Stock Options as a percentage of investable assets - what's too high?

[pb4uski]

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.

 

[gcgang]

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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[brett]

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