HN Explorer

Ask HN: Vested shares, create covered calls, sell immediately, hold etc?

2 points by elastic_church ↗ HN
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).

Do create covered calls on all or some of the position (if not all, then why)?

Do you sell them immediately for the cash?

Do you sell them to buy other equities in a brokerage account?

Do you hold them and occasionally wait for a window where employees can sell to liquidate a little here and there?

Not a formal survey, just looking for opinions

6 comments

[ 0.23 ms ] story [ 31.1 ms ] thread
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.

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).
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.
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

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?
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