Re:Ask HN: Anyone have stock option horror stories?
by toast0 on Thursday March 17, 2022 @12:19AM
(#30707635)
> Why would you even be able to exercise the options in the trading blackout window? Doesn't that count as trading itself?
Exercising options isn't prohibited during a trading blackout, because it's not a market transaction. (Especially if you're only exercising with no sell to cover).
If your options are ISO, and you want to get the best tax treatment, it must be at least two years from grant and one year from exercise. If you joined around a year before the IPO, and you wanted the nice tax treatment, but to sell as soon as possible, then exercising near the IPO makes sense.
If you do sell in the same tax year (which isn't always a calendar year, many companies and some people have adjusted their tax year), then it's a capital loss (and a disqualified disposition), etc. But if the IPO is later in the tax year, the blackout may extend beyond, and you'ld owe AMT in one year, and maybe realize a big loss in the next. If you realized a big gain in the next year, you'd also get a big AMT credit, and things would work out; but the AMT credit isn't refundable, so it could take many years to get that back, more if you also lost your job because the company imploded.
Exercising options isn't prohibited during a trading blackout, because it's not a market transaction. (Especially if you're only exercising with no sell to cover).
If your options are ISO, and you want to get the best tax treatment, it must be at least two years from grant and one year from exercise. If you joined around a year before the IPO, and you wanted the nice tax treatment, but to sell as soon as possible, then exercising near the IPO makes sense.
If you do sell in the same tax year (which isn't always a calendar year, many companies and some people have adjusted their tax year), then it's a capital loss (and a disqualified disposition), etc. But if the IPO is later in the tax year, the blackout may extend beyond, and you'ld owe AMT in one year, and maybe realize a big loss in the next. If you realized a big gain in the next year, you'd also get a big AMT credit, and things would work out; but the AMT credit isn't refundable, so it could take many years to get that back, more if you also lost your job because the company imploded.