I work at a fast-growing IT company and I have been rewarded with RSUs + ESPP totalling close to 100K in a foreseeable future. I am deciding to keep the RSU and ESPP awards as a stock and not cash in. There is also certainly a considerable risk in doing so if company goes into trouble causing stock to nosedive. I am considering to protect by regularly buying a PUT options, lot of them. Now when you trade your employer's stock outside the employer sponsored plan, that could raise alarm of insider trading. But my strategy is simple enough to buy an enough number of simply PUT options to guard against potential downturn. Will it likely to cause a FEDs knocking on my door? For small trades it may not concern but mine could be considerable. I dont wanna to break law much less be scrutinized. I have heard stories of enough people going to prison for that and I am not intending to repeat it knowingly or unknowingly. Where can I refer to a associated insider trading laws to make sure I am not breaking anything? Should I consult tax pro or even yet tax attorney? Thanks.,
Just spend the 1-2k on a lawyer specialized on capital markets law. My best guess is that you would have to make probable that you didn't see a downturn coming and that it's just your diversification strategy, but I think it's safer to hire a company to buy puts in a blind trust for you.
The fed will only knock on your door if you are trading on material non-public information. The SEC will knock on your door if you are trading inside your black out period. If you have one. The company’s compliance will come knocking on your door if they get wind of the transaction and it violates your contract with them. Your boss may come knocking on your door if he finds out you are betting against the company. Doesn’t mean you will get in trouble.
I would reallocate Atikon's $1-2k away from a lawyer and spend it on a well regarded financial adviser that has experience in start ups, including when they fail or don't do much, to look at your RSU & ESPP strategy and come up with a plan. You probably know this...RSU and or your contract could have some terms in them that an adviser could drill into and there could be a more optimised solution than just holding onto them. I would say a $1-2k investment to protect or capture the $100k is smart while buying PUTs to protect a theoretical $100K might not be, so pay to get someone on your team that has done this before, allot.
A lot would depend on your employer's rules which probably have a demarkation as to who can and can't. A 144 may need to be filed as well. There really is no general answer - I wouldn't do it or anything that looks like - or any competitor without consulting your HR group.
Ask your HR department for all the rules related to trading in your company’s stock, including timing and options. No need to bias them against you by mentioning puts. Read them carefully. Most non-executive employees won’t have blackout periods or enough corporate information to rise to the level of material non-public information that could give rise to insider trading concerns, but the HR should tell you that. There’s a difference between violating company policy (“we don’t allow you to buy puts or short our stock, so we can pump up our execs option grants”) and what’s actually illegal. Go against company policy and get caught and you could suffer the expected consequences - losing your job and/or unvested stock, options grants, etc. carefully judge the risks you’re willing to take, both career and financial, and act accordingly.
You need to contact HR about your blackout period. Best to collar the shares (short OTM call, buy OTM put).