Options for Tech Employees With Concentrated RSUs

Many tech employees wake up one day to find that a single employer’s stock is more than half their net worth. Each RSU grant felt small at the time. Compounded over several years and a rising share price, the position now dwarfs everything else. The instinct is to do nothing, because selling feels like a tax event and disloyalty at once. But holding is also a decision — and usually the riskiest one.

How are vested RSUs actually taxed?

This is the part most employees get backwards. When RSUs vest, the full value is taxed as ordinary income, and your employer typically withholds shares to cover part of it. Your cost basis in the shares you keep is the price on the vest date. That means if you sell shares soon after vesting, there is little or no additional gain to tax — the big tax already happened at vest. The shares that hurt to sell are the ones that vested years ago and have appreciated a lot since.

• Shares held more than a year past vesting qualify for long-term capital gains rates on the appreciation since vest.
• Recently vested shares often carry little embedded gain — selling them is close to tax-neutral.
• Wash-sale and trading-window rules can still apply, so timing matters even when the tax does not.

Is concentration or tax the real risk?

A 30% tax on a gain is a known, bounded cost. A single growth stock falling 50% or more is neither known nor bounded — and tech stocks do exactly that, regularly. The discipline is to separate the two decisions: how much single-stock risk you are comfortable carrying, and how to unwind the excess in the most tax-efficient way. Letting the tax tail wag the risk dog is how concentrated holders end up riding a position all the way down.

What is a 10b5-1 plan and do I need one?

If you are an insider — an officer, director, or someone with material non-public information — discretionary selling is constrained to open trading windows and exposes you to second-guessing. A Rule 10b5-1 plan is a written, pre-set selling schedule adopted while you are not in possession of inside information. Once in place, sales execute automatically on the schedule, which both diversifies the position steadily and provides an affirmative defense against insider-trading claims.

Can an option overlay help with the low-basis lots?

For the older, highly appreciated lots, selling all at once concentrates the tax into a single year. An option overlay takes a different approach: covered calls generate premium income against the position, a protective put or collar can set a floor under the value during the wind-down, and the structure paces the exit over time rather than forcing it. The mechanism does not avoid tax — it gives you a defined range to hold within while you sell on a schedule, and the premium can help offset the eventual tax. None of this guarantees any outcome; options involve risk.

This article is for educational and informational purposes only and is not investment, tax, or legal advice. Option strategies involve risk and are not suitable for all investors. Tax treatment of options is complex and depends on individual circumstances, holding periods, and applicable law; tax rates referenced reflect 2024–2025 federal and state estimates and are subject to change. Consult a qualified tax professional and investment advisor before acting. Yayati Asset Management is a Registered Investment Adviser. © Yayati Asset Management. VOLT™ is a trademark of Yayati.