If the options aren't that far in-the-money, and he doesn't need the cash now, it's actually better to wait to exercise.

If he exercises now, he only gets the raw value (current price - strike).

If he waits to exercise, he get the time-value of money and implied leverage (he doesn't have to cough up the strike until he exercises), and the optionality part (if Netflix goes below the strike, he can decline to exercise).

He also can hedge by short-selling (and lock in a sure profit no matter what), but you'd need a big-value account at a brokerage to hedge on favorable terms.

> He also can hedge by short-selling (and lock in a sure profit no matter what), but you'd need a big-value account at a brokerage to hedge on favorable terms.

It's interesting, because I thought about this. When I worked for the company I wasn't allowed to hedge, because you can't buy shorts in the company you work for.

Now that I'm out I can, but the problem is, the company gave me such good options there is no way I can buy an opposite option for the hedge. For example, there is no retail short for more than two years, but my options still have between 6 and 9 years left.

Buy the longest term put and roll the position when it is near expiration. Don't fully hedge, just 1/2 to 1/6.

Also, don't write covered calls, that gives up too much upside. Instead, sell outright.

But if he doesn't hold the stock for at least one year, he gets short-term capital gains rate of 35%, rather than the long-term one of 15%, which might tip the scale the other way.

But then again, if he exercises in one year and does not sell that year, he gets the tax bill in the exercise year, potentially with no way to cover it.

It's a lot more complicated than it should be.