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Incentive Stock Options

Submitted by davebonnie4@com... on 17 August 2006 - 1:20pm

I have existing incentive stock options that have different remaining years and strike prices some vested and some not. I receive new stock options each year at different strike prices each year. Can you provide guidance on how to best model these?

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Submitted by Laurence Kotlikoff on 19 August 2006 - 10:28am.
1

Hi, You should determine when you expect to exercise each of the stock options and what price you expect the stock will be at when you exercise each option. You should treat the difference between the exercise price and the expected stock price as a taxable special receipt. I believe this form of compensation is taxable at ordinary rates, but you should confirm this with your accountant. Call me at 617 834-2148 if you have more questions on this or reply to the forum. best, Larry

Submitted by davebonnie4@com... on 21 August 2006 - 10:30am.
2

So I model the options outside the tool and just put the sales returns in as special receipts. Is their any decent tool you can recommend for modeling the options themselves?

Submitted by theojes@hotmail.com on 22 August 2006 - 1:51pm.
3

I also have a series of incentive options to model. I use a separate Excel spreadsheet to model them.

- John

Submitted by bobs on 15 October 2010 - 8:29am.
4

So say I plan to sell some stock options and use the income to buy a mutual fund in a given year. If its the current year, I can model the options, count the income as a special receipt and add the amount invested in the mutual fund in 'Net Purchase of Assets' under current savings.

If I sell the options in the future, I can count the income as a special receipt in that future year, but how should I model the purchase of the mutual fund?

Thanks

Bob

Submitted by johnshelton on 15 October 2010 - 4:39pm.
5

It should affect your portfolio (assuming you're using Monte Carlo).

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