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Technology Stocks : Novell & Sun Microsystems - Takeover?? Do you have info?
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To: oryx who wrote (36)5/18/1996 11:45:00 AM
From: Jay Parker   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?

For instance, consider some original WordPerfect options (strike $8.5) that were converted to Novell in the buyout are are worth about $6 - $6.5 right now. However, to excercise these without selling the stock will cost me $8.5 per share plus the gain on the options is considered ORDINARY income so I have to pay taxes of about $2 per share on next years tax return.

If I simply hold on to the options then I have no out-of-pocket expenses and when the stock goes up then so does the value of my options. Additionally I can invest the 8.50 per share in another company and get gains in two stocks at once.

Reasons for excercising options?...
1. Expiration due?
2. Transfer future increase from ORDINARY income to CAPITAL GAINS for tax reasons?
3. Enable writing covered calls?
4. Stock ownership more beneficial than option ownership in takeover?
5. Execs required to own X number of shares?
6. Someone had more money than they knew what to do with?!!!!!!

Just wondering why I should consider converting my options to stock?

- Jay "still holding WP options" Parker
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