Right method to off-load NFLX stock options

Hi All,

First, thanks a bunch for all the great minds in making this a great place to get good education. Bear with me as I go about explaining my situation. Financial planners (who say sell all), nor day traders (whose focus is making money with volatility) understand this fully.

My portfolio, which is just two stocks, has primarily NFLX stock options (fully vested, expiring in 2011 and 2012). I am planning to off-load them in the next 4 years.

Why not off-load all now? I get heavily taxed as I still work in technology at least till this year. 2nd, these are non-qualified options, meaning that tax is part of its growth, until sold. 3rd, there is amazing amount of time value left (4 years in most of them, unfortunately though, I cannot sell it)

Hedging:

Everything I tried, I am just bleeding money (put spreads and all). LEAPS are super expensive for NFLX.

Liquidity:
From financial need perspective, I do need to off-load at least 25% of them (at around the current price), preferably, in Jan 2019 when my taxes will be lower.

What would you do?
1. Would you hedge it? And any other ways than puts and put spreads which seem to be milking me every day. Still hedging is necessary as I plan to leave at least 75% for 2 to 3 years and 25% till Jan 2018.
2. Would you sell now, though losing on tax, it provides liquidity now and market may go either way.

I am looking for different view points that will give me a good picture, so that I can see something I missed.

Thanks

 

I would either sell or not. Hedging is likely going to cost you and frustrate you.

 

added the third point to the main post: Why not off-load all now? I get heavily taxed as I still work in technology at least till this year. 2nd, these are non-qualified options, meaning that tax is part of its growth, until sold. 3rd, there is amazing amount of time value left (4 years in most of them, unfortunately though, I cannot sell it)

 

Hedging with a no cost collar will only cost you upside, not bleeding money. You can collar at different level and time frame based on your financial plan. A collar won't work if your current gains are insignificant. But if your current options have huge gains, it is a reasonable strategy.

 

Where are they struck? if they vested in 2011, I would think they would be struck around $10-15

 

Mistake, expiring in 2021 and 2022.

@newwurldmn ,The strike price is whatever it was in 2011 and 2012.

@ironchef , let me read a bit more about no cost collar. Thank you!

 

If you need to offload 25% at current prices in 2019 why dont you just sell 2019 calls ATM?

 

Risk reversal on these. Short the LEAP call, buy the LEAP put. But you're a bit late for this because if it goes down, you'll be realizing the gains on the put as long term (whereas, had you gotten them before 1/18/18, your holding period could have been either LT or ST, and you could have taken the ST loss on the calls against your LT gains and pick up some pretty pennies from the tax man). You can still do this with the Jun 2019s. You should also pick up a bit extra on the call side when you sell those. When January rolls around, you exercise your calls (that you currently hold), exercise the puts against them (if it goes down), which locks in LT gains, then buy back the calls for a ST loss and repeat the position with Jan 2020 LEAPs.

 

Collars make sense, if you're certain there's no Constructive Sale Rule issue. (Consult your tax advisor).

 

Can only protect the down side up to the premium you receive with selling ATM calls.