Are you subject to restrictions in selling your company stock?
Many public companies, like Amazon, institute ‘trading windows’ for key employees and executives.
Whether you are a ‘key employee’ generally boils down to access to company profit and loss details. Profit and loss access generally includes: an executive with control over a piece of the income statement or department backend data access to revenue amounts and metrics. These key details may influence the company’s stock price once made publicly available.
A key employee with this insight may trade company stock ahead of the earnings release and profit from the transaction.
Thus, trading windows generally occur after released earnings reports.
What does this mean for you?
The Problem: Many employees decide to sell stock to pay for important expenses or to reduce risk. Employees may wish to buy additional stock based on their understanding of where the company value will be longer term. It may not be ideal for them to wait until a trading window opens.
The Solution: Create a trading plan (SEC Rule 10b5-1).
A trading plan allows you to establish a buying or selling program for your vested company shares over a specific period of time. The plan is then approved by the company and implemented by you.
These plans are very specific in detail to minimize trading flexibility and you may not deviate from the plan instructions, but they do help you through the trading restrictions you are otherwise subject to.
Why should you sell your company stock, anyways?
Find out what RSUs or company stock does to your investment portfolio.
Once you sell your stock, what is next?
- Why building a financial home is so important
- When you may need to bring in some help
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