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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?

#201

Post by aahortwwy »

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.

Lottery tickets aren't worthless, and the expected value of a startup option is higher than a lottery ticket.

You shouldn't value them at $0.

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

#202

Post by [deleted] »

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.

[deleted]

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

#203

Post by lumost »

ggm wrote: post #136
lumost wrote: post #62

Earlier quoted context omitted.

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.

Yes, however in a less aggressive tech market the return would have probably been 0. This was also the best case, the P/E buyout and subsequent funding injections may have diluted the value of those shares.

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

#204

Post by heretogetout »

gambiting wrote: post #198
peter422 wrote: post #155

Earlier quoted context omitted.

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.

What I enjoy doing doesn't pay anything, so my job is a necessary impediment to happiness. Sucks.

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

#205

Post by zwily »

scarface74 wrote: post #187
bradlys wrote: post #129

Earlier quoted context omitted.

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.

One out of ten odds are also much, much better than the lottery though.

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

#206

Post by staticman2 »

atombender wrote: post #200
kqr wrote: post #132

Earlier quoted context omitted.

> 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 you…

"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?"

Because of reversion to the mean. Rebalancing should insulate you from weird outcomes like 90% of your money being in GameStop stock then crashing to nothing a week later.

Pretty much every professional fund of fund rebalances, including those by the company Bogle founded. This is weird advice.

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

#207

Post by skinnymuch »

scarface74 wrote: post #189
highwaylights wrote: post #180

Earlier quoted context omitted.

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.

What is diff about last few months? I’m going to be doing the monkey dance too. I don’t get satisfied from doing more enjoyable coding work compared to salary increases. Even if I don’t get to big tech until after a recession possibly hits.

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

#208

Post by skinnymuch »

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.

Why did you fire the first?

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

#209

Post by fatnoah »

sbierwagen wrote: post #77
lumost wrote: post #62

Earlier quoted context omitted.

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…

As you say when you mention liquidation preferences, I wouldn't be surprised if a PE buyout of a distressed company zeroed out employee equity.

It wouldn't have to be a PE buyout for equity to be zeroed out. Any buyout could lead to this, even in a non-distressed company (as pointed out by another poster).

Source: Me w/options in two startups that were acquired by public companies.

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

#210

Post by fatnoah »

jokethrowaway wrote: post #121
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…

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.

I've done startup, FAANG, and everywhere in between. Each offers advantages and disadvantages, but I learned far, far, far, far more about building software in my many years at startups. I've done everything from standing up infra, configuring routing tables, doing tech support, helping with sales, writing code, being a product manager, being a people manager, being an executive with a 40+ person distributed org, going through an acquisition, living through dotcom boom and bust, 2008 crisis, etc.

FAANG pay was ridiculous, and there are also great things to learn there as well, but I value my startup time much more in terms of my own growth.

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