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Posted by Augustine on June 18, 2008, 6:16 pm
I left my previous job with thousands of shares granted as NQSO under
water. Not that they've always been under water. As a matter of
fact, their value reached a peak of 2x their exercise value, when I
sold a few to install wood flooring at home. Yet, at that time, I
even entertained paying off my house with them, just to give an idea
of their value.
Does anybody know about a reasonable option exercise regime in order
to ride the crests and reap some profit, even if not the most profit
the possible, but at a lower risk?
TIA
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Posted by Rich Carreiro on June 18, 2008, 7:59 pm
> I left my previous job with thousands of shares granted as NQSO under
> water.
What are the termination conditions on your option grant?
Many option plans say that any options not exercised within
some amount of time after termination (90 days is not atypical)
are voided.
--
Rich Carreiro rlc-news@rlcarr.com
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Posted by Augustine on June 19, 2008, 5:12 am
>
> What are the termination conditions on your option grant?
They were forfeited after 90 days, all of which way underwater...
Thanks.
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Posted by joetaxpayer on June 19, 2008, 8:59 am
Augustine wrote:
>
>>What are the termination conditions on your option grant?
>
>
> They were forfeited after 90 days, all of which way underwater...
?? If they were all forfeited, what is this question about?
When I referred to the $60 calls (your follow on question), I meant
this; There is an active market in options for most actively traded
public companies. The company options you got may not be bought or sold
in the open market, but you can use the options market to implement a
protective strategy. You have a (company issued) option with the price
of $30. If the stock is now $60, you can sell through your company and
pocket the $30. But then you look (through your broker or Yahoo, etc.)
and see that the $60 call (the right to buy the stock at $60) by next
december sells for $10. So you buy one contract (100 shares) and spend
the $1000.
In this example, say the stock goes back down to $30. You made $3000,
less the option you bought, so $2000 or 2/3 your potential gain. But if
the stock went on to $100, that option is now worth $40, and you made a
total $6000.
Joe
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Posted by joetaxpayer on June 18, 2008, 8:23 pm
Augustine wrote:
> Does anybody know about a reasonable option exercise regime in order
> to ride the crests and reap some profit, even if not the most profit
> the possible, but at a lower risk?
Say the option has a strike of $30, but the stock now trades at $60.
Sell some shares, but buy calls at $60 strike. If the stock continues to
rise, you are out the premium you just paid, but continue to participate
in the rise. If it drops, at least you took some money off the table.
The other choice is to sell X% of shares each period over the life of
the options. If there are 2 years left, sell 10% every 2 months or so,
riding the up and down of the market.
The market always has risk, and options, generally more so.
Joe
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