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!

Public Comments

1. There could be many reasons, like they need to pay their mortgage! However it is usually considered negative if the senior managers of a business sell stock in their company (after all they are likely to know the prospects of the business best).
2. David, It means that the company is nearly broke and they are cashing out quick ahead of bad accounting reports !
3. 1. The options are about to expire, and they will become worthless unless they exercise them. 2. The options are at a high price, and they don't have the money to exercise them, so they sell them instead. 3. They need the money, the stock is at a high price, so they exercise the options, which is probably to buy the stock at a low price, and then sell the stock at the much higher market price. 4. They need the tax credit, the stock is at a low price, so they exercise the options, to buy the stock at a high price, and then sell the stock at a much lower market price, and lose money, but gain a tax deduction. (Not likely).