Re: [CANSLIM] USLB

From: "Robert Gammon" <rgammon51@yahoo.com>
Subject: Re: [CANSLIM] USLB
Date: Fri, 03 May 2002 07:09:46 -0500 (CDT)

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OOPS, I math challenged myself,  this should be TWO (2) stock 
splits later.

Robert
 
On Fri, 03 May 2002 07:06:22 -0500 (CDT), Robert Gammon wrote:

>Jans,
>  A specific example might be as follows
>
>  As a mid to upper level manager, you are granted options to 
buy the company stock at 
>current market price.  The options expire in 10 years.  You are 
getting options on 1,000 
>share per year at a strike price of $25.
>
>  Fast forward to 2002, 9 1/2 years after you were granted the 
options.  The current market 
>price is $50, and the stock has split 3 times along the way.  
Your 1,000 shares are now 
>4,000 shares and the strike price on the option is $3.13.  Faced 
with getting or losing 
>those profits, wouldn't you be exercising and selling the 
shares???   For the math 
>challenged among us, thats nearly $187,500 before commissions 
and taxes and all I had to do 
>was hang on. Most in this position don't merely hang on, they 
continue their outstanding 
>job performance and the options get larger each year.
>
>I picked a relatively mild example. something for a middle 
manager.  For the top 5 to 10 
>individuals, multiply the numbers by 10 to 50.  To the 
recipient, this is 'free' money. 
>Greater than 90% exercise for cash (i.e. sell the shares 
immediately)
>
>If you exercise and hold, you MUST come up with the cash for the 
purchase (4000 * $3.125 = 
>$12,500) PLUS the tax on the imputed gain (187,500 * 35% = 
$65,625) or about $78,000
>So, I PAY $78,000 or I RECEIVE $121,875 (after taxes)???    I 
already have over 75% of my 
>total net worth tied up in the company stock, and you want me to 
ADD to the position????  
>I'll take the cash, thank you very much.
>
>Robert
>
>On Thu, 2 May 2002 22:01:12 -0400, Tom Worley wrote:
>
>>Tom:
>>
>>     As I understand it, "in the money options" mean that the 
options are
>>higher than the striking price.  And deep in the money-I 
presume-would mean
>>that the options are a lot higher than the striking price.
>>
>>     If this is so, and the options are about to expire, than 
why don't the
>>option-owners exercise them (ie. sell them)?
>>
>>jans
>>
>>
>>
>>In a message dated 5/2/2002 8:53:33 PM Eastern Daylight Time,
>>stkguru@bellsouth.net writes:
>>
>><< Why would an insider sell if he thinks things are going 
great and will
>>get
>> better? Because often their entire net worth is tied up in one 
company, and
>> they need to diversify. Also, they may have options about to 
expire that
>>are
>> deep in the money. Can't just exercise the options, need to 
sell stock to
>> pay the immediately due tax bill.  >>
>>
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>
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