Hedging strategy for Employee Stock Options/RSU/ESPP shares before earnings.

Here's just some friendly advice. Take it with a grain of salt from a previous Web 1.0 web company employee that had a lot of unvested and vested stock grants...

If you have a lot of of "in the money" stock options, or you have a pretty sizeable ESPP holding or sizeable holding of RSU stocks that you haven't sold, you might want to consider some short term, slightly out-of-money PUT options before earnings call next week to insurance yourself against a disasterous earnings call if that happens...

The option price for a $70 PUT option to sell QCOM that expires Jan 30 is about $1.40 right now..

In the event that QC has great numbers wall street loves it, the stock moves up, your stock options/ESPP shares goes up with it..And even though your $1.40 put option will go to $0, it would be most likely offset from the subsequent rise in the stock price...

In the event that QC's earnings call is a complete disaster, the hit to your portfolio will be much more lessened by the "insurance" your PUT options that gives you the right to sell at $70/share.

So for example, buying 10 puts to give you the option to sell 1000 shares at $70, would set you back $1400. In the event QC stock craters to $65/share, your "insurance" already paid off. You don't need to actually sell your shares, you can sell the PUT options themselves with a roughtly equivalent gain...

It's the strategy some of us did for high-flying internet companies back in the Web 1.0 days... Some of our unvested stock options had $30-40/share strike prices, and the market prices of our stock were around $250/share... So some of bought put options over a longer duration of $200/share while we remained unvested... They were pretty cheap During that time, our company stock did tank from $250/share to around $30/share, rendering some of our company issued stock options useless...But our PUT options ended going up significantly at the same time, and in many cases it was better that way, because the gain from the appreciation of our put options was immediately realized since it was options we bought and owned ourselves....Again, consider it insurance protection...

Anyway, good luck next week people...

Comment! It's anonymous!

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@Anonymous59617, yes we are on the same page. My comment was a joke replying to 59592 who makes it sound like rules for derivatives trading are simply part of some draconian corporate policy meant to snuff out the fun of some low level drone turned Johnny McTrader.

A corporate policy is a first line of defense. Having put or call buying from employees may give the appearance of shadiness. Who knows how much or how well timed your trade has to be to raise red flags. Hence no point in trying!

It's not about how the actual numbers are, it's the perception of how it will do... Come on, you know how this drill works. It's all about what the analysts think, not about the actual performance of the company... Just don't fvck with the SEC or else http://goo.gl/GYCvWh

Anonymous59595.. There's a huge different between corporate policy versus fvcking with the SEC laws...That guy was a moron, because it doesn't matter what corporate policy is.. You don't fvck with the SEC when you are an insider or have access or given inside information....No matter how small you think your trade is, the SEC can and will find you....If in doubt, ask Martha Stewart.....

maybe this guy read the derivatives part of the policy but forgot about the material nonpublic information part of the policy. OOPSIES.

or maybe he just stole some pens from the copy room and got fired

http://timesofsandiego.com/business/2014/08/21/second-ex-qualcomm-exec-fesses-insider-trading/

surely an insider trading "corporate policy" is more about avoiding potential REAL issues with the SEC than trying to find dirt to fire some random engineering schmuck who writes a covered call.

Oh... and BTW, that "corporate policy" about derivatives. Yeah, I would say that's the least of your worries...

If corporate really wants to get you, I'm sure there's enough dirt in the I.T. dept on you to make firing you easy for just about any reason, including excessive personal use of company internet access, which I assure you 99% of employees are guilty of....

And besides, if QC does really have a disasterous quarter, the last thing you'll be worried about is a company policy.. What are they going to do? Fire you after you've be laid off and replaced by a cheaper worker from Bangalore or Beijing???

The days of a squeaky clean corporation that "takes care of you" are long gone, especially for you domestic workers. You think about that.

You "experts" are talking about snapdragon and LTE chips. I'm talking about the royalty from the patents. That's the red herring, and that will depend on the outcome of the negotiations with China...And unless you happen to be part of the negotiations, it's anyone's guess how that is going (went)....And if you actually did know, there's nothing you can do either way because then that would be inside trading, which isn't just against company policy but against the law....

For the remainder of you lemmings out of the know.. You really don't know which why the coin is going to land...You're trying to paint a rosy picture based on emotions. I'm telling you to try to think of it strictly from a risk perspective.. IF things go well during earnings call, great news....More power to you and your net worth.. IF however things go south, you really would be kicking yourself for what will then seem like cheap insurance in hindsight....

All speculation is already in the current price. Analysts are way ahead of you guys. Anything you do now will just be following and not leading. Best to stay put and trust that the company has a good future which it will. It's still a solid company and positioned really well in this space. The only real competition is Intel and guess how much money they have lost trying to play catch up. Yup. Not pretty. They will ALWAYS play catch up. They dominate the computer processor space but their designs are not good enough for mobile applications. Their line of i3,i5,i7 continues to bridge the gap but far from optimal. Again, catch up.

well, I encourage everybody to READ the policy and decide for themselves

nobody ever accused me of being a lawyer!

"yes i'm sure. policy is very clear"....

Hmmm... Note to self. Find all the QC employees that back-stabbed me in the past that don't follow this policy, and report their ass.....

yes i'm sure. policy is very clear

QCOM will have a great earnings report, no need to hedge your bets.

"... many of the people I know probably are violating company policies by writing covered call options all the time"

yeah, no kidding. I mean that eTrade account that are holding those employee stock grants I believe actually allowed them do option writing and buying... if I recall someone mentioning not too long ago....

"Employees already know derivatives aren't allowed"

You sure about that? Because then, many of the people I know probably are violating company policies by writing covered call options all the time....Lol.... a less than effective approach to hedging, usually done when you don't expect the stock to move much, so that the option expires, allowing you to keep the premium...

"Employees already know derivatives aren't allowed"

Ah, so then you're screwed....

Employees already know derivatives aren't allowed

Thread regarding Qualcomm Inc. layoffs

Hedging strategy for Employee Stock Options/RSU/ESPP shares before earnings.

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