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This is not investment advice, but I would never exercise worthless options that are not threatened by expiration (i.e. while you stay with the company). It becomes a gamble with spare money that you need to be able to afford to lose it all once you leave or are laid off, even then usually it's not worth it. Also acquisitions do not guarantee honoring of existing options.
B.A.C.A.H.
2013 Jul 17, 7:53am
My advice is, have fun blogging. But don't boast about ISO's and tax dodges on the retrievable web.
My advice is, have fun blogging. But don't boast about ISO's and tax dodges on the retrievable web.
I should clarify...
I'm not asking for anything that is illegal or shady in any way...I'm wondering what the valid / legal / acceptable ways are for dealing with this.
FortWayne
2013 Jul 17, 10:44am
Yes, contact your IRA broker... they should be able to set this up for you. Not every broker will allow it though, so just ask.
If they are "non qual" don't waste your time.
B.A.C.A.H.
2013 Jul 17, 3:45pm
I'm not asking for anything that is illegal or shady in any way...I'm wondering what the valid / legal / acceptable ways are for dealing with this.
I looked into this during the dotcom bubble. One of the best things I couldn't arrange. Those stocks got diluted a few times to keep the gig going before "the conversion/sale" of highly diluted shares. Instead of a life changing sum or even a house down payment sum, those ISO's were cashed for a down payment on a basic uncool vehicle.
Didn't matter anyway. I inquired at both fidelity and also with the pre-IPO's CFO, both gave the same answer: retirement fund rules don't allow such a thing.
I have a good deal of stock options at the company I work for -- they currently have no value, but I think it's quite possible that we will be acquired at some point. If I exercise them now, it will cost a lot of money out of pocket, but (assuming a 1 year hold) I can pay long term capital gains in the event that there is an exit. Of course I would have to tie up capital and assume a lot of risk to do that...
So, I'm wondering if there is a way to exercise the options, paying for them with money that is in an IRA (I do have a self directed IRA set up). The obvious goal here is to hold the stock in a tax sheltered account so that if/when we are acquired I can avoid the taxes on the gain. You know, the Mitt Romney shuffle that I hate so much.
Is this possible? Can it be done at the 11th hour, or do I need to execute the purchases now? (currently the strike price is = to FMV, in other words the options have no value) If there is a material event that triggers a new 409A valuation, does this complicate things?
Basically I'm looking for any advice on this subject.
The options are incentive stock options and not "non qualified" stock options (I believe).
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