#RuggeroRespigo on #Reddit #stockmarket Stock options about to vest. Exercise and sell, exercise and hold, or just wait? I have a chunk of stock options about to vest at my job. My company is public, so Id be able to immediately sell if I so desired; however, its been on the market less than a year, so Im uncertain where the stock price could be in another year. My options are Incentive Stock Options, and, at the current stock price, the gains on this chunk would be about half my annual base salary.As I see it, I have a few choices on what I should do once my options vest:Exercise and sell immediately upon vesting. This is the safest, simplest option and would give me a nice bonus right now. However, I would have to pay income taxes on the gains at my marginal tax rate of 33%.Exercise immediately upon vesting and hold for at least a year. Because I have ISOs, I dont have to pay income tax when I exercise, and I only have to pay capital gains tax (15%) when I sell if I hold my exercised options for at least a year. Cutting my tax bill in half is definitely a big plus, but this option would have me putting a lot of eggs in one basket. Anything can happen in a year. The stock price has more than doubled since going public, and Im about 75% certain it could double again in the next year. This is a risky, but potentially highly rewarding option. I cant really pursue this option, because I dont currently have enough liquid funds to fully exercise all of my options.Exercise and sell a portion of my options, using the after-tax gains to exercise the rest of my options for holding. This gets around the problem of not having enough cash to fully exercise my options. Part of my potential profit is taxed as ordinary income, and the rest would be at the capital gains rate if I hold it for at least a year.Do nothing and wait. I could just hang on to my options for the time being while I save up some cash to be able to exercise all my options. I dont like this choice because it increases the amount of time that part of my net worth is undiversified. If anything catastrophic should happen to the company while Im waiting to exercise (or in the subsequent year while Im waiting for capital gains to kick in), not only would my options lose value, I could also be out of a job. This is the worst option, I think.Some of my and my wifes short term goals are to save a down payment for a house purchase within the next 12 months and to save up for our first child within 2 years. Wed be fine hitting these goals just with our base salaries, so Im trying to think of my stock options as a windfall.Another important point: this is just my first chunk of stock options that vests. I have additional options that will vest over the next couple of years. So, if I were to cash-out this chunk immediately, I would still be able to participate in any potential upside the stock price produces in the future at the same strike price.Other stock option holders of Reddit: what have you done in the past after vesting? Did you sell? Or did you hold to take advantage of capital gains?
Posted on: Fri, 19 Sep 2014 03:39:08 +0000
Trending Topics
Recently Viewed Topics
© 2015