ESPP -> FUBAR

[IHateKeithSmart]

So, I've screwed up my Employee Stock Purchase Plan (ESPP). My plan allows me to accrue funds for 6 months, and then do a bulk purchase of company stock for a 15% discount. If I do a same day sale, I can lock in a 17.65% gain.

Of course, that's what smart people do with these. Me, I've held a few blocks of stock, and now I have about half below market value. Going forward, I am planning on doing same day sales, as I got advice from someone who said "Only keep the stock if you would buy it outright with the same money" (i.e. don't hold it just because you got it at a discount).

Does anyone have any generalized or specific advice about ESPP? Should you always do an immediate sale? What percentage of portfolio would you feel comfortable having invested in your company's stock?

[schnoodleC]

ESSP is great because you are almost gauranteed that 15% return but the up side is much greater. I've made really huge money through ESSP plans. My strategy is:

1) Always invest the max, whatever it takes. It is soooo +EV
2) Unless there is a compelling reason be cautious about holding on to the shares. As an employee you already have lots invested in your company. Don't overinvest.
3) If the stock goes up a lot over the 6 months and you have a big paper gain then consider holding onto the stock for a year so that your profit will be taxed as long term capital gains rather than short term gains/ordinary income.

[WLVRYN]

Especially if you have stock options/restricted stock separate from your ESPP, I would dump the shares as soon as you get them. You can use the options as the "home run", while using the ESPP to augment your regular income. Sure there are tax consequences, but to me this seems like a ridiculously easy way to make a really nice profit with near zero risk.

I agree with schnoodle that you should put every last penny that they allow you in the program. Borrow money if you have to, sell crack, sell your body, play poker, do whatever. I dont know of too many investments that guarantee you a pre-tax 15% return with no risk.

I suppose you could try to implement an option strategy writing covered calls or buying puts to lock in at least some of your gain if you wanted to hold for longer term in order to improve your tax position, but for simplicity I would say just sell them when you get them.