Why do insiders sell stocks after receiving options?

We investigate corporate insiders’ trading behaviour around option grants and find that they substantially increase their net sales after receiving options. The increase in insider net sales is positively associated with risk metrics such as idiosyncratic volatility and stock price crash risk, but not with proxies for insider opportunism. This suggests that the increase in net sales is likely driven by risk-reduction considerations rather than opportunistic trading based on inside information. Consistent with this view, we find that insider sales following option grants do not precede more negative returns.