Should I exercise company stock options

kingoftherodeo

Hi All

I'm in a bit of a quandary. I have stock in my employers company ( a successful tech company) which has been vesting over time. Currently about 30% of it is vested and the company stock price is at a high. Clearly there is always a downside and I've been burnt before buying various stocks over the years. Right now the company shows little sign of slowing down but I wonder whether I should start to take some out and sell with a view to doing something else with the money.

We have just bought a new house and are looking to have an extension to the back of the house. Whilst I have saved most of the funds there is the option to use some stock to bolster the funds with a view of hopefully getting a return down the road come selling. Alternatively I could save it, over pay some of my mortgage or let it sit where it is and hope it continues to go up (?!)

I have no idea what to do. Anyone else been in a similar situation and have any sound advice?

Thanks all

bowlhead99

The "free money" is getting options which start off effectively worth nothing (because you haven't served the time to encash them) and then become valuable over time as they approach and reach the vesting date.

Once they are vested what you effectively have is real money in your hand which you are choosing to keep invested in a volatile asset heavily geared to the share price of your employer. Certainly if the company hits hard times, and cuts back on your promotion prospects or even lays you off, at the same time that its share price falls... eroding your tangible real free money to zero: you will be seriously !!!!ed off that you kept all your eggs in that basket.

You have 70% not yet vested, right? So, at the moment you're forced to keep that as a geared investment linked to the fortunes of your employer. You can get your good upside potential from that. There seems to be no need to have your other 30% actual real vested money tied up in the exact same thing.

If it were me, I would cash out the max allowable 30% and do something else with the money. To be honest, actually I am a bit of a gambler by nature. But as the remaining 70% scratches my "bit of a gambler" itch, I don't need the other 30% doing the exact same thing. If I still want to gamble on options with my money, I could cash in the 30% and invest it in options in a different tech company and at least spread my risk a bit. Or in a portfolio of shares or investment funds. Or invest it in speculatively extending my house. Or invest in something low risk like clearing a mortgage debt. Different people would have different priorities but "taking the cash off the casino table" now - and then deciding later what you're actually going to use it for - is sensible.

You have already "won the bet" in that the share price of the company has stayed steady or risen while you were waiting to vest. Now it had vested, it is quite a risk to "let it ride". Start cashing in the chips.

All IMHO of course.

kingoftherodeo

This is a really helpful response thank you. I'd read that you should cash in whenever you get the opportunity, i.e. every time the shares vest. Your response puts it in far better layman terms and whilst I am also much of a gambler by nature I feel like you make a valid point. I've been really burnt before when it comes to gambling stock and now would be a good time to redeem myself maybe!

Much appreciated

Chickereeeee

I was in the same position a few years ago. Let it ride or cash out some?

I cashed out a bit to pay off mortgage (did not need to, but small tech startups are a bit high risk anyway, and I wanted to reduce risk).

At the same time, a colleague remortgaged his house and bought more stock. As it turned out, he won. Big time.

C