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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?

#81

Post by roflyear »

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/

Homie when is the last time weeks and weeks of 4% drops happened?

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

#82

Post by roflyear »

Retric wrote: post #54
andsoitis wrote: post #51

Earlier quoted context omitted.

> 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.

Yah and if I could buy bananas today for $1 and sell them tomorrow for $5 I'd be fairly wealthy. And if my uncle was a monkey and my aunt a banana farmer we'd all be well off.

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

#83

Post by benmanns »

dilyevsky wrote: post #72
fortran77 wrote: post #63

Earlier quoted context omitted.

No. The worst outcome is you make no money AND you have to pay AMT on gains you never were able to realize.

Is amt really an issue if you’re high income swe? (especially if double high income). Seems like since trump’s “tax cuts” your normal rate will always be higher than (base + options * strike price)*.28 unless you really get a ton of options and there’s huge fmv growth.

It’s not options * strike price, it’s options * (fair market value - strike price), which is usually 0 at issue and is $$$ if you exercise and sell after an IPO (or after subsequent funding rounds/revenue growth which bumps up FMV).

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

#84

Post by roflyear »

shshshd wrote: post #60
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…

Why do you think the world is ending?

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

#85

Post by roflyear »

UkrainianJew wrote: post #39
tmountain wrote: post #6

Earlier quoted context omitted.

This is not financial advice, but stocks are getting cheaper every day. Invest into profitable companies that can weather the storm.

There's one caveat. Say a profitable company pays $1M dividends. With the industry-average 3% yield, this puts market cap at 32M. Currently you can get 3% risk-free with government bonds, and this number will go further up as the interest rate rises. Say, it goes to 6%. Now, in order to be competitive with bonds, the profitable company will need to find a way to pay 2M in dividends, or its cap will drop to 16M (i.e.…

Plenty of stocks have value and pay zero dividends.

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

#86

Post by JumpCrisscross »

benmanns wrote: post #80
JumpCrisscross wrote: post #31

Earlier quoted context omitted.

> 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 don’t have the details to be able to say anything useful. But there might be a narrow window of tax circumstances in which 70% of the equity without AMT but with loan costs is better than 100% with AMT + marginal long-term taxes and no loan costs. (Such schemes make sense if you’re concerned about…

It works out in the event that the shares end up worthless.

> works out in the event that the shares end up worthless

Then you're at parity with never exercising.

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

#87

Post by justin_oaks »

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…

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.

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

#88

Post by staticautomatic »

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…

Can you use EquityBee for early exercise?

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

#89

Post by d357r0y3r »

justin_oaks wrote: post #87
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…

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 the company for a few years.

It's a great perk, even if it doesn't end up amounting to anything.

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

#90

Post by dilyevsky »

benmanns wrote: post #83
dilyevsky wrote: post #72

Earlier quoted context omitted.

Is amt really an issue if you’re high income swe? (especially if double high income). Seems like since trump’s “tax cuts” your normal rate will always be higher than (base + options * strike price)*.28 unless you really get a ton of options and there’s huge fmv growth.

It’s not options * strike price, it’s options * (fair market value - strike price), which is usually 0 at issue and is $$$ if you exercise and sell after an IPO (or after subsequent funding rounds/revenue growth which bumps up FMV).

Er botched the formula you’re correct
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