High Tech Comp.

[Anonymous]

I recently became aware that RSUs and Options are a high percentage of High Tech compensation and that most people hold on those shares for a bit. Good for them. Wondering how people hedge those massive positions.. Are they allowed to buy Puts? Anyone with experience care to share?

[Anonymous]

Its generally not legally safe to buy puts as an employee, put for little little focus. It's not really practical risk.

RSU companies generally pay more than other employees, so employees are happy for whatever they get.

Most employees just treat it like a variable bonus paid monthly or quarterly, and so immediately at vest time to diversify.

The grants pay out over 4 years, so it ends being dollar-cost averaged into no big deal, as long as you aren't a moron who retroactively tries to time the market and cries about it.

[Anonymous]

Options are usually for non-liquid stage of companies and are valued at $0 until IPO other liquidity event, unless the company has a standing buyback offer.

[Anonymous]

I work at a Mag 7 company. I just hold. I don't trade options against my RSUs. While there's no rule or policy against it (for ICs at least) it's basically gambling.

[Anonymous]

I don’t know that most people hold RSUs. We sold ours on the day we vested , and I am sure many others do likewise.

[Anonymous]

I always sell immediately to diversify. If you’re heavily invested in the company you work for then it doubles the risk if the company performs poorly because you might lose your job on top of a loss in stock value.

In the real world it doesn’t always work that way as we’ve seen recently. Companies are laying thousands of people off while the stock is near ATH levels.

[Anonymous]

OP. I understand that you can sell RSUs on assignment and diversify. What about unvested RSUs? For example, if Meta gives someone 200K worth of RSUs that will vest over 4 years, are you allowed to buy puts for the 200K at the grant price so you don't lose out if the market crashes?

[Anonymous]

Anonymous wrote:OP. I understand that you can sell RSUs on assignment and diversify. What about unvested RSUs? For example, if Meta gives someone 200K worth of RSUs that will vest over 4 years, are you allowed to buy puts for the 200K at the grant price so you don't lose out if the market crashes?

No, you can't options trade against unvested RSUs.

[Anonymous]

You can, it would just be a naked position and not covered.

[Anonymous]

We hold ours but you pay taxes at each vesting.

[Anonymous]

Anonymous wrote:OP. I understand that you can sell RSUs on assignment and diversify. What about unvested RSUs? For example, if Meta gives someone 200K worth of RSUs that will vest over 4 years, are you allowed to buy puts for the 200K at the grant price so you don't lose out if the market crashes?

If you want to profit on a drop you can make regular short sales.

[Anonymous]

I’ve worked at one of the big tech companies, we were not allowed to trade options on company stock.

[Anonymous]

Anonymous wrote:Options are usually for non-liquid stage of companies and are valued at $0 until IPO other liquidity event, unless the company has a standing buyback offer.

This isn't true whatsoever. Typically, options are priced at the most recent funding valuation for a private company.

Practically, your options aren't worth anything until you can turn it into actual $$$s which would happen through an IPO or acquisition or your company becomes high profile enough to have private shares trade on the private secondary markets (there are several).

[Anonymous]

I think most responses misunderstood OP's question..

There are only two methods to reduce concentration risk.
1. Sell at vest and diversify. However, this doesn't mitigate the risk of unvested RSUs losing value.
2. Buy puts to hedge the value of outstanding RSU+shares held. Some companies may prohibit employees from buying puts. I suspect one could ask their parent/sibling to buy puts on their behalf and reimburse the associated cost.

[Anonymous]

Anonymous wrote:I don’t know that most people hold RSUs. We sold ours on the day we vested , and I am sure many others do likewise.

I have no idea what people do, but both DH and I work in tech and have always chased options or RSU's. WE have never sold until we left and were forced to. A lot of our friend sin industry have made a small fourtune doing just that. Furthermore in terms of ESPP, I still own some ESPP including my bigges win, ServiceNow ESPP that I got years ago at at an average cost per share of 95, with some I got at $25 and some at $125. That is all worth well into the high 6 figures.