Cisco Systems, Inc. (CSCO) Message Board

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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 75.48

+0.3%

9:45 AM EST

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To: The Phoenix who wrote (41303)	10/23/2000 12:22:52 PM
From: GVTucker	Read Replies (1) of 77400

Gary, RE: If the 'cost' is higher isn't the exposure lower since the gain is lower and it's the gain that the taxes are paid against. Right? Nope. The higher the stock goes, the higher the 'cost' goes, and the higher the exposure goes. The stock drops and the 'cost' drops, even though that would seem to be counter-intuitive. The company is giving the employee an option in lieu of cash as part of compensation. If you convert the options into their cash value and then count that as compensation expense to Cisco, that is where you get to what I am calling a 'cost' here. These are essentially call options these employees own. Thus, as the stock rises, these call options also rise in value, thus seemingly increasing the 'cost'.

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