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Stock Options – 10 Rules for Effective Planning

Stock Options – 10 Rules for Effective Planning

Photo Credit: (vincent desjard)

Working in a job that offers stock options does not always mean that you work in the financial industry and understand those options. As you can imagine this can sometimes make managing stock options a highly complex and intimidating endeavor.

In this post we will introduce five of the ten rules that will help anyone grab hold of various simple strategies that could help you plan for the effective future of your stock options.

1. Set obtainable targets and goals: Stock options have been used as talent incentives for years and they should be treated with the value that they possess. Set goals for yourself and your stock options and then determine what you want to gain from a future sale of stock. These goals can be as simple as take my wife on vacation or buy my son a car etc.

2. Always determine a general plan: Develop a plan for your stock options over time and always consider all of the choices you can make in regards to those stock options. This plan will help you achieve the goals that you set before you began planning the use of your options.

3. Know the accurate value: Be sure to understand and take into consideration tax changes and intricacies that can affect the value of your stock options when developing your plan. Over-estimating the value of your stock options will only set you back when it comes time to achieve your financial goals.  This includes discounting the value of stock according to exercise prices or additional taxes etc. Seek professional help if necessary.

4. Hold on as long as you can: This rule is directly dependent upon the outlook of your company. If the outlook is positive then consider holding onto your stock options for a longer amount of time. Stocks tend to gain momentum over time and their value usually increases. For this reason, it could be beneficial to exercise your stock options at a later date. Take everything into consideration when you create your plan for exercise.

5. When waiting could be wrong: Remember those goals we made in rule 1 and that plan we made in rule 2? Well, keep these in mind as there may be guidelines for exercise you need to follow and holding onto your options may not be beneficial to your long term goals.

These first five rules are only skimming the surface when it comes to planning the effective use of your stock options. Be sure to check back next week for five more rules that could impact your financial stock option planning.

Stock Connections specializes in working with San Francisco Bay Area companies that are involved in mergers & acquisitions, are raising capital, or creating stock option or other equity plans. We help start-up, private and public firms become – and remain – SEC-compliant. Stock Connections’ services are designed to help both start-ups and established firms comply with SEC and other regulations in their equity compensation programs. If you or anyone you know is looking to get involved with any of the above, we encourage you to contact us today! 

 

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