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

1 points by shedletsky 7 years ago | 1 comment

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 high

2. 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 lockup

Can I do any better than this?

marketgod 7 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.