[...] My Company ESPP Has Become My New Property Tax Escrow. PT Money has an interesting point of view regarding his investment in employee stock purchase plans. He sees the automated deduction and the immediate minimum 15% return (minus taxes)—like that offered with my company’s ESPP—as a good holding account for his property tax funds. Even those earning minimum wage (hee-yah) could benefit from investing a portion of their income. [...]

[...] My Company ESPP Has Become My New Property Tax Escrow at Prime Time Money – I don’t have the option of an ESPP, but if you do, you should definitely read PT’s post explaining why it’s such a good deal. [...]

@good money blog – if you use the shorting method I have described there is no risk in losing money, you will have locked in the 15% (minimum) gain – the only risk is if the share price RISES and then you will lose out on that gain – but then you are just getting greedy! It makes no difference how volitile the stock is. Imagine you work for an Enron like company and on the last day of the period your company shares are priced at $60/share and you had invested $6,000 in your ESPP for that period. You know your company will be buying 100 shares for you so you short 100 shares and recieve $6,000 in cash from your broker. Then let’s say something terrible happens that night and your company shares go down to $1. Doesnt matter to you (other than you may no longer have a job!) because you already locked in your gain – you cover your short sale with the shares you get a few days later from your company and you get to keep the $6,000 cash.

Obviouslly this example is grossly oversimplified, there are little things like margin interest expense, transaction charges, etc, but in general this simple approach means ZERO risk to ESPP:

Right before close of last day of period determine how many shares company will be buying on your behalf and then short that amount of shares. Once shares hit your brokerage, use those shares to cover your short position. Enjoy your stress-free, locked in profit.

Anyway, I did make some easy gain when my company used to have the ESPP program. At the time, I even thought about hedging the position (before it could be sold) by shorting it. I was told employees weren’t allowed to short company stocks but I did think about asking my siblings to help me out.

Good point about the lag time between purchase and sale. I wonder how close to the purchase date I’ll be comfortable doing the short sale?

Thanks for the vote of confidence.

One thing to remember is that there can be some risk – at the end of the period when your company buys your shares with your money it will be at least a few days before they hit your broker. That period of time where your shares have been bought but you cant sell them defines your risk window. You can move your risk to zero by shorting your shares once you determine how many will be bought, and then using the ESPP shares to cover once they hit your brokerage. In this way you really do have ZERO risk.

In public your CFO will say not to do this because he is paid to have you buy and hold, but in private they will ackowledge it is smart money management.