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Basics - Volatility

Basics › Volatility

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NEW! 6 Pro Tips For Navigating Volatility With RSUs And Stock Options

When volatility strikes, should you change your financial plan or stick with it? This article presents insights from financial and tax experts on strategies for stock options and restricted stock/RSUs in down and volatile markets.

How To Stomach Volatility In Your Company's Stock Without Losing Your Mind

Stock options, restricted stock units, and other types of equity compensation are valuable benefits. When the company's stock price becomes a rollercoaster, remember that equity comp is a long-term deal. This article offers expert advice for coping with stock-price volatility.

Stockbrokers' Secrets: Equity Comp Strategies For Volatile Markets This is premium content

Stock-price drops can stress out even the most experienced holders of stock comp (and their advisors). Sooner or later, volatility may force decisions that affect your financial future and long-term wealth. In this article, the author discusses topics that come up again and again with clients.
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What To Do With Your Just-Vested Shares After Your Company's Stock Price Drops This is premium content

When markets are on a wild ride, stock volatility can rattle anyone's financial plan for equity comp and company shares. What should you do with shares acquired from equity awards now? Should you change your strategy or ride it out? This article provides a financial planner's insights.

NEW! Two Special Tax-Return-Reporting Issues In 2023: Volatile Stock Prices And Employee Mobility This is premium content

The impact of down and volatile stock markets can complicate your tax return. So can interstate mobility and allocation of income between states, a growing issue as more employees work remotely or become digital nomads. This article presents insights on these topics from tax experts.

7 Things To Know When You Sell Company Stock To Raise Cash

For reasons beyond your control, you may find yourself in a position where you suddenly need to sell stock for cash to meet urgent living expenses. When selling stock you must always proceed with caution. Review this checklist of topics to understand on tax, company, brokerage firm, and SEC rules.

Using Behavioral Finance To Shape Planning For Stock Compensation This is premium content

Emotions can have a powerful impact on financial decisionmaking. The study of behavioral finance, i.e. how people make decisions about investments and other financial matters, can help you to develop a sensible approach to stock compensation and holdings of company stock.

How Employee Stock Purchase Plans Offer Special Benefits In Down And Volatile Markets This is premium content

One good thing about employee stock purchase plans (ESPPs) is they can't be "underwater" like stock options. In fact, an ESPP with a discount and a lookback can be a good deal even in down markets. This article explains the unique shelter from volatile and falling stock prices that ESPPs offer.

Preventing Irrational Decisions About Selling Company Stock Or Exercising Options

Whether you are a novice or advanced investor, it can be hard to decide what to do with your company's stock grants. Should you exercise options now or wait? Should you hold company stock at vesting or sell it and reinvest? Behavioral economics and investor psychology offer insights that can help you develop a personally acceptable approach.

Manage Your Expectations To Avoid The Option Blues

You may feel let down by your stock options if your company's stock price has dropped, leaving your options underwater. Getting less than you expected is something that inevitably occurs in a free market, and it is helpful to be prepared for losses as well as gains.

Better Late Than Never: Stock Option Strategy For The Market Upturn This is premium content

When stock markets rise, question the urge to exercise your options for quick profits as soon as possible. Exercising too early can be a big mistake.

Reframing Your Stock Option Exercise Strategy In Volatile Markets This is premium content

Your option grant terms and the behavior of your company's stock price are only part of your financial-planning story in volatile markets. Equally important is the price movement of what you will buy with the proceeds from an option exercise and stock sale. As this article explains, relative changes in price, not absolute changes, are what matter.

Equity Compensation Strategies For Down And Rising Markets This is premium content

Even when stock prices are volatile, there are still opportunities to achieve gains from stock compensation. This article presents a range of ideas to consider: buying stock now to swap later, exercising and holding ISOs, or making a Section 83(b) election for restricted stock.


What are underwater stock options? Why shouldn't I exercise them?

Underwater stock options have an exercise price which is greater than the market price of the underlying stock. For various reasons, you do not want to...

Can restricted stock, RSUs, and performance shares go underwater? This is premium content

Not in the way stock options can. Restricted stock is worth the full market value of the stock when it vests (or, with restricted stock units, when shares are delivered). It does not matter if...

Can my ESPP go underwater or be affected in other ways by falling or volatile stock prices? This is premium content

Employee stock purchase plans cannot be "underwater" in the traditional sense of having a purchase price greater than the current stock price. With an ESPP, the market price at the beginning of an offering does not...
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What approaches do companies apply to underwater stock options? This is premium content

The number of companies, and their employees, with underwater stock options has substantially increased, especially since the historic drop of the stock markets in 2008. Various surveys and corporate examples show that...

How have the stock-market volatility and economic fluctuations of recent years changed stock grant practices?

While it is too early to know exactly how stock grant practices may change because of impacts from the Covid-19 pandemic in 2020, there are some lessons from what happened in past big market drops...

I have underwater options. Will I get a tax loss when I exercise them? This is premium content

No. When your exercise price (e.g. $10) is higher than the...

I have underwater stock options that are about to expire unexercised. Can I write these off as some type of loss on my tax return? This is premium content

Wishful thinking! Just as you are not taxed on the value of the options at grant, you may not write off any expired unexercised options, whether underwater or in the money...

What is an options exchange? This is premium content

An options exchange is an alternative to repricing underwater stock options. Most companies set an exchange ratio of underwater options for new ones at the current market price so that the total value of the new options is equal to that of the previous options. Alternatively...

What factors should I consider in accepting an option exchange, and what is the process? This is premium content

Deciding whether or not to accept an options exchange involves many variables, including the potential for...

What is the tax impact on me if my company modifies outstanding stock options or SARs, such as by extending the option term? This is premium content

With approval from the board, and perhaps also shareholders, your company can modify outstanding grants in a way that is consistent with its stock plan. However, it should avoid tax pitfalls for you and the company, such as...

What impact can a stock option exchange have on employees who are tax residents outside the US? This is premium content

While stock option exchanges usually do not create tax consequences for participants who are US tax residents, employees who are tax residents of other countries may be taxed when...

If my company offers me options in exchange for underwater options, or reprices them, will there be any tax impact on me? This is premium content

Very few companies arrange a straight repricing of outstanding options. Companies concerned about widespread and deeply underwater options may offer...

My company will let me exchange my underwater options for restricted stock. What is the tax impact? This is premium content

The standard option-for-option exchange is not taxable. When you exchange underwater options for restricted stock, the value of the shares...

Can the exercise price of outstanding stock options ever be raised or lowered? Can the options be repriced? This is premium content

Generally, the exercise price cannot be raised without your written consent...

If my company or a third party buys my employee stock options for cash, how is this taxed? This is premium content

You recognize ordinary income for the full value of the cash payment. Any deferred portion of the cash sale proceeds is not taxable until...

In an acquisition, what happens to my underwater stock options? This is premium content

This depends on the provisions in your stock plan and the structure of the merger or acquisition. According to the flexibility for adjusting outstanding grants that your company's stock plan provides, the buyer can...

If my company cancels my underwater stock options, will they still count against the $100,000 ISO limit? This is premium content

This depends on whether the ISOs are already vested. According to the final IRS regulations on ISOs...

What tax treatment applies if I exercise vested pre-IPO options that now cost more to exercise than they are worth? This is premium content

In a public company you would never exercise underwater stock options. In a private company...

In a divorce case, how do you argue that underwater stock options have value? This is premium content

When the net intrinsic value of the stock is zero, the attorney for the nonemployee-spouse has two ways to obtain...

At death, the value of options is included in the gross estate for estate tax purposes. But what happens if the stock's value drops below the exercise price and the options expire unexercised? This is premium content

When options are exercised, generally the estate or beneficiary is able to take an income tax deduction for the amount of estate taxes already paid by the estate. But when they are not exercised you cannot take the deduction against other income...
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