How to sell RSUs intelligently.

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driftingaway
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Joined: Wed Jul 10, 2013 9:40 am

How to sell RSUs intelligently.

Post by driftingaway » Thu Jul 11, 2013 6:26 pm

I have a good chunk of RSUs that vest over time on a 6month cycle.

I know the general advice here is to immediately sell when they vest, and I could set my account to automatically to do that. I completely get the general principle here, and I don't really want this much exposure to my employers stock, but I am slightly concerned that an automatic six month dump could end up with me selling in a short term slump and taking a hit. I've been told that there is slightly higher than usual activity on the days around our vest dates.

My temptation is to pay taxes in cash, and then sell everything when I can validate that the market is ok (CEO didn't just die, weird press, etc), but this feels dangerously like market timing to me. Doing fixed share selling is an option, but it seems like trade fees would start to bite if I spread out too much.

For those of you with RSUs how do you handle this? At the very least do you have any advice to make a forced sell date less mentally terrifying.

yosef
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Re: How to sell RSUs intelligently.

Post by yosef » Thu Jul 11, 2013 6:40 pm

How can you "take a hit" on RSUs? They are given to you at zero cost, right? I usually sell as soon as I see a small pop, but always within a week or 2.

driftingaway
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Re: How to sell RSUs intelligently.

Post by driftingaway » Thu Jul 11, 2013 6:51 pm

touche.

Yes. they are given at zero cost. But I would much rather sell my X number of shares on the small pop than the small dip. You sound like you have a pretty good strategy. Do you then pay tax out of cash?

yosef
Posts: 337
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Re: How to sell RSUs intelligently.

Post by yosef » Thu Jul 11, 2013 7:18 pm

My employer sells a portion of the shares for taxes prior to giving me the rest. Typically after they hit my account I'll either unload them immediately or wait up to a week or 2 for a small pop if the price "seems off" when they're first available. It's not very precise, but again you really can't lose with RSUs. I consider any gain above when I get them to be gravy ;)

jjbiv
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Re: How to sell RSUs intelligently.

Post by jjbiv » Thu Jul 11, 2013 10:02 pm

Sell shares immediately unless you have inside information or like to gamble. That is the most intelligent approach.

mikep
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Re: How to sell RSUs intelligently.

Post by mikep » Thu Jul 11, 2013 10:10 pm

jjbiv wrote:Sell shares immediately unless you have inside information or like to gamble. That is the most intelligent approach.
+1.. If you normally wouldn't buy your company stock at the open price after vest, then sell at open after vest.

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mhc
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Re: How to sell RSUs intelligently.

Post by mhc » Fri Jul 12, 2013 9:25 am

I sell immediately and invest according to my AA.

Holding on to shares and waiting for the market to go up may never happen. I speak from experience. After playing these games for 20+ years, I have decided to sell all ESPP and RSU shares immediately.

inbox788
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Re: How to sell RSUs intelligently.

Post by inbox788 » Fri Jul 12, 2013 10:54 am

driftingaway wrote:I have a good chunk of RSUs that vest over time on a 6month cycle.
First of all, I'm unconventional in that I don't mind holding company stock, especially short term. Further, I'm ok with over-weighing company stock in my portfolio. It all depends on your risk tolerance and outlook on company stock. So let me address some issues:

1) Are you holding other company stocks (i.e. ESPP) that can be used to better time sales, particularly to take advantage of long term capital gains? Some programs are automatically short term gains, so this may or may not apply.
2) Is there any advantage taxwise towards shifting or splitting between two tax years? (Would you avoid bump in marginal rate?)
3) What is your alternate investment? Are you going to take off risk by staying in cash? Shifting to bonds? Invest in market? Some company stocks don't really differ that much from market, so if all else is equal, diversify.
4) There are a number of ways to hedge holding company stock that may not be allowed or many people are not comfortable with, or may not completely hedge, but are available (i.e. buy put, buy collar, buy put on similar company or market, buy vix, etc.)

HornedToad
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Re: How to sell RSUs intelligently.

Post by HornedToad » Fri Jul 12, 2013 11:17 am

I usually sell either immediately or within a week or two if it looks like it's in a dip.

A fair amount of people sell immediately and so there seems to be downward pressure right when the RSU's vest.

icefr
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Re: How to sell RSUs intelligently.

Post by icefr » Fri Jul 12, 2013 12:16 pm

I have mine set to sell all immediately. I get a few vests a year though and so I still get some value out of the stock price going up by the next vest then being higher. I'm not really interested in buying my company's stock personally if they gave me the cash. Sometimes I feel like I should have kept the old shares as the price keeps going up, but I'm not really that unhappy with it since I invested according to my AA and that would be a huge chunk of change in my employer's stock. If my mortgage was paid off, I would probably consider keeping some of the shares for a bit, but that's still hypothesizing at this point in time.

driftingaway
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Re: How to sell RSUs intelligently.

Post by driftingaway » Fri Jul 12, 2013 3:32 pm

HornedToad wrote:I usually sell either immediately or within a week or two if it looks like it's in a dip.

A fair amount of people sell immediately and so there seems to be downward pressure right when the RSU's vest.
That's my concern. I don't intend to be in the companies stock long term, but its figuring out how to time it.

Unfortunately, I am all RSU so I'm pretty limited in how much timing control I have.

dickenjb
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Re: How to sell RSUs intelligently.

Post by dickenjb » Fri Jul 12, 2013 3:47 pm

Sell immediately. As other poster pointed out, not doing so is equivalent to buying your company stock on the vest date with a motive to catch a point or two rise. Speculation at best.

quiet_morning
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Re: How to sell RSUs intelligently.

Post by quiet_morning » Fri Jul 12, 2013 5:15 pm

I went through the same thing. I vested into a number of RSU's periodically and sold when I was first allowed. After the first few sales, the price dropped ~40% and I felt very wise. It has since risen to 2x the value of my minimum sale. Of course, I do not feel great about that. But, I stick to my boglehead guns by asking myself the following: If they had paid you in cash, would you have turned around and purchased company stock? Usually the answer is no.

By choosing not to sell, you are effectively choosing to buy, modulo taxes. Does that buying fit into your IPS/AA/whatever?

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