Which shares do I exercise?

I recently met with an executive who has been granted shares of options every year for the past eight years. When we initially met,  she told me that she had some options that would be expiring in a year and a half and was wondering if those are the ones we would want to exercise first?  Without knowing the grand price for all of the options that she still had, it seemed to make sense.

A Closer Look:  However, when I looked at each of the options individually, it was clear to me that we needed to exercise the options that were deepest in the money, as most of the time value had already been recognized.  In other words, options that are deep in the money have very little time value remaining, even though they may not expire for 5 years or longer.

Dan’s Moral:  Look beyond the expiration date in determining which set of options to exercise.

Each blog includes the special feature,  “Dan’s Moral”,  as a wrap-up commentary, direct from blog author, Dan Langworthy.   Check “Dan’s Moral” in other blogs on Equity Compensation Advisor by category of interest.  We hope you find what you are looking for, however, Dan welcomes your requests for new equity reward topics that may interest you.  Contact Dan Langworthy by commenting below.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  The example above is for informational purposes only.  Your results will vary.
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