Stats for nerds
3recommend
7mentions
4people
2011–2019years
86% recommend14% neutral
Mentions per year
What Hacker News says
- I found Consider Your Options (by Kaye A. Thomas) helpful and easy to understand.
- I highly recommend also reading the book Consider Your Options[0]. It's an easy yet very informative read.
[0] https://www.amazon.com/Consider-Your-Options-Equity-Compensa...
- I've had ISOs in a couple of startup employers, non-qualified options in a startup customer, and RSUs in a couple of public employers.
The only book I've read on stock options is _Consider Your Options_ by Kaye Thomas, which I thought was good. I do my own taxes, and there was enough detail in that book to let me figure out the tax implications of my options. (Including AMT the one time I had to pay it.)
The actual mechanics when you already have options are straightforward. You either exercise speculatively (pay real cash to turn options into shares, then hold the shares), or exercise risklessly (pay cash to turn options into shares which you sell immediately for more cash than it cost to exercise). Exercising speculatively has risks -- you pay real money for shares that then go down in value, possibly to less than the strike price, possibly leaving you with a tax bill even though you made a loss. Exercising risklessly is safe.
I don't like to speculate with meaningful amounts of money. If in doubt, sell the stock and diversify. Think of the worst case (the company crashes and you lose both your job and the value you thought the stock had). Better to not have all your eggs in one basket and sleep well. I suspect this is not a popular sentiment there, though.
The real question with options is when you're considering multiple job offers. Company A offers $100k and 3000 options. Company B offers $110k and 5000 options. How do you value the options? For a startup, the usual answer is that you can't, because there's no anti-dilution protection. If the founders want to hose you, they can hose you, by diluting your shares or by firing you right before a vesting date. So I value them at zero and take the job I like better, or the job that pays more actual cash.
(RSUs in a healthy public company are a bit different, since they have an actual immediate cash value. I value them at 75% of the current value of the stock. The 25% discount is because of vesting periods.)
- Great point. I'd recommend the book "Consider your Options" when you're accepting a job with stock options: http://www.amazon.com/Consider-Your-Options-Equity-Compensat...
It can be dense reading, but no one cares about your money more than you do, so it's your responsibility to make sure you understand what's going on. Doing that research saved me making more mistakes down the road.
Another common mistake with pre-IPO companies is to say "Wow, I get X thousand options!!" But you have to ask how many outstanding shares the company has. What really matters is what percentage of the company (your shares divided by total outstanding shares) is being offered to you.
- I would also recommend the book Consider Your Options at http://www.fairmark.com/books/consider.htm . It costs <$25 and will take a few hours to read, but can save you from making very expensive mistakes.
I bought this book back in the early days of Google to make sure I was doing everything right. It's boring but clear and helpful, which is about as much as you can expect from a book about stock options.
- Great article. If you start or join a startup, you really need to educate yourself on this topic. When I started at Google, I bought a book called Consider Your Options: http://www.fairmark.com/books/consider.htm It's quite good.
I also have a copy of Piaw Na's book: http://books.piaw.net/guide/index.html (An Engineer's Guide to Silicon Valley Startups) but I have to admit that I haven't read it yet because most of my finances are in order at this point.
