Stock Options

[lazyday]

Dreamer,

No offense to any I hope, but I think the replies here on average might be colored too much by the recent bear market or tech market crash. It might be true that one should sometimes take the money in case it goes away should the stock tank, but I wonder if there's a bit of "fighting the last battle."

A very important factor is how long you expect to be at the company. My thinking assumes you expect to be there for 10 more years. If not (or if the options don't last that long) it would make much more sense to exercise early, in case you don't get another chance before you leave.

 

[LEX]

lazy:

No problem here. I expect there was a real service recieved from those posting and reading this chain. Now that we are at critical financial mass from excercising our options, and our money is working hard to perpetuate our carefree lifestyles, its time for a tropical drink by the pool to contemplate the next fun filled adventure. 8)

 

[lazyday]

time for a tropical drink by the pool

Agreed.

 

[cute fuzzy bunny]

No offense to any I hope, but I think the replies here on average might be colored too much by the recent bear market or tech market crash. It might be true that one should sometimes take the money in case it goes away should the stock tank, but I wonder if there's a bit of "fighting the last battle."

Gong...

The advice I gave was the strategy I used between 1993 and April of 2000. Full on bull market. Same thing I'd do today. Its simple diversity, divest yourself of vested shares and diversify. If the company stock continues to do well, super! You'll have more vesting soon! If the company starts looking like a texas armadillo by the side of the road thats getting john galts full dinner time attention, super! You got rid of it and diversified! If you love the type or category of business your company is in, then buy an index or an ETF in that business or class. In fact, when I was selling off my companies technology stock I was buying QQQ's. Until I felt technology had just gone way too far that is.

 

[Dreamer]

Thanks again everybody. I have one last question regarding stock options. When DH stock was going up, there was a lot of talk about the stock splitting. That made me nervous, because I was afraid if it split, then the stock option would be worthless. For instance if stock was $70.00 and split to $35.00 and the exercise price was $62.00, then do you have to wait until the stock goes from $35.00 to above $62.00 before you could use the stock option? If so, then IMHO, the stock price would not make it back up before it expired.

This stock is not an initial stock offering and it is a pretty boring company that has been around for quite a while.

I need to read up some more and have DH check with his boss who I would think has had stock options in the past. Part of his deal with the stock options, require him not to let other employees no that he has them or he will forfeit them, so he could not ask anyone other than his boss.

Dreamer

 

[cute fuzzy bunny]

Splits halve the option price, so its all good. Splits are psychological anyhow.

By the way, check this out. Honestly I didnt read it through end to end but it looked like some interesting info.
http://www.stockoptionadvisors.com/nqsofaq/

 

[JB]

No offense to any I hope, but I think the replies here on average might be colored too much by the recent bear market or tech market crash. It might be true that one should sometimes take the money in case it goes away should the stock tank, but I wonder if there's a bit of "fighting the last battle."

Actually, my strategy was developed in 1988 way before the bubble. It's worked well for me (and others) through multiple market cycles and companies. My .com buds were kicking themselves for not following this advice in 99,00 and 01.

 

[sgeeeee]

Gong...

The advice I gave was the strategy I used between 1993 and April of 2000.  Full on bull market.  Same thing I'd do today.  Its simple diversity, divest yourself of vested shares and diversify.  . . .

This is very similar to my experience and reasoning. There is some small upside potential to holding the stock and beating the tax man out of a few percent, but the downside potential is murder. And I know a number of people who experienced that downside. Unless you would want to buy that stock with any additional money that fell out of the sky and into your pocket, it is very difficult to rationalize keeping the options.

 

[JB]

There is some small upside potential to holding the stock and beating the tax man out of a few percent, but the downside potential is murder.

Five years later and the IRS is still repaying the 0% interest loan I gave them. At the rate they are willing to pay be back it will take another 10 years. I here noise that they may do something about this, but I'm not expecting much.

 

[cute fuzzy bunny]

This is very similar to my experience and reasoning.

I just got a call. Its snowing in hell!

 

[Dreamer]

That is a very good site. Thanks everybody for the great information. I feel much more comfortable now. You guys are great!

Dreamer

 

[eridanus]

Hi,

Check out filing an 83(b). The tax benefits can be huge. On the other hand, you can do like I did and pay the accelerated tax only to see the company fail. Whoosh!

http://www.fairmark.com/execcomp/sec83b.htm

 

[Nords]

Thanks again everybody.  I have one last question regarding stock options.  When DH stock was going up, there was a lot of talk about the stock splitting.  That made me nervous, because I was afraid if it split, then the stock option would be worthless.

Management would never screw themselves over this way.

If the stock price splits then the options adjust by the same ratio.

Splits mean absolutely nothing mathematically, but emotionally investors decide that the company is on to something good and they start buying. Statistically splits are good for an extra boost to a company's stock price, so this would be a good thing for your options.

 

[Dreamer]

Here's to hoping that it splits!!! I just keep learning and learning from this site!

Dreamer