What should you do with stock options during a recession? • Hacker News Board

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

#51

Post by andsoitis » Thu, Jun 16, 2022, 1:06 AM UTC

FinanceAnon wrote: post #22

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.

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

> so holding cash at 0% return is still better than negative returns from stocks

holding stocks as they go down in price does not necessarily matter. It only matters at time of sale. Selling an index (or a particular stock or set of stocks) as they go down only to buy them again later is not the right strategy... you're incurring transaction costs at the very least and the fact that you cannot time the market means you'll probably lose out even further.

Hold the index, unless you need the cash flow or forecast that you need more buffer for flexibility and don't want, in the short term, to be penalized for volatile stock prices (e.g. in case you need to sell to service some cash needs).

And if you have the cash, continue to buy the index on the way down. If your view is that the market, over the long term, is the best generator of wealth, then continuing to buy into it is the more rational strategy.

Inaction is sometimes the best action. There are more ways to be dead than being alive.

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

#52

Post by PheonixPharts » Thu, Jun 16, 2022, 1:08 AM UTC

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.

It still make sense as long as the thing you're buying is something you'll eventually need to buy anyway.

Say there is a 20k car you need to get to work that you should purchase within a year. Then assume, in a simplified scenario, you can either take out a 6% annual loan, or just save up the money for a year and then buy the car.

Now say the car raised in cost with inflation at 10%. In one year the wait and save will mean the car new costs $22k where as if you had just taken out the loan it would have been $21.2k.

Typically the loan isn't the best thing you can do because a.) inflation isn't that high and b.) there are other ways to generate revenue with your money if you have it one hand.

I still see plenty of those wacky startups offering 0% interest for a year. I made a $10k, necessary, purchase for my home last year using one of those and going to save quite a bit by doing that.

There's also the darker truth that if shit really hits the fan, you can always default on debt, often without real risks of your stuff being repo'd. There's no equivalent if you wait to purchase something in the future.

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

#53

Post by andsoitis » Thu, Jun 16, 2022, 1:10 AM UTC

sakopov wrote: post #9

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.

Equities have been decimated. The housing market is starting to look like it's next. There is nowhere to hide right now.

"You only find out who is swimming naked when the tide goes out."

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

#54

Post by Retric » Thu, Jun 16, 2022, 1:13 AM UTC

andsoitis wrote: post #51

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

> so holding cash at 0% return is still better than negative returns from stocks holding stocks as they go down in price does not necessarily matter. It only matters at time of sale. Selling an index (or a particular stock or set of stocks) as they go down only to buy them again later is not the right strategy... you're incurring transaction costs at the very least and the fact that you cannot time the market means y…

If you can sell 100 shares today and use that money to buy buy 200 shares in 6 months then you are better off than if you had held 100 shares for that same six months as long as you buy back into the market.

Actually trying to time the market is largely a fools game, but people do get lucky. Or more often realize they shouldn’t try and time the market.

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

#55

Post by maerF0x0 » Thu, Jun 16, 2022, 1:15 AM UTC

> 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 choose to not work for companies that do not have extended exercise windows -- and IMO neither should you.

[1]: https://blog.samaltman.com/employee-equity#:~:text=2)%20Most....

[2]: https://github.com/holman/extended-exercise-windows

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

#56

Post by twiceaday » Thu, Jun 16, 2022, 1:18 AM UTC

subsubzero wrote: post #36

I gave my Wife money to exercise her ISO's(startup before IPO) for her first 1.75 years of shares when the company valuation hadn't changed. Her company went public and the stock jumped and then crashed, I think the current price per share is lower than her exercise price so she is underwater and the money I gave her is worth less as shares vs. cash I originally gave her. Really a huge bummer as this job up-ended our…

I advise you to think 'if I had the value of these shares as cash would I spend 100% of it on shares of this company?' The loss already happened, that part is done. The shares have no memory and won't 'rebound' like a rubber-band just because they were down before. What matters is new things that the company does going forward, relative to all other companies.

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

#57

Post by nrmitchi » Thu, Jun 16, 2022, 1:20 AM UTC

anon291 wrote: post #23

I'm planning on exercising some of mine (in the post-resignation 90 day period) via EquityBee. I don't want to lower my own cash reserves now due to a looming recession, but do believe the company has upside. EquityBee (and a few other companies, like vested, all of whom I think are legitimate) gives me money to exercise the options in exchange for ~30% of the shares should the company go public, plus repayment of th…

> The worst outcome is I make no money; the best is that I keep 70% of my shares without paying for them. They even pay AMT.

I'm not 100% sure about this, but IIRC these programs are typically structured as a tax-free loan to you. If the shares end up worthless, the loan is then forgiven.

So while you may not be out the principle of the loan, or the AMT, the forgiven loan may be taxed as income at some point in the future.

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

#58

Post by refurb » Thu, Jun 16, 2022, 1:23 AM UTC

s1artibartfast wrote: post #46

edgefield wrote: post #40

Earlier quoted context omitted.

This is the sunk cost fallacy. The best option might be to leave and find something else.

They are talking about the shares, which are already fully owned and liquid. The question is to sell them and invest the cash somewhere better(??) or HODL.

It's a startup before IPO, so not liquid (unless the company offers to buy-back).

This is a great reason to value options at $0 when taking an offer. It's a lottery and you shouldn't assume you'll see any money from then. If you do, it's all gravy.

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

#59

Post by kobalsky » Thu, Jun 16, 2022, 1:24 AM UTC

pishpash wrote: post #44

neilfrndes wrote: post #10

Earlier quoted context omitted.

I recommend reading 'The Intelligent Investor'. The book describes strategies that help you navigate all kinds of markets. https://en.m.wikipedia.org/wiki/The_Intelligent_Investor . As counterintuitive as it seems, the book actually recommends buying stocks in a bear market since they are priced reasonably. Warren Buffet's famous quote comes to mind: “Be fearful when others are greedy, and greedy when others are fear…

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/

to be fair there's a good chance we are nowhere near the bottom.

if SPY dips below 250 then you'll start seeing the fear of god in some faces.

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

#60

Post by shshshd » Thu, Jun 16, 2022, 1:30 AM UTC

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.

10k is not that much money. I know it takes a lot of effort to save, but its small change. If you have somewhere to store it, buy consumable goods.

- Several hundred dollars each of tuna, prosciutto, a wheel of Parmesan, jerky, rice, flour.

- If you have an oil/wood heater fill up the tank. If gas buy plenty of wool sweaters.

- If you have to drive to work, get a scooter.

- If you live in Czechia, or Finland, (you're not Swiss I gather) a rifle, shotgun and/or pistol. Otherwise upgrade your locks

- Any left over money (if any) buy an assortment of gold, silver and what not.

This might all seem doom gloom, and it is. But inflation is the least of our concerns. We're headed straight to an early 90s Soviet style collapse of our economies.