Ask HN: What Is the Best Way to Hedge RSUs During Post-IPO Lockup?

1 pointsby shedletskyover 6 years ago

A unicorn I worked at for two years is going IPO soon. The RSUs are double trigger vest.I want to hedge the risk that the stock gets cut in half in-between the IPO and the lockup expiration.Here are the two strategies I have found so far:1. If you have X shares/RSUs, short X additional shares at open of IPO. Cover after lockup expires.Pro: lock in a sale at the IPO price Con: requires significant margin reserves & cost-to-borrow might be high2. Sell costless collar on X shares using options contracts.Pro: doesn't require huge margin reserves Con: options market is not guaranteed to exist any time during the lockupCan I do any better than this?

1 comment

marketgodover 6 years ago

Have you looked into secondary markets?1) If you short X shares and it goes up you don't get the upside ride and it can fly early on.