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by JumpCrisscross 2527 days ago
> When the internet bubble collapsed in 2000, it literally bankrupted people who had been compensated with stock options

Best practice is to sell stock sufficient to pay for taxes when exercising options. (Same for workers subject to U.S. taxation being paid in a foreign currency.)
2 comments
nostrademons 2526 days ago
Alternatively, you can sell a covered collar that protects your downside enough to know that you'll have the cash on hand come tax time. This limits your upside somewhat, but usually less than selling the stock outright. Mark Cuban famously used this strategy to protect his Broadcast.com payout under lock-out.

https://www.acceleratedfi.com/real-world-options-example-how...

(Check the details of your contracts with an attorney and financial advisor; I've heard that some lock-outs now explicitly forbid trading in derivatives of the stock to prevent doing what Cuban did. With financial engineering being as advanced as it is, though, it's always possible to create a "synthetic" derivative that is nearly guaranteed to have the same value as a particular options strategy without mentioning the particular asset involved.)

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H8crilA 2526 days ago
Trading options against employer's stock may be forbidden by insider trading policy. It was in my previous job (along with shorting, and only trading during trading windows). Can't say I disagree with such policies.

Other than that yeah, get a collar or just straight up buy some puts. Or like others recommended - sell some % instantly and put in high grade bonds, or a savings account. Forgetting taxes is a big mistake.

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pault 2527 days ago
Isn't the whole point of the story that they weren't allowed to sell when they exercised their options?
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JumpCrisscross 2527 days ago
> Isn't the whole point of the story that they weren't allowed to sell when they exercised their options?

The story most applicable to cryptocurrencies is the one where the stock was publicly traded [1]. Those exercisers chose not to sell.

(With respect to ISOs for private stock, yes, it's different. Best practice is not to exercise until you have a plan for paying taxes. This could be lining up a loan or a secondary sale, or only exercising what you can pay for.)

[1] https://www.chicagotribune.com/sns-tech-taxes-story.html

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