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Technology Stocks : Novell & Sun Microsystems - Takeover?? Do you have info?
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To: Jay Parker who wrote (37)5/18/1996 12:59:00 PM
From: Eric Hall   of 84
 
>Why would they excercise options and keep them? If they expect the
>stock to go up then aren't they better off holding on to the options
>without buying the stock?

Because you pay capital gains taxes on the difference between the option price and the market price. Therefore, it is better to exercise your options at a lower price. If you have options for $5, you pay less taxes if you purchase for $7 than if you purchase for $10.

If you *know* it will go to $10, then you would want to buy at $7 so you could avoid the taxes later.
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