Hedging RSUs

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Topic Author
ge1
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Joined: Sat Apr 28, 2012 8:15 pm

Hedging RSUs

Post by ge1 »

My wife has a sizable amount of deferred stock from her previous employer. The stock had a nice run up recently and I would like to hedge the shares by buying put options. I identified puts which expire right around the time when her stock vests. From people who have done this before, would you hedge all shares (let's say she has 1,000 shares vesting, would you buy 1,000 puts) or only a portion? Also would you pick just the one expiration date around vesting or would you spread she puts over multiple expiration dates?

I realize every situation is different, so probably difficult to give advice. I know her old company pretty well myself and have very little faith in it, therefore it is attractive to be able to effectively "lock in" a price now even taking into account the price I need to pay for the options.

thanks
ryman554
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Re: Hedging RSUs

Post by ryman554 »

Why are you hedging assets that do not yet exist?

The wife could quit her job and the RSUs would go poof.

Please think of RSUs as a bonus in cash based on the performance of the company as a whole. Act genuinely surprised and delighted when RSUs vest, and for goodness sake, never *rely* on RSUs for budgeting reasons. Golden handcuffs are bad enough without being inextricably bound.
Wagnerjb
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Re: Hedging RSUs

Post by Wagnerjb »

She has already left the former company and the shares have still not vested? Are you sure? I would be surprised to see that.
Andy
Topic Author
ge1
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Joined: Sat Apr 28, 2012 8:15 pm

Re: Hedging RSUs

Post by ge1 »

Yes, she resigned earlier this year but was able to negotiate with the company to not lose her RSUs, but they keep vesting as per the original schedule.
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TomatoTomahto
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Re: Hedging RSUs

Post by TomatoTomahto »

We have never hedged RSUs. I'm not sure that compliance would have approved of doing it, but we never asked. Since your wife left the company, I guess that's not a problem, but I still wouldn't do it. Fwiw, we had RSUs worth roughly a year's compensation (but vesting spread out over a few years), so also not a small amount.

I can't give you advice on strategy around puts. I guess if the price of the puts is low enough, it can't hurt you more than a certain amount.
I get the FI part but not the RE part of FIRE.
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quantAndHold
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Re: Hedging RSUs

Post by quantAndHold »

Most companies either don’t allow hedging of RSU’s at all, or the rules are so restrictive that it becomes impractical. When I checked into doing it for myself, I also found that the options were expensive.
Topic Author
ge1
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Joined: Sat Apr 28, 2012 8:15 pm

Re: Hedging RSUs

Post by ge1 »

Yes agree, that was the case for my wife’s company as well. As she no longer works there that no longer applies.

The way I see it even after deducting the price of the put option I can lock in a share price for the RSUs which I view as very favorable given the sharp increase in the share price this year.
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