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Old 12-23-2014, 07:38 PM   #21
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I exercised options after I retired each year when they were about to expire.
My experience is different.

I was laid off from one company and given 3 months of severance. When that ended, I could begin applying for unemployment, and I had 30 days to exercise all my outstanding options.
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Old 12-23-2014, 08:19 PM   #22
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Originally Posted by MichaelB View Post
...
You need to read the agreement carefully to see if you are subject to any restrictions or conditions regarding hedging and selling. ...
MichaelB makes a good point here that I overlooked. Gotta play by the rules!

-ERD50
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Old 12-24-2014, 09:27 PM   #23
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Just suck it up and pay the taxes. I've seen a lot of people lose life changing money because they put too many eggs in one basket. No company is immune from the possibility of bankruptcy, however small. Imagine waking up unemployed with 20% of your assets gone.

If you could accept that, you don't need to sell.

Otherwise, sell down to your comfort level and don't give the taxes a second thought.
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Old 12-24-2014, 09:58 PM   #24
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I exercised the bulk of them a month before they expired. Paid a lot of taxes but hell, if I could have held them a few more years, they would have been worth more.

But the timing worked out great for me, it was in the summer of 2008 and I immediately put most of them in high yielding CDs, some as much as 5% over 2 years.

When the financial crisis hit, I didn't have too much equities exposure but I was concerned about having a lot of cash beyond the FDIC limits. Helped that they raised it from $100k to $250k so I split the sums across several accounts.

Then I started moving them to VG as the CDs matured and interest rates plunged.

Timing was propitious.

Paying taxes wasn't fun, some high 5-figure tax bills. But the way I looked at it, it was an unexpected windfall (when I got the option grants, I didn't have high expectations of them).

Maybe I could have hired a tax advisor and optimized the tax efficiency but maybe the advisor would have had me sell earlier at lower prices.

It worked out well in the end.
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Old 12-26-2014, 12:38 AM   #25
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We have some that are due next March. I set up some customized collars in a different brokerage account so I feel no violation of the rule not to short your own company stock.[...]
I'd be really careful about this - the restriction against shorting your stock usually has nothing to do with which account you do it in. At least for the times I've been under similar restrictions, the account wouldn't have made a difference. This is similar to the rules that would apply to insider trading - you can't get your spouse to do the hedge for you either.

As far as the OP is concerned, I didn't see in the description whether these are non-quals or Incentive Stock Options (ISOs).

If they're ISOs, you should consider the qualifying disposition rules:
Qualifying Disposition Definition | Investopedia

This will let you treat the gain as capital gains instead of regular income, albeit while incurring the risk of holding the stock for a year after exercise. (Note also that there's a potential AMT impact in the year you exercise - it's a good idea to sell enough shares immediately to cover the AMT bill). I'd recommend doing some reading on the details of this before pulling the trigger.

Since ISOs aren't that common these days, you may have non-quals which makes things simpler, since it removes the qualifying disposition option.
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Old 12-26-2014, 07:27 AM   #26
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I'd be really careful about this - the restriction against shorting your stock usually has nothing to do with which account you do it in. At least for the times I've been under similar restrictions, the account wouldn't have made a difference. This is similar to the rules that would apply to insider trading - you can't get your spouse to do the hedge for you either......
+1 the prohibition is on you shorting your own stock, not shorting it in the same account as your options.
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Old 12-26-2014, 11:39 AM   #27
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I've been fortunate to work at a stable megacorp where the stock price has had a nice run up, and I'm sitting on a decent chunk of change of in-the-money fully vested stock options.

My worry is that they now represent almost 20% of investable assets, and it will go up to 25% once the next traunch becomes vested early next year. This is uncomfortably high for me.

Add to this is that if I exercise my options, it will be taxed at the highest marginal tax rates, and I feel I already pay enough taxes to Uncle Sam.

Has anybody else been in this situation? Any advice on how to manage this?

If you are trying to get rich, roll the dice, no limit on what % to have in a single security.

If you are trying to protect wealth, no more than 10%, even less if your earnings are also tied to this asset.


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Old 12-26-2014, 03:18 PM   #28
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My advice would be to you to ignore the tax consequences and deal with risk. Risk of the stock price falling or risk to your ability to cash out and retire.

I was in the same boat. I was concerned about loosing it all so I developed a sell strategy to sell my options over time. I did, at prices between 42 and 54. The stock subsequently went down to 12. By that time I had retired early, was FIRED thanks in part to the options, and was only left holding the bag on a few remaining underwater options. It is back up to 40 now but then again, I have been FIRED for over three years.

I know some colleagues who were also worried about tax. They no longer worry because their options went under water and expired-so they were e not fortunate enough to have realized a gain
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