Getting Started In Employee Stock Options

Front Cover
John Wiley & Sons, Jan 14, 2010 - Business & Economics - 240 pages
An A to Z guide for understanding employee stock options (ESOs).

In Getting Started In Employee Stock Optionsauthors John Olagues and John Summa provide a full understanding of ESOs and demonstrate how to make the most of them. Page by page this author team, a highly experienced options market maker and a professional trader, share essential information that you’re probably not hearing anywhere else. This book contains the keys to managing and hedging ESO opportunities in addition to important tax and valuation guidance appropriate for the highest executives to the non-officer managers and the newly arrived employee.

  • Examines essential ESO issues, including tax consequences, risks, and industry pitfalls
  • Written by an experienced pair of stock option experts
  • Enables employees and executives to make more informed decisions regarding their stock options grants

Written in a straightforward and accessible style, Getting Started In Employee Stock Options will help protect the value of your options, help you avoid costly mistakes, and allow you to take advantage of certain friendly tax rules. Some of the world's foremost authorities on options have endorsed Getting Started inEmployee Stock Options.

 

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Contents

Chapter 1 Introduction
1
Chapter 2 Preliminary Concepts and Definitions
5
Chapter 3 Options Valuation and Basic Concepts
15
Chapter 4 Risks of Holding ESOs Unhedged
27
Chapter 5 Tax Consequences of ESOs
31
Chapter 6 Straddle Rule and Tax Implications of Hedging ESOs
37
Chapter 7 Management of ESOs and Premature Exercises
45
Chapter 8 Comparison of Premature Exercises with Early Withdrawal from IRA
53
Chapter 15 Why Do Companies Want You to Exercise Prematurely?
107
Chapter 16 ESO Hedging Case Studies
111
Chapter 17 ESO Valuation Methods
127
Chapter 18 Comparing Restricted Stock with ESOs
129
Chapter 19 Google Transferable Options
133
Chapter 20 Introducing the New World Options Plan
139
Chapter 21 Understanding Executive Abuses I
149
Chapter 22 Understanding Executive Abuses II
153

Chapter 9 Strategic Choices for Managing Your ESOs
57
Chapter 10 Basic Hedging Strategies Overview
61
Chapter 11 Constraints on Hedging Real and Imagined
75
Chapter 12 Premature Exercise Pros and Cons
87
Chapter 13 Putting It All Together The 7 Percent Solution
91
Chapter 14 Does Hedging ESOs Undermine Alignment of Interests?
103
Chapter 23 Understanding Executive Abuses III
157
Appendix A IRS Tax Implications of Hedging ESOs under IRS Sections 1221 1259 1091 1092
165
Appendix B Did the SEC Encourage Backdating and SpringLoading?
181
Glossary
185
Index
195
Copyright

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About the author (2010)

John Olagues is owner of Truth in Options (www.optionsforemployees.com). Formerly a member of the Pacific Stock and Options Exchange and the Chicago Board Options Exchange, Olagues cofounded Options Research, the first analytical service to provide theoretical options values to market makers and the general public. For years he was considered one of the leading options market makers in the world, having created many of the trading and hedging strategies used today.

John Summa, PhD, is an author, economist, and founder of OptionsNerd.com. In 2001, Summa coauthored the Wiley title, Options on Futures: New Trading Strategies. A former fund manager, he recently launched the ESO educational Web site, HedgeMyOptions.com.

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