Basics: Core Concepts
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Articles (Jump to FAQs)
Beth Walker
Avoid the mistakes others made during prior boom markets and downturns. Common mistakes arise in nine different situations, including termination, mergers, financial planning, term expiration, and life events.
Beth Walker
Avoid the errors that many people have made, including mistakes that stem from major life events and taxes.
Marilyn Renninger
Stock options aren't just for the folks on mahogany row any more. But turning stock options into the real green stuff takes some know-how. You need to know certain features of your grant to decide when to exercise your options and sell the stock.
Richard Friedman
UPDATED! Get a sense of what you should, and should not, expect in the terms of your stock option grant. This survey of 300 companies in 2007 looks at trends in vesting schedules, post-termination exercise rules, and other plan features (includes some details on restricted stock grants).
Kate Victory
How typical are your grants of stock options or restricted stock? Compare their terms and provisions with the results of the NASPP's
2007 Domestic Stock Plan Design & Administration Survey.
Kate Victory
It's hard to find comparative data on grants of stock options and restricted stock. The NASPP's
2007 Domestic Stock Plan Design & Administration Survey includes data on grant guidelines, expiration provisions, job termination exercise rules, and M&A.
Richard Friedman
Your company just gave you a stock option grant, or your existing options are underwater. You wonder: "What are my stock options worth? Are they worth anything at all?" Learn about different valuation methods, including Black-Scholes.
W.E.B. Bantling
My clients want to exercise options shortly after they vest for a significant purchase, like a fancy boat or a sports car. The most expensive boat or car I can imagine is the one bought with your just-vested options. Tips I tell clients include not exercising too soon or waiting too long.
Sue Stevens
Morningstar.com
Stock-option fundamentals, including terms, types of options, and basic strategies, along with a checklist of core issues.
Russ Banham
Journal of Accountancy
Although stock options are no longer perceived as the quick path to riches, they still can be a powerful wealthbuilder when you avoid tax catastrophes. In order to maximize their value, don't be blissfully ignorant of the perils of stock options.
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FAQs (Jump to articles)
Generally, a stock option is a right that a corporation grants...
Restricted stock refers to outright grants of company stock to employees or other service providers...
A company may make these grants for a variety of reasons...
If your employer is a for-profit corporation, it probably can offer stock options or other types of equity compensation to its employees. There may, however, be many reasons why your employer is not offering stock grants...
Almost none, assuming the legal and other technical formalities are followed in creating...
A stock plan is a formal document that contains the general rules of operation that are common to all...
You should look at the following...
Yes. The two main types are nonqualified stock options (NQSOs) and incentive stock options (ISOs). The names indicate their...
Consulting firms have studied the use of stock compensation in both developed and emerging economies. Stock options remain popular, but interest is growing in restricted stock/RSUs and performance shares. Among surveyed countries...
401(k) plans are a type of broad-based, tax-qualified retirement plan funded by pre-tax contributions, unlike money used to exercise options or buy stock in your ESPP. Company stock in your 401(k) can be sold only for other investments in the plan (not to fund cash needs and purchases). You have more flexibility with the shares from your stock grants because...
Expensing became mandatory for calendar-year companies at the beginning of 2006. This does not change the tax treatment of options. However, because companies take an earnings charge for the "fair value" of the option grant on their income statements, companies may change their grant practices by reducing the number of stock options, moving to grant more...
No. Until you exercise a stock option, you do not have the rights of a...
Under SEC Rule 428(b), your company is required to deliver...
A nonqualified stock option, or NQSO, is a type of stock option that does not qualify for...
An incentive stock option (ISO) is a type of stock option that qualifies for special tax treatment...
A vesting schedule dictates when you may exercise your stock options or when the forfeiture restrictions lapse on restricted stock. A schedule is time-based if you must...
"Capital gain" is income that arises from the sale of a capital asset. Gain from the sale of securities held for investment...
Check your company's stock plan for the allowed methods and procedures. The most common methods involve...
The specific steps vary among companies. You usually first need to make an irrevocable election to exercise...
No. The taxation of your stock options depends on whether they are...
Most options are granted with a 10-year term. Some have a shorter life, such as...
No. You could lose them in any of the following ways...
Publicly traded stock options (or "call options") listed in newspapers...
Common stock is the form of securities issued to the vast majority of owners of a business corporation, as in an option exercise or ESPP purchase...
Preferred stock is a class of equity securities of a corporation that is given greater rights than common stock...
Many companies allow...
SEC stands for the Securities and Exchange Commission. The SEC is the federal agency...
The largest association devoted to stock-plan drafting, design, and administration...
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