Legal to sell covered calls on company stock you own?

I own several thousands of shares of my employer via the employee stock purchase scheme. I am looking into generating some extra income by selling covered calls every couple of months - nothing fancy just a few OTM calls. Is it legal? Will it be considered insider trading?

I asked around and some have warned me that trading derivatives can be considered insider trading.

 

Insider trading is an attempt to profit from trading on information that is not publically available. It is independent of whether or not you use derivatives.

If you are doing this ahead of some information you know about the company that has not been publically released, then that is unadvisable. If you have information but are not sure if it is insider information, better off not to do anything as well. If your firm has a legal or HR department you could always ask them.

However, if you are just an doing this as a passive strategy for income generation then it is fine.

 

Your employee handbook will make this very clear if it's okay and when it's okay (there are often blackout periods when you can't trade).

Outside of that, it's perfectly fine.

 

Just because you're an employee does not mean you're necessarily an "insider". Strictly insiders are those with non-public knowledge about big things that can move the stock.
Generally that only applies to executive level people, not regular employees.

 

> Is it legal? Will it be considered insider trading?

Why would you ask on a chatboard rather than asking your Legal or HR department?

 

Unless you work for a bank or MF you're probably OK, provided there are no blackout dates.

 

No. The "vehicle" doesn't matter. What DOES matter is whether you have information and trade upon it which is "material and non-public". Otherwise, you're OK to pursue your strategy.

 

What DOES matter is that he's open and transparent with his Legal or HR department about his contemplated trades. Even if legally OK, sneaking around will be hazardous to his career, and it's unfortunate others on this thread are egging him on, rather than telling him simply to pick up the phone and make some calls internally.

 

Do it -- Greed is Good
'Spread the buy orders through different accounts and you won't get burned."

 

Q: Legal to sell covered calls on company stock you own?


It shouldn't be illegal - think about what you are doing. You are capping any upside potential AND still exposed to all the downside risk. Why would you do that? If you want income sell the shares.