Charlotte Jones is a Principal & Senior Wealth Advisor at Compound. She taps into her product management background from her work in tech to advise Directors of Product on their wealth management, guiding them through financial planning, equity, and tax planning.   

4 Plays for Managing Executive Equity: When You Can't (or Won't) Sell

You can’t eat your stock. That’s what I tell my clients to emphasize why you need to be careful to establish some liquidity for your equity compensation.  

You might have millions tied up in company stock — a company you’ve been building — but that doesn’t always mean it translates into cash you can use. Just try giving equity to a mortgage lender. It’s likely they’d turn you down, no matter how well your company is doing.

And that’s assuming you even want to sell.  

Liquidity (the extent of which you can turn your executive compensation into usable cash) can be affected by a number of things.. If you’re privy to inside information, there are windows where you can’t sell at all. And if you’re at a private company, your board may prefer you sit tight even if there is a liquidity opportunity.

But you could also be in your own way. If you've spent years building a concentrated equity position from the inside, of course you're reluctant to sell. 

This is the endowment effect: the more you’ve built something, the more highly you value it.

Often, there’s overlap between actual restrictions and reluctance.

But you can untangle that position. There are approaches besides waiting indefinitely or selling everything at once. We’ll cover four strategies to consider, and how each one might serve your situation.

These strategies are often most relevant to the C-suite. If you’re a director or middle-manager, take a look at our Manuals on: 

• Managing your startup stock
• Seeing beyond your company loyalty 

Both will help you see your equity situation more clearly, in the context of your full financial picture. 

Key takeaways:

• Concentrated equity doesn't mean you're stuck — Even when blackout periods, tax concerns, or board and investor optics prevent you from selling, there are structured plays that can help you protect, diversify, or access liquidity.

• Match your equity compensation constraint to the right strategy — A collar limits downside on a concentrated stock position, an exchange fund diversifies without triggering capital gains, a variable prepaid forward unlocks liquidity while deferring taxes, and a 10b5-1 plan enables systematic selling during blackout periods.

• Many executives may need more than one strategy to protect, diversify, and access liquidity without selling — A collar protects downside. An exchange fund diversifies. A variable prepaid forward unlocks cash. When you have more than one constraint (and most executives do) the plays work best in combination.

How Executives End Up With a Liquidity Problem

You likely didn’t end up concentrated by accident, and you probably didn’t end up attached to the stock by accident either. The market doesn’t always share that attachment, though. Your equity is a number on a cap table, and treating it like anything else can work against you.

Every vesting date that passed without selling was a decision, even if it didn't feel like one. Over time, grant by grant, that turned into a single, oversized bet on one company.

It is very common for insiders to fall prey to overconfidence and self-attribution bias - where they overestimate the accuracy and importance of their private information and have an “illusion of control” over the company’s performance. In reality, a company’s performance is heavily affected by things that an insider cannot predict or control: tariffs, macroeconomic shifts, regulatory changes, or even something like embezzlement inside the company. The more of your wealth tied to the company’s stock, the more you are risking your personal wealth by not diversifying. 

But your company stock isn’t really the whole problem. The problem is what’s missing around it — a retirement account, a brokerage account, real estate, cash. Basically anything that isn’t in this one company.

If your equity is your entire financial picture instead of one piece of it, you don’t just have a concentrated position. You have a portfolio with one asset in it

Plus, the more concentrated your position, the fewer moves you have available, and the more expensive each one becomes.

The longer you hold, the more gain you've accumulated. A sale that might have been manageable years ago can trigger a tax bill that makes selling feel worse than staying put. That doesn’t mean you're out of moves, just that the moves need to be the right ones.

Four Distinct Strategies to Address Four Different Equity Situations

Many executives are dealing with more than one liquidity constraint at once. You might be facing  blackout periods when you can’t sell and tax exposure you’d rather avoid, while also feeling a general resistance to selling, because it feels like giving up something you’ve built.

The blackout periods and tax exposure are the more obvious obstacles. They’re restrictions written into your plan or dictated by insider information, and there are ways to work around both.

But the resistance to selling is a different problem, mostly because it doesn’t usually feel like one. It feels like conviction. You’ve built the company, so you know it better than anyone, and holding onto it feels like the responsible move, not the risky one. That confidence is worth a second look, because it’s not always right. The same forces that could hurt your business — a shift in the market, new regulations, someone else’s mistake inside the company — don’t ask whether you were ready to diversify first.

None of that means you have to sell. It just means the decision should be a real one, not something that happened by default. And there’s more than one way to make it. Some strategies work around the rules, some work around your own reluctance, and most executives end up using more than one.

The right strategy also has to fit your goals — when you need cash set aside for specific life moments, when you plan to retire, or how much upside you're willing to give up in exchange for protection or liquidity.

Which strategy could fit your goal?

‍If your goal is downside protection without selling → Collars could be an option

If your goal is diversification without a taxable event → Exchange funds could be an option

If your goal is liquidity now with taxes deferred → Variable prepaid forwards could be an option

If your goal is systematic selling despite blackout periods → 10b5-1 plans could be an option

Strategy 1: The Collar 

Your situation: 

1. You want to keep your position, but need protection if the stock value drops. A collar’s designed to limit your downside risk so that if the company’s value drops below a certain threshold, you're not completely exposed.
2. Your board asked you not to sell during a fundraising round. A collar protects your downside without requiring you to sell or triggering a tax event. 

How it works: You buy put and call options to create a floor (the minimum value) and ceiling (the maximum value). A zero-premium collar is typically structured to cost nothing upfront.

Does this work for me?

• If you're at a public company → collars are available to you 
• If you want to stay in the position while limiting your downside → this is a worthwhile strategy to explore
• If you want protection but you're not ready to diversify → this limits downside without triggering a sale

Tradeoffs to weigh: You give up the chance to make upside if the stock soars, and structuring the collar correctly may still involve transaction costs, even when it's set up as "zero premium."

No plan approval required. You can set this up independently with the help of your advisor.

Strategy 2: The Exchange Fund 

Your situation: You need to diversify without selling, and you have at least several million dollars in concentrated stock.

How it works: You contribute your concentrated stock into a private pooled fund alongside other investors' concentrated positions, and receive a proportional share of that diversified pool. This is generally structured so it doesn't trigger a capital gains tax event.

You still get to benefit from stock upside, but your exposure is now spread across a diversified pool. This means you're not fully exposed when any single stock dips. A fund manager curates which positions they accept to ensure the pool is genuinely diversified.

If you've resisted diversifying because selling feels like a vote of no confidence, this lets you diversify without selling because you're contributing to the position, not liquidating it.

Does this work for me?

• If you have several million dollars in concentrated stock → you meet the fund's minimum entry requirement
• The fund manager accepts your position → you're in (they're selective — if your stock is weak or the pool is already overweight in it, they'll pass)
• If you want diversification without triggering capital gains taxes → this is an option available to you

Tradeoffs to weigh: Once you're in the pool, your upside is tied to the fund's performance, not just your original stock's. Exchange funds also typically require you to stay in for several years before you can exit, so this isn't a strategy for near-term liquidity.

Exchange funds aren’t publicly listed, and you won’t find one by searching. Access runs through an advisory firm with existing relationships to the fund itself — which is really the whole reason to have one in your corner for this strategy.

Strategy 3: The Variable Prepaid Forward

Your situation: You need liquidity today but can't (or won't) sell right now. However, you're willing to deliver the stock later — ideally when your income is lower and the tax hit is smaller.

How it works: You sell a futures contract on your stock, receiving cash today in exchange for an obligation to deliver the stock at a future date. You control the timing of that delivery, ideally when your income is lower (like in retirement) so the tax hit is smaller.

Does this work for me?

• If you have millions in concentrated stock → this is a worthwhile strategy to explore
• If you're in peak earning years but expect lower income later → timing delivery for post-retirement to reduce your bracket is an option
• If you need cash but want to defer taxes → this gives you liquidity today, tax consequences later

One tradeoff to weigh: once you sell the forward, you've locked in your price. If the stock rises significantly before delivery, you don't get to participate in that upside — you've already sold it.

A variable prepaid forward must be allowed by your company’s equity plan.

Strategy 4: The 10b5-1 Plan 

Your situation: You need to sell, but blackout periods are in the way. You want to diversify systematically — not just during the narrow windows your company allows.

How it works: Before you have access to insider information, you write out a trading schedule specifying when you'll sell, at what price, and how many shares. Once it's written, trades can execute even during blackout periods — on your terms, not around whatever window your company gives you.

Does this work for me?

• If you need to sell shares rather than hedge or defer → this enables systematic diversification
• If you establish the plan before you have insider information → trades can execute during blackout periods
• If you want to diversify gradually → this gives you a predictable, rule-based schedule for executing

Tradeoffs to weigh: Once you sell the forward, you've locked in your price and given up any upside above it. These contracts are also complex to unwind once in place, so this isn't a decision to make quickly.

A 10b5-1 plan must be allowed by your equity plan, and you must set it up before you get insider information.

Additional strategies to discuss with your advisor:

Pyramiding: This is another hedging approach that’s plan-dependent, and worth discussing with your advisor if the collar isn't available to you.

83(b) elections: If your plan allows, you can exercise options before vesting — often pre-IPO, when the spread between strike price and fair market value is still small. 

This could reduce your tax exposure significantly, but the decision window is narrow: before you have access to insider information, and before the valuation climbs. However, if you exercise early and the valuation drops, you've paid for shares that are now worth less than what you paid, and that loss isn't easily recoverable.  

Secondary market sales: You can pool equity to meet institutional minimums ($5-10 million) not accessible to individual executives alone. 

In this case, your company or broker facilitates the strategy and groups you with other shareholders to meet that minimum. 

In a secondary market sale, your company has to sign off — known as ROFR, or right of first refusal — and the optics of an executive selling on the secondary market could raise questions internally, especially during a fundraising cycle. Before any sale can go to a third party, the company can choose to buy the shares itself at the agreed price before you're able to sell externally.

No Single Strategy Solves Everything: Making Equity Decisions Work For Your Portfolio

These four strategies aren't mutually exclusive, and the right combination looks different for everyone.

An executive approaching retirement who needs liquidity today is in a totally different situation than someone mid-career who wants downside protection without triggering a sale. The same plays serve different purposes depending on your tax situation, your timeline, your concentration, and what you're actually trying to protect. 

A collar paired with a 10b5-1 plan solves a different problem than a variable prepaid forward alongside an exchange fund, and you can uncover which combination fits your picture with an advisor.

You might also be reading this while the window is already open: an IPO is announced, a tender offer comes through, a tax deadline arrives. But at that point, the best strategies may have already narrowed. The planning that actually works happens before the decision becomes urgent. 

An advisor who specializes in equity compensation reads your plan documents, understands what's allowed, and maps your constraints to the potential right plays. 

Of course, a sophisticated advisor knows that your equity is never the whole picture. It intersects with your tax situation, your portfolio, your real estate, your retirement timeline and your financial goals. Understanding the give and take between all of it is what helps you build and protect your wealth.

Start by understanding your full picture. Compound's Dashboard connects all of your investment accounts, your equity compensation, and cash flow, so you can see where things stand. From there, your advisor can use our equity simulator to model different scenarios with you, so you can see the potential impact of different strategies before you act.

Sign up for free → https://compoundplanning.com/dashboard 

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FAQs

Do I need to check my equity plan before using these strategies?
Yes — some strategies, like the variable prepaid forward and 10b5-1 plan, must be explicitly allowed by your equity plan. Others, like the collar and exchange fund, can usually be set up independently. Always review your plan documents and/or work with an advisor before going ahead.

Can I use more than one of these plays at the same time?
Absolutely. These strategies aren't mutually exclusive and are often most effective when layered to address different issues you’re facing. 

What if I'm still years away from retirement?
Planning early gives you more options. A variable prepaid forward, for instance, works best when you can time the stock delivery to a future period of lower income — like retirement — so the earlier you think through the timing, the more tax-efficient the outcome might be.