
Ask HN: Vested shares, create covered calls, sell immediately, hold etc? - elastic_church
I was curious how you guys manage your positions with the vested shares in your publicly traded companies, and what circumstances promote your decisions (assuming they are objective at all).<p>Do create covered calls on all or some of the position (if not all, then why)?<p>Do you sell them immediately for the cash?<p>Do you sell them to buy other equities in a brokerage account?<p>Do you hold them and occasionally wait for a window where employees can sell to liquidate a little here and there?<p>Not a formal survey, just looking for opinions
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ChuckMcM
On shares that were worth significantly more than the strike price. I would
"sell to cover" which meant exercising the vested shares, then in the same
transaction selling enough of the shares to cover the tax impact and the cost
of exercise. That results in no net money, but you end up holding owned shares
at the basis price of the market price when you exercised. I then held the
remaining shares for at least a year so that when I did sell them I could get
long term capital gains treatment.

Shares that were not that highly valued relative to their strike price I did
not exercise until I left, and assuming they weren't under water I did a same
day exercise and sell to pay the tax and return what remained as cash which I
put into by brokerage (long term) savings account.

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elastic_church
So since you were holding for long term capital gains tax treatment, did you
consider writing calls on them? Many big companies have deep exchange traded
options markets a year out, where you can easily get an extra 10% by simply
writing a near the money call (if you have at least 100 shares).

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ChuckMcM
Generally every publicly traded company except Sun had me specifically agree
to not trade in any options (of any kind) on the company's stock. There are
also complications in the way in which trading windows work, although I expect
you could argue writing a call was equivalent to a 41-b disclosure in terms of
market visibility.

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elastic_church
interesting, wow, in that case I would immediately sell (depending on the tax
scenario) and buy a competitor's stock or something in the same sector to
write calls on

proxy trade

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ChuckMcM
Yup. From a hedge standpoint that makes the most sense. But lets say you're a
Facebook employee, what is your hedge? Google? Apple?

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elastic_church
or just buy the broad sector ETF and write options on that, but the volatility
premiums are substantially larger on tech companies (because people going long
are greedy)

especially decent since this entire scenario doesn't really account for
possible appreciation in price of the shares, and just capital preservation
with decent annual gains and lower tax

