have nothing to do with compensation. Not for everyone, of course, but that's fine too.

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

#197

Post by matwood »

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 didn't read it that way. Startups live on the backs of people who either can't or don't want to work in big tech. The US in particular glorifies entrepreneurs and scrappy startups, but it's super hard and most fail.

If I thought I could pass the tech screening, and then deal with big company bureaucracy I would tomorrow. Instead, I'm a tech generalist who also doesn't mind handling business or selling, and I have a low BS tolerance. I've done ok in small companies over the second half my career, but I certainly made less than big tech.

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

#198

Post by gambiting »

peter422 wrote: post #155
indecisive_user wrote: post #141

Earlier quoted context omitted.

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…

>>There is no reason to work anywhere for more than 4 years.

I sometimes feel like no one on HN actually enjoys what they do. It's strange.

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

#199

Post by xhrpost »

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…

Tax benefits are still limited to 90 days. Personally I feel if the stock is really important to you, start saving into an "exercise fund" for yourself so that you're able to exercise when leaving rather than waiting for your next gig to start.

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

#200

Post by atombender »

kqr wrote: post #132
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…

> 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?

Bogle did extensive analysis on the impact of rebalancing (between stocks and bonds) on historical portfolio returns, and decided that it does not meaningfully increase your returns.

His main argument was rebalancing effectively switches high-returning assets for lower-returning ones. If one part of your portfolio did better than another part, why would you get rid of it just to bring the asset allocation back to your target?

Rebalancing will also generally generate capital gains in taxable accounts. If you're aiming for 60/40, but your stocks are now up and it's 70/30, selling those stocks to bring it back to 60/40 again means you will pay capital gains on whatever you sell.

The data shows you can get better returns by rebalancing weekly, but this is really too much for most investors, unless you use something like M1 where rebalancing is a single button click.

Of course, there's more complexity to this question. The above mostly applies to the accumulation phase. To someone in, or close to, retirement, for example, having a portfolio that's drifted too far into stocks can be a risk.

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