Employee Stock Options - Service 2 Example
Example Customer Need for Service 2
"I am concerned that the market may go down and my options will drop in value. I still have six years before they expire and I expect to remain with my company throughout that time. Can you tell me what the fair value of my options would be if my company stock price drops to 20 in four months? I am trying to determine if I should exercise and sell them before they drop in price."
Example Customer Inputs for Service 2
Example Output to Customer for Service 2
If the price of Microsoft stock drops to 20 on October 5, 2003, the theoretical fair value of an option to buy one share of stock at a strike price of 20 and an expiration date of 6/21/2009 is $7.10, based on the inputs you provided and the underlying assumptions of the Option Pricing Model. Options to purchase 10,000 shares of stock, at a strike price of 20, with an exercise date of 6/21/2009 would still have a fair value of $71,500.00 at that time, based on this fair value calculation.
If you wish, you can use our Service 3 to calculate your net gain and tax consequences if you were to exercise your options right now before the price drop that you are expecting in October.
Additional data used in the fair value calculation for this particular case only:
- MSFT Current Price: 25
- MSFT Volatility: 33%
- Interest Rate: 3%
- Annual Dividend: $0.08
Example Benefits to This Customer
This customer was expecting a drop in price of her company stock and was trying to make a decision on whether she should exercise her options and sell them prior to the price drop so that she would not suffer the consequences of the price drop. She also used Service 3 to determine what her net gain and tax consequences would be if she exercised the options right now and sold the stock to avoid a loss.
This analysis showed her that even if the price drops as she expected, the options would still have a higher fair value at that time than the proceeds from exercising her options right now while the price is still high. This saved her from making a potentially bad decision. Had the actual numbers been different though, it could lead to a completely different decision.
Analyze Your Employee Stock Options Today
Find Out the Fair Value of Your Options Now and make Projections for the Future!
Use our employee stock option analysis services to find out the fair value of your options right now and make projections to see what they should be worth in the future. Pick the best time to exercise your options and find out how much money you will walk away with. Maximize Your Retirement Funds!
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