[jedberg]

How do the police know that you're cooking meth in your basement? They don't, but if you do something dumb or make a lot of money, they tend to find out.

It's the same here. Buying/selling options on Lyft as an employee is against their employment contract, and probably SEC rules. If they make a few thousand dollars doing it, chances are no one will find out.

If they make a few million, the SEC will probably look into that.

[docker_up]

Why is the SEC involved, especially if there's no insider trading involved? What if a Lyft employee quit a few months ago, and then hedges her RSUs with puts? There's no insider trading involved, why would the SEC care?

[jedberg]

The SEC deals with all trading irregularities and violations, not just insider trading.

The rules aren’t there just because Lyft wants to be mean, they’re there because regulations require it and also because one of the guiding principles is “no perception of insider trading”. That means you have to avoid behaviors that might look like insider trading.

A current or recent insider using hedging is very suspicious looking. What do they know?

When I left Netflix I was warned that I needed to wait at least three months before making any trade other than buy. And I was still restricted to the employee trading window for six months.

[asynchrony]

Employees are normally forbidden from trading any derivatives, short selling, or even buying shares in a margin account.

I’m not sure about the case of an employee that has left the company, but I expect that it would still qualify as insider trading through some window.