|
As the market recovers
and stock options granted in the mid 90s approach
expiration, option holders are once again faced with a
big question. How does one go about making timely and
confident decisions that maximize the value of their
options and minimize the risk? Since stock options are
arguably the most complex of all investments, most
option holders just hope for the best and either take
action upon expiration or when they need money. There is
a better way!
Employee stock options embody both
investment and taxation aspects. These aspects share
equal importance because proactive investment analysis
and tax planning will enable option holders to maximize
value, minimize risk and possibly reduce their tax
burden. Our High Value Stock Option Planning
approach is an educational, iterative and ongoing
process that provides two types of analysis:
- Investment: Analyzes the value, leverage
and risk in an option portfolio in order to identify
when to take action
- Taxation: Models the after-tax cash-flow
effects of various strategies so as to achieve tax and
cash-flow efficiency
Stock Options are
powerful wealth builders because small increases in
stock price yield larger incremental changes in value.
By definition, this is leverage. However, leverage is a
two-edged sword because a decrease in price results in a
larger decrease in value.
Leverage is a great
indicator of when to take action. It can be
effectively quantified as the time value of an
option by using the Black Scholes formula. When the time
value is low compared to the in-the-money value, the
option holder is at risk because the downside effects of
leverage outweigh the upside potential. Our easy-to-use
tool StockOpter® Insight creates a Personal Option Profile© that clearly illustrates the
investment issues of value, leverage and risk. For more
information on StockOpter Insight© including a FREE Demo and
the latest release CLICK
HERE.
The value, leverage and risk in one's
option portfolio are constantly changing so they must be
periodically monitored. In addition, the following
personal issues should also be considered prior to
taking action:
- Cash flow requirements: funding of major
expenses such as college or a retirement home
- Employment status: retirement, job change,
etc.
- Company status: changes that will effect
the future stock prices
For additional
information on stock options check out two great
articles that can be found on MyStockOptions.com.
"How
to Avoid the Most Common Stock Options Mistakes" by
Beth Walker and "Better
Late Than Never: Stock Option Strategy For The Market
Upturn" by Michael Beriss are packed with great tips
for both advisors and option holders.
To help
advisors develop tax and cash-flow efficient exercise
and sell strategies for their clients, we are pleased to
announce two new members of the StockOpter® family:
StockOpter Pro© and StockOpter® Entry. These
products replace the current version of StockOpter® and
will be available in October.
StockOpter
Pro© incorporates current tax law changes and was
designed to significantly reduce the time required to
model diversification strategies and to accurately
analyze a larger variety of client situations.
StockOpter® Entry is a new low cost version that
is designed for planning assistants and occasional
users. More information about these two new stock option
planning tools and the announcement of their general
availability will be sent to you shortly.
In
addition to providing software to the nation's leading
employee stock option experts, we are now offering
corporate services to assist key employees in
understanding and maximizing the value of their options
and restricted stock. Unlike traditional approaches, we
do this by delivering personalized education, periodic
updates and individual planning assistance. Detailed
information on this modular and customizable program
called "Corporate Optionee Services" that we recently
provided to The
Bank of the Cascades can be found on our website.
Seventy key employees from the bank received a
Personal Option Profile© and attended seminars
that showed them how to maximize the value of their
employee stock options. Participating employees rated
the program a 5.5 out of 6 and indicated an interest in
additional assistance.
|
| | |
