Std Deviation

Your point makes no sense to me. You have no guaranteed ROR on B6 stock because your model does not account for risk. The risk that you’ve bet on a single a single stock will hold its value (however short the window is between buying and selling). A window that Fidelity can tap the brakes and slow down. What if we plant an A320 and kill all 150 pax on the day you sell it and it goes down 30%? What if there’s a BK declaration? What if trading is halted? Or delayed?You’re talking gains but you’ve never mentioned loss. We can argue it all day long and we’re never going see it each other’s way. You think my philosophy is foolish and I think the same of yours. I also think dabbling in the stock of your primary income source is dubious. Exactly what’s your average profit in dollars ? Couple of grand? If you were so confident in the 15% (17 according to you) why not go all in with 50% of your salary? Perhaps you do.... now that’s literally putting your money where your mouth is. After all, guaranteed right?

It’s not the deal it appears to be. Or maybe it is and the average pilot is just smarter than a billion dollar financial institution and its client.

PasserOGas

It's a deal if you sell. The scam is if you keep it.

They are banking on some percentage of people keeping the stock. Then they benefit 3 ways.

1. The interest earned during the 6 months they get to keep everyone's money.

2. The slightly inflated stock price due to increased investment. Yes they issue it at a discount, and yes they are diluting it, but if you keep your money in the stock, the market cap will go up by however much you have invested. Remember out of 100 shares they issue, only 15 are "free". The rest are all paid for by you and thus benefit anyone being paid in options.

3. You feel like an "owner". Even though your fraction of ownership is microscopic, you may feel OK making less in compensation because you want "your" company to do well. Yes people are that stupid.

There is no escaping #1, but its effect very small. Perhaps 3% over 6 months. If you sell immediately upon receipt you can escape #2 and #3.

Actual return is probably around 12%. Still not bad for a guaranteed return. Just make sure you sell it.

BeatNavy

I’m guessing by what you are saying you (and your wife since you brought her into this as part of your apparent justification for why people should listen to you) don’t understand how the CSPP works. You should probably learn about it before you start spouting off incorrect stuff. One, the cap is 10% of your income and $25k a year, so 50% isn’t possible. But, to answer your question, I’d probably do it for an instant 17.6% RoR if it was allowed. You say it doesn’t account for risk. You can literally sell it as soon as it hits your account. There is a 0 day holding period requirement in our CSPP program. As soon as the shares are in my account, I can execute a sell order. Plane crashes after that? Ok. My shares are sold. Market meltdown? Same. Plane crashed the day before the window closes? Ok. Doesn’t matter. The 15% discount is 15% less than the closing price on the last day in April/October...you aren't continually buying shares throughout the 6 month period and therefore subject to price fluctuations or JBLU stock success/failure. You are putting cash into a holding area that collects until a singular one time purchase at the 15% discounted price executes. If the share price swings from $100 a share to $1 a share throughout the 6 month period, it doesn’t matter. The only price that matters is on the execution day, the last biz day of the months of April and October. And as soon as it executes, it can be sold. That’s about as low risk as stock trading, or any form of investing for that matter, gets.

And since you don’t understand where 17.6% comes from, I’ll do a little basic 6th grade math to help you. You buy a share of AAPL stock for $100 a share. It goes down 15% in one day. It’s now worth $85 a share. You lost 15% of your investment, you freak, and you sell your share of AAPL stock to me for $85. The share price goes back up to $100 the next day. I then sell it. You lost $15/share, I gained $15/share. You lost 15% (15/100). But $15 on my $85 investment is 15/85, or 17.647%. So I made 17.6% on my investment while you lost 15%. The same is true with the CSPP. If JBLU is trading at $20 at the close of the window, I get it at $17 a share. Assume I have 100 shares of JBLU at a purchase price of $17/share, or $1700 worth, and I turn around and immediately sell it for what it’s worth at $20/share, or $2000, I just made $300 on that $1700 purchase, or 17.6%, instantly. There’s no risk. The money to purchase those shares was tied up for a few months, so I lost opportunity cost, but I made over 17% on that money in a few months. I’ll take a guaranteed 17% any day, and any investor or financial advisor who wouldn’t is insane. If I make $100k a year at JB, make max contributions at 10% and put $10k a year into this program, that’s an extra $1700, for doing nothing but executing a sell order once every 6 months, with no risk.
But yeah I mean if you don’t want $3-4K a year risk free for doing nothing, there’s no reason to do the program. I totally see your side lol.

ShyGuy

Yeah but arent there tax penalties if you sell same day? I thought there is a holding period (18 months?) for employee stock purchase programs in order to benefit from the tax burden.

BeatNavy

It’s taxed at the ordinary income tax rate if you sell it right away. It’s long term capital gains if you hold it for a year, and I think some amount of time from the beginning of the holding period. But since we are talking about selling it right away, it’s just ordinary income tax rate, which you’re likely paying on any short term investment and/or any additional income. It is a 0 min holding day program, and there are no penalties or tax implications for selling right away. Financially, it’s a program that gives you free money (taxed, just like any other income) for tying yours up for a little while, and if used conservatively (is selling right away) is risk free.

Gordie H

Good summary of the program Navy, many Thanks.

Red Sox!

IrishNJ

Are you sure? I'm pretty sure that the 15% discount is ALWAYS taxed as ordinary income, even after a year. The only element that is taxed at a long term cap gains is if the stock price went up from the time you got the shares AND you hold the shares over a year (then you still pay ordinary income tax on the 15% but long term cap gains on the price increase).

BeatNavy

The base contribution amount (including the 17.6% gain) is always taxed as ordinary income. The gains (if any) above that are what is taxed as long term if held greater than a year, or at the ordinary income tax rate if held less than a year. So yes, correct, sorry if I wasn’t clear in the previous post.

Name User

FWIW my wife works for a tech company and we also max the ESOP for her as well. She gets that 15% discount and price at the time she signed up for it, and she buys shares at $26. Even now a few years later she still gets that $26 price and the stock is at $45. Pretty good deal.

For an airline I would definitely flip it same day though. Even then it's a good deal, especially at our income levels. Not a lot of work for no-risk couple thousand a year, look at it as your vacation money. The people who don't do ESOP for the most part do not understand the program, which is fine, their loss.

ShyGuy

Can someone spell it out using a simple $100 example of one stock.

Say the price of stock was $100 and you get it at that discount of 15% so you got it at $85.

Instant same day, you put sell order through. Now you’ve “made” $15. What’s the tax burden now?

Just regular tax rate on the $15?

Fed, state, SS/med?