Income Taxes and Record Keeping ( tax ) Message Board

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Strategies & Market Trends : Income Taxes and Record Keeping ( tax )

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To: William Sheppard who wrote (2288)	8/27/1999 1:15:00 AM
From: Richard Nehrboss	Read Replies (1) of 5810

William, You can do better than locking in your profit. You can lock and generate some type of return. Does your company have listed options (in addition to your ESOs)? If so, here's an example: Say I'm a MSFT employee... I have options in the money at $70. These have an intrinsic value of $25 if MSFT is at $95. You can sell Jan00 calls against your calls for $9.5. At the same time, you can buy a Jan00 $95 put for $8. In this situation, you have a locked in profit of $1.5 and with the guarantee of $95 for your options (or stock if exercised). This works out to just under 4% annualized, not great, but it's locked in money with no tax consequence on your options. You can increase the return for a slight bit of risk. For example, you should be able to get about 10-15% for 5% downside risk. Hope this helps Richard

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