Employee Stock Option Strategies

Equity compensation is a powerful incentive because of its wealth-building potential. These programs are highly complex, however, and mistakes can be extremely costly. Therefore, it is important to develop an optimal stock option exercise strategy that will enable the maximization of after-tax cash flow by giving careful consideration to the types of options involved, the value of the stock, the cost of exercise, the expiration dates of the options, tax effects, and optimal exercise methods. Essentially, we employ a two-step process:

Step 1: Analyze and monitor the value, leverage, and risk in the portfolio to identify when to make timely diversification decisions.

Step 2: Develop an exercise and sell strategy optimized for tax/cash-flow efficiency by modeling the after-tax effects of various alternatives.

The ultimate goal is to maximize wealth from these valuable and hard-earned compensation programs.

Important Disclosure