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If you have holdings that are locked up, are you allowed to short stock or use options to hedge your position?
by cj 3mo ago
If you have holdings that are locked up, are you allowed to short stock or use options to hedge your position?
- unknownfuture 3mo agoNo. Typically lockup agreements prevent any kind of trading of derivative or synthetic positions (think: shorts, swaps, options, etc).
- BobbyJo 3mo agoAlmost certainly, outside of standard trade restriction windows. I don't think they have any control over what you do in the market outside of preventing insider trading.
- unknownfuture 3mo agoYes they absolutely can and do. Lockup provisions are contractual and typically quite strict.
- hobonation 3mo agoNo. Especially not if you have friends who could short the stock and you come to some sort of pocket agreement that never sees the light of day. Especially then.
- gretch 3mo agoWhat the law says and enforcement of the law are sometimes 2 different things, but generally employees should not be shorting their own stock, lock up or no lock up. The issue is that this creates a conflict of interest. In the worst case scenario, as an employee, you can literally do a bad thing to cause the stock to go down. E.g. An engineer can make a bug which blows up a rocket. So then you could short the stock, bug a rocket, and become super rich. It's the same issue with athletes betting on their own team - it's trivial to throw the game.
- hansvm 3mo agoMy holdings aren't even locked up, and I'm still not allowed to short my employer -- true as a matter of policy which could get me fired, and true from a US legal perspective most of the time given my role.