Options Trading Tutorial

What does it usually mean for a company when directors, officers start exercising stock options & sell them? Don't know if I worded correctly but the article I read said they've exercised options for shares of common stock and sold them in the same day. Didn't know if this is a sign of the company going private or what. Thanks!

Does the terms of this preferred stock agreement prevent the granting or exercising of stock options? --- From Prospectus --- The terms of the Series A Preferred Stock do not permit XXXX to declare, set apart or pay any dividend or make any other distribution of assets on, or redeem, purchase, set apart or otherwise acquire shares of common stock or of any other class of stock of XXXXX ranking junior to the Series A Preferred Stock as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up of XXXX, unless certain conditions are met. ------------ I am a current holder of this companies preferred stock. The company is currently experiencing operating difficulties and has already suspended common stock dividends. I suspect the preferred dividends may be halted next. However, the company uses stock options to hire and retain top management. If those options cannot be granted or exercised, I think that would give managment incentive to not halt the preferred dividends.

Is better to hold stocks for a year or go with the cashless option when exercising stock options?

What does it mean to exercise stock options? I've noticed in the past few weeks at the company I work for (a 6-billion dollar company) the officers are exercising their stock options. The company is receiving cash from the transactions. What does it mean to exercise stock options?

Exercising Options.... questions about company stock? Ok, Im new to trading, and stock market in general. Can someone explain in beginner's language how I exercise stock options? Here is my scenario: Upon being hired I was granted 2,500 shares of ACUS, which was trading at $1.75 per share. CURRENTLY IT IS TRADING AT $0.43 per share! I am leaving the company and thus have 90 days to exercise my options. Am I going to lose these shares if ACUS price doesnt go back up to $1.75? Is there anyway to avoid this or is it just inevitable because the company stock price has fallen so much? Any help would be greatly appreciated yes they are vested options I was given, not bought... raysor. So as I figured, they are worthless and useless since the stock price isn't going up $1.35ish anytime in the next 90 days.

Tax question related to exercising non-qualified stock options? If I have 1,000 shares of non-qualified stock options with exercise price at $15. When I exercised them the price of the stock was at $35. I did not sell right away and hold on to them for a few months. Unfortunately the stock keeps falling and I finally sold at $25. Is it true that I have to pay tax on gain base on the stock price when I first exercised the options (i.e. $35) and not the actual sales price (i.e. $25)?

What type of tax planning should be considered before exercising incentive stock options? Provide an example.?

How to find the Stock Market Return & profit per share from exercising the option? There's a test in my Finance class tomorrow and guess who discovered he had the wrong book! Anyway, I went to investopedia and cruised through the book I DO have and couldn't find how to calculate the Stock Market Return OR how to find the profit per share from exercising a stock option. I assume the exercised option is just the current price minus the option price, but I have no clue about the SMR. Thanks!

Is it better to surrender or Exercise stock options? If you have stock options at the company where you work and that company gets acquired you have two choices. You can either surrender your options and take a cash payout or you can exercise your options and still take the same payout but aparently there are different tax implications for each case. What are the differences? Is it better to do one or the other?

CEO or CFO exercising stock options? What does it mean when a CEO or CFO execises their stock options? Are they selling or buying? Is it a time to buy shares of that company or stay away for a while?

Is it a good idea to exercise stock options in an LLC? Due to employment, I have the right to exercise stock options in an LLC. However, I have no knowledge of whether the company is likely to be taken at some point in the future. The options grant agreement also includes language that appears to obligate me to retain these shares indefinitely and not sell or otherwise encumber those shares. Without the ability to draw on these shares for potential investment, would these shares be a sound investment?

Is there AMT if a non-US resident exercises ISO stock options vested while in the US? I am planning to exercise stocks options I had got vested while I was in the US (from 2001 to Oct 2004). Since then I have moved to India. I am an India Citizen. Would there be AMT implications for me in FY2006 if I exercise and hold these options?

Is it better to exercise stock options high or low? Let's say I have 100 shares of Yahoo stock options at $5 per share, and another 100 shares at $20 per share. Yahoo's current stock price is $25, the market expects it to rise to $35 next year. Is it better to exercise now while the price is low? Or is it better to wait till the price is high? Is it better to exercise the cheap $5 ones first? (Better meaning making the most profit / holding the most stocks after exercise / paying the least taxes.)

Should I exercise stock options b/c the company has announced a future dividend? I have approximately 2,125 unexercised stock options with my company. If I exercise them, it will be at a good profit but I hadn't otherwise planned to excercise them. The company has just declared a dividend in the next 30 days for stockholders of record in a future date. The divdend would result in approximately a $3500 payout to me. But, I have heard that stock prices tend to go down after a dividend due to the change in value of the company through the payout of a dividend. Does it make sense for me to exercise the options to benefit from the dividend?

Should I exercise my stock options or take the cash settlement for tax purposes? The company I work for has been purchased by an international company and the deal willl close in sept. I have unexercised iso stock options that are worth $180m. If I do not exercise them, I will be paid in cash when the merger closes in Sept. I will make about $200m in regular salary this year. I want to MINIMIZE the taxes I will pay on my iso's. Based on my salary, I know if I exercise the options I will have to report the value for AMT purposes. Would I be better off excercising the options (my old company stock would be converted to the new firms stock) and holding it for at least a year and dealing with AMT or just taking the cash and reporting it as regular income. Is their a tax advantage either way? Thanks

Tax question related to stock options? In exercising stock options using the cashless vs. the self funded method, is there any difference in the amount of tax that I have to pay? Thanks.

Trading out stock options vs. exercising options? My question is what is the difference between trading out a stock option and exercising an option. Do you need capital when trading out an option as you do when exercising them? Also, is there really any difference between trading out an option and buying the stock and selling/shorting it for a profit? So when you "trade out" the option, do you need to capital to do so, or are you just selling the contract. Guess what I am wondering is, can you make money on options without having a bunch of cash to back the exercising of them? So when you "trade out" the option, do you need to capital to do so, or are you just selling the contract. Guess what I am wondering is, can you make money on options without having a bunch of cash to back the exercising of them?

Exercising/ Offsetting stock options? Hi, I am wondering if I buy a call option on say ZZZ at $80 now and sometimes later before expiry that ZZZ went to $95. Now if I want to exercise my option (buy and then immediatly sell the stocks to capture the gain), do I need the capital to buy the underlying the stock? Meaning, do I need to have $80000 first to buy the stocks before I sell it? Thanks

Are taxes withheld and reported on W2 for employee stock options? When exercising employee stock options, are taxes automatically withheld by the employer and reported on the w-2 so therefore no 1099-B needs to be filled out. It looks like I overreported withholding in 2005 according to the IRS and it appears because I doubled up the withholding for the stock exercise. Thanks

Can I use 2007 W-2 income from exercise of stock options and deferred compensation to contribute to an IRA? I am retired and receive payments from a deferred compensation plan and also had stock options that I exercised in 2007 all of which were reported as income on a W-2 from my company - can I use this income to contribute to an IRA

When does it make sense to exercise your stock options in a private venture backed company? My understanding is that there are significant tax advantages if you can afford to exercise your options and hold onto them for a year. Does anyone know the specific details about this? Furthermore, I have been trying to figure out what election 83(b) is all about and if this rule, or any other rules, should influence whether or not I exercise my options and how... Thanks in advance!

taxes! I exercised stock options and federal taxes were withheld? Federal taxes were withheld from the amount paid to me and when I did this in 2005 and H&R did my taxes, it looks like they did not include this as income paid or taxes paid. I hoped to just follow what they did but it doesnt make sense to me. How do I know the taxes withheld were the right amount? What should I do?

If I exercised stock options and later sold the stock, what is my cost basis - the price I bought the stock at? or the market value the day I bought the stock? Thanks!

Stock options in start-up company: tax implications of exercising and FMV? I have a great deal of options in a start-up company. For reasons I won't go into here, I have an opportunity to use backpay to exercise these. All options are for non-statutory common stock and were awarded at $0.07/share (over the past couple of years). My understanding is that a FMV hasn't been done in two years. If we exercise these now and the company's position is that they are still valued at $0.07/share, there appears to be no tax liability on our part. So my question is: are we at risk if, in a year or several month's time, the IRS comes knocking on the company door and questions the FMV of $0.07? Do they then audit everyone who exercised options and come after them for taxes owed? I have no reason to suspect that the company feels the valuation has gone up or is concerned about this. However, I need to know if I am going to be owing a big chunk to Uncle Sam before I do this. For some background, no common shares have been bought nor sold by anyone in the company to date. The company has gone through several rounds of funding for preferred stock at $0.50/share. Beyond that, there is no point of reference for common share valuation beyond the FMV conducted two years ago. I really need to know where I stand with this, so any information you might have would be GREATLY appreciated. Thanks! Update: Thanks for the reply, AK. The issue isn't the company knowing how much to withhold, per se. The question was with regard to the valuation being two years old and, if the IRS came knocking down the road, would I, the now shareholder, be responsible for backtaxes if the government felt the valuation wasn't correct. IOW, I felt I had no tax implications the day I exercised the options, and this is what the company reports, but then the IRS disagrees a year later. Does the gov't then audit everyone who exercised options then? After typing this out, I think I understand now that I would be screwed if the above scenario played out. It's not like the IRS is going to give us a "pass". This crap is too complicated.

What price are stock options exercised? MY EXAMPLE: I sold a call option to buy a stock I own at $3.00. They paid $1.30 per share. So that brings them to a total cost of $4.30. What price would my option get exercised at? (they buy it at the $3.00 price with the option obviously... but what market price would my option get exercised @?)

If I have 1 day left to exercise stock options? should I sell all(buy $12, sell $19) same day, sell to cover, or cash exercise? Thanks! I no longer work for the company. But by the 31st , I have 438 shares to buy at $12. It's selling today a $19. Is it a good idea to do a same day sell?

In which state are my stock options taxable? I have been living in Illinois for several years. I just exercised some stock options. I got these options in 1997 while living in Maryland. The grantor, my former employer, sent me a check and withheld a bunch of Maryland state taxes. (They had my address screwed up in their computer.) Even though we've now corrected my mailing address, they won't fix the check to switch the withholding to Illinois. They are saying the sale of options are taxable in Maryland because that's where I lived when the options were granted. Is this true or are they just too lazy to fix it?

Tax reporting for exercising ISO stock option? I just exercised some ISO stock option by buying and holding the stocks. I have not sold any of the stocks yet. Do I need to report to IRS now about the exercise? I understand at the end of the year I need to report it on 1040 for AMT calculation. I just don't know if there something I need to file right away, say within 30 days of my exercise.

how does Walmart handle the cost of stock options? As an employee of Walmart, i exercised some stock options last year and cant figure out what my cost is. I had taxable compensation added to my w-2 but don't know if that is my cost or not.

Can an employer refuse to allow you to exercise privately-held stock options? Divorce is looming, husband's boss is high school friend, I think they'll say the stock options are worthless & won't be exercisable ever. Can they say that? Is it true? Can the boss hold the stock options forever & not allow them to be exercised?

My company may be acquired: What are my tax issues related to stock options? The company I work for may be getting acquired. I have a significant set of stock options that have or will vest upon the acquisition. I have not exercised these options. The stock options could be worth between $1-3 million. What are my tax obligations if the company is acquired for cash. Does it change if it is acquired for stock? Is there anyway to reduce the taxes that I will have to pay?

If I exercise stock options that I have had for over a year and sell them right away is the gain a LT cap gain Any details you can add to let me know how to report this on my taxes would be most appreciated. Obviously, this is the first time I'm dealing with this.

If we exercised some stock options and tax was with held do we claim as income and pay again as income? An HR Block rep is saying yes, Merrill Lynch is saying no. I have an appointment with a CPA but I am looking for input. thanks!!

if an employee exercises his stock options, does that increase or decrease the share price? if an employee exercises his stock options, does that increase or decrease the share price?

Do I get a tax break from short term gains if I exercise my stock options and place it towards a down payment?

What happens when employeed who are awarded stock options did not exercise their share options b4 they expire? What happens to the share options? Do employees lose out in such a case? Thanks!

Is there additional taxes, other than initially taken out, on exercised/cashed stock options?

Do you have to exercise stock options? I currently work for a company that gives restricted stock awards/grants. I have been offered a position with a company that is offering me both restricted stock awards/grants and stock options. I have never dealt with stock options before, but I think that I do know how they work. If I agree to the stock option plan, I will have the option to purchase 1,000 shares that will vest over 3 years and expire within 10 years. I realize that if the price of the stock is $10 when the plan goes into effect and I exercise the vested options at $30, I will pay the $10 a share and "earn" $20 profit per share. My question is, if the stock price never goes above the price of the shares when the plan goes into effect, do I have to exercise my options and end up losing money? Might be a stupid question, but I don't know the answer! Thanks!

what is the process between employee, employer, and stock broker in employee stock option exercise? Can someone explain to me how this works? When an employee exercises stock options, does the employee 1) normally pay the exercise price to the broker, who then sends the net proceeds back to the employee? Or 2) does the employee pay the company, and the company lets the broker know, and then the broker pays the employee the net proceeds? If I sound confused, believe me I am. Could someone be kind enough to give me a step by step of exactly what happens in the process, and what transactions are occurring between employee, broker, and company? THANKS!!

If I exercise stock options with a private company, what are the tax implications? I have many stock options in a start-up at $.07/share. If I pay to exercise those, do I have to pay 2009 taxes (cap gains, I imagine?) on those? A recent fund-raising round went for $.50/share. So 1,000 shares x $0.07 = $70 to exercise. Then $0.50 - $0.07 = $0.43 x 1,000 shares = $430 x 25% tax bracket = $107.50 in taxes for every 1,000 shares I exercise. Do I have this right?

I own 200 shares of a stock, can I write covered call options on the stock without exercising them soon? I own 200 shares of the stock, and I believe the price will increase substantially from what it is currently. I would like to sell some in-the-money January 2012 call options for this particular stock that I already own, collect the premium, but I don't want the option to be exercised anytime soon - is this possible? If I sell the covered call options on my stock, can the buyer decide to exercise them at any time? Would I have control over when they are exercised? I am new to options trading, and I would like clarification on this aspect of it. Thanks.

Is there any tax advantage to buying a home with stock options? If I'm buying a home and want to exercise and sell some stock options to pay for part of it, is there something I can do to reduce the short term capital gain taxes? Specifically, does the 1031 exchange apply here?

Can I offset stock option exercise gains with losses? I exercised some non qualified stock options this year and the gains will be reported as W2 income complete with withholding. Can I take short term losses on other stocks to offset these gains? Or am I limited to $3000 write off?

what is meant by exercising an stock option? what is meant by exercising an stock option?

Can anyone tell me more about stock option and IPO? Dear all, , I don't know much about stocks and neither does my father. Here is the situation that need your help. Please give me your best answer. My father has worked in a big company in California and he has per say 1000 shares of stock option at price of $2. We are not sure if we should exercise this stock option or not because we hear so many different version of tax issue. His company will go IPO possibly next year at price around $15, we were told we can only sell our stocks after 6 months of IPO date once we exercise. Question: 1. Should we or should we not exercise it and wait till it IPO? It is a healthy company. 2. Does anyone know about this TAX issue? Some say once we exercise we have to pay accrued tax on gain of ($15-$2)x1000S/H, is this ture? If yes, are these tax due right away or due on next year's tax season? 3. What is the process of exercise stock options? Thanks for you help so much!

Stock Options - Exercise or Sell to Close? Someone purchased 170 Call options for $20,000 a month ago at $1.10/contract with a January expiration (TODAY), and the options price today is only at $.60/contract. If this person sells at $.60/contract he loses about $9,500. HOWEVER, the stock price is actually "in the money" at present ($73.70 right now) and the Call was for only $73.00. However, to exercise all 170 contracts (x100 shares each contract equals 17,000 shares of stock at a price of $70.00 each equals $1,190,000) he would need to actually purchase that many shares for that amount. This person does not have $1.19M in his account. QUESTION: Would it not be possible to let his brokerage auto execute these shares tonight and then this guy could turn around and sell them all on Monday morning to cover the expense? (Assuming the stock price closes at or near the current $73.70.share and he would be assigned them for only $70.00/share?). What am I missing in this scenario? Is this possible?

an executive officer of a public compan. I received stock options as part of a compensation package.? an executive officer of a public company. I received stock options as part of a compensation package. I exercised the options and purchased the shares. When I tried to sell the shares after leaving the company, the company refused to cooperate, asserting a right to repurchase them. The company also obstructed my effort to sell other shares. The share price then fell by more than 75%. The company grudgingly offered to let me sell some of the shares, but they had become nearly worthless.

When should I exercise my stock options? I'm working as a vendor to a technology startup but am still unfamiliar with the nuances of stock options. Basically, I have been granted an option to purchase X shares in the company, that vest pro rata over Y years so long as I work with them. The exercise price is "fair market value" as determined by the company's board when I exercise the option. When should I exercise my options? The company is still in its early stages and has not received significant venture funding just yet. Do I just purchase shares as soon as they vest, hoping to capitalize on a high valuation from VCs when it occurs (if not an even higher purchase)?

RFI | How Indian Stock Options are settled at expiry? I am getting conflicting answers around how the Indian Stock Options are settled at their expiry. Can anyone please explain the following: Are the Indian stock options automatically settled by the exchange based on their Intrinsic value at the expiry? Or do the option holder needs to exercise the option on the day of expiry (assuming the option is in-the-money)? For a call option: Intrinsic Value = Spot Price - Strike Price For a put option: Intrinsic Value = Strike Price - Spot Price Regards, Rakesh

I am leaving a company and my stock options are under water, what are the tax implications? Can I exercise the options and take a net loss for a tax deduction? If not, do I just let the options expire? Does that have any tax implications I should be aware of?

California unemployment compensation during weeks I exercised NQ stock options from previous employer? I was laid off of my job several months ago at a technology company and have been collecting California unemployment compensation since then. The Non-qualified Stock Options I received at my company expired 90 days after my layoff. I recently sold (aka cashless exercise) my remaining options right before the 90-day expiration window. I know that the spread between my options' grant price and the market price is treated as taxable income. But is it also treated as "work" from EDD's perspective for purposes of determining eligibility for unemployment benefits? In other words, can I still collect unemployment benefits for the week that I exercised my options?

tax on retirement stock options of a non-resident? hello everybody, i am a retiree. in 1998, i retired from a New jersey corp which gave me stock options to retire. i left new jersey and resided in florida. i have never been to NJ since 1998. from 2000-2004 i exercise my options and was not taxed on them, however in 2005, the state of New jersey assessed me a tax despite the fact that i have never resided there for 6 years. is this proper for them to do? what should i do in order to get those taxes back?

How long should I wait before exercising options after an acquisition announcement? My public company just got acquired. How long should I hold onto my vested options before exercising? In the months following the announcement and leading up to the closure of the acquisition, what is the 'typical' behavior of the target company's stock if the deal is well received? Some basic details: Purchase price: 2x market cap. The target stock went up 35% post announcement. Both companies up day after announcement. Very good fit/synergy between the two companies and deal will likely go through in 60-90 days.

Why are stock options automatically exercised if they are in the money by $.05 or more? ?

Amt and stock options? Cpl of years back, I exercised some stock options for the company I worked for. I exercised the stock options into shares( and not cash). It is a different debate as to why I did this because i wasn't aware of the catch in there that I would be caught into AMT and because of that, I ended up paying AMT that year. Now in 2006 last year, I sold those shares at a loss( would you believe it). So my question is... 1>Is there any AMT adjustment that can be done this year for the loss in those shares ?( It doesn't look like that I have to pay AMT this year) 2>If the above is no, then does this loss qualify only as a short/term long term loss with other stock transactions ? Thanks a lot!

I exercised and held ISO stock options.If i dont fill out the AMT form.How would the IRS find out?

Should I exercise my 2000 private company stock options? My exercise price is $4.25, the value today I believe is around $7.50. I understand I will have income to pay on the market value difference. The question I have really is, what happens if my company doesn't go public in 5, or 10 or 20 years? What happens if the company bankrupts, or gets bought out (ie the most likely scenerio on buyouts since I don't have the stock option plan documents as I got laid off by the company).

Employee Stock Options Expire while Freeze is in place? My company put a freeze in place for all employee stock option activities in July 2006 without advance notice. I have less than 30 day to exercise my stock options or they will expire. Does anyone know what my rights are if the options expire while the freeze is still in place? My company's officers - including HR, Finance, and Legal have all said they cannot provide an answer and cannot provide any direction. Help! Eric The company is Monster Worldwide (MNST). The options are valuable -10 years worth of accumulated value - somewhere in the $25K range. Monster did come under scrutiny for backdating options and hence froze the process. Have gone to Managers, CIO, HR contacts, and even company legal contacts and they will not provide an answer on what will happen. Does anyone know the best way to get a legal or SEC answer? Thanks!

Are employee stock options taxed as capital gains or ordinary income when exercised? If the options were issued a few years ago, the stock goes up, and you exercise and then sell all in one transaction. Capital Gain or ordinary income? If Capital Gain, is it Long Term (award vs. exercise date) or short term (exercise and sell in one transaction)?

Exercise ISO stock options, how is tax handled? I am going to exercise some ISO stock options which will give me a sum of ordinary income (can't wait the year and a day for LTCG). I have the following questions which hopefully someone in the know can help me out with. Will I need to immediately file a payment to the IRS to avoid a penalty? What is the IRS form that I will need to complete and send in with my payment? (1099, 1040.....?) What is the penalty if I wait until year end and file as part my annual return? I've heard about a $100k limit on ISOs - please explain? Where can I read up and learn more about this? Thanks for your help!

If I exercised a big chunk of stock options in 2006, but did not sell anything, what are my tax liabilities? I exercised hoping to start the clock for one year to get long term capital gains, but now fear a hefty AMT tax for 2006. Do I owe that if I never sold anything?

Does exercising a Put Option mean I have to buy the stock on Monday to realize a proft? Or is the stock bought automatically when the option is exercised and I automatically receive the proceeds.

Should i exercise ISO stock every other year or every year to minimize tax? I have 8000 shares of a well-in-the-money ISO options. 4000 share are available now and the rest will be available at the end of next year. I want to exercise them and then sell one year later. To minimize tax, should i: 1) Exercise 4000 share in 1/2006, sell them in 1/2007, and then exercise the other 4000 share in 1/2007, and then sell in 1/2008? Or 2) Exercise 4000 share in 1/2006, sell them in 1/2007, exercise the other 4000 share in 1/2008 and then sell in 1/2009? In other workds, should i exercise ISO stock every other year or every year to minimize tax? I do understand that i will need to pay AMT for my 1/2006 ISO exercise. Howevever, i won't be able to recover that AMT tax if i exercise more in 1/2007, right? That seems to suggest i should wait till 1/2008 before exercising more ISO stock options. Your help is greatly appreciated.