Many if not most publicly-traded companies explicitly prohibit their employees from hedging out their risk in this fashion. Check the fine print of your employee handbook before doing it. And if you are a section 16 employee, you should already know that you are almost certainly prohibited from doing it.<p>What, did you think you were the first to think of this?
This is what Mark Cuban did when he sold broadcast.com to yahoo in a all stock sale - <a href="http://www.quora.com/How-did-Mark-Cuban-save-his-wealth-from-the-dot-com-crash" rel="nofollow">http://www.quora.com/How-did-Mark-Cuban-save-his-wealth-from...</a>
Before getting into the software industry, being paid in stock seemed like a no-brainer, because I looked at tech salaries and thought that you people were all making, at a baseline, well above what it costs to live a comfortable existence, so why wouldn't you play the odds a bit and try for a valuable payout when your stock options mature? Then I got a tech job and realized that, no, most people in tech are still just making ends meet due to the insane cost of living that descends like a dark cloud anywhere a thriving tech scene springs up.
I think the spirit of this is misguided and goes against the spirit of the compensation. The stock based compensation is designed to align everyone's incentives as well as filter for individuals who believe in the prospects of the company.<p>Hedging out your stock based compensation goes directly against this, and misaligns you with the rest of your company. I think if you don't believe in the companies prospects it is best to take another job or ask for more cash and less equity.
This will work if you're paid in the stock of a big company, which will have a market in its options as well. But then why not just short the things if you don't want to have the stock?<p>It doesn't work for non-listed startups. Lots of idiosyncratic risk, and no liquid market in the shares.