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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.93

+1.2%

Nov 28 12:59 PM EST

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To: Wyätt Gwyön who wrote (47534)	1/30/2001 4:04:26 PM
From: Adam Nash	Read Replies (3) of 77400

Basic Stock Option Primer: Two kinds, Incentive (ISO) and Non-Qualified (NQSO) Most (97%) of options are NQSO, but you see ISOs a lot in startups. ISOs are the ones that can get you into AMT problems. That's a story for another post. NQSOs require the employee to pay the strike price to the company in exchange for equity. The difference between the strike price and the market price at the time of exercise is taxable income, and will appear on your W-2. Most NQSOs are exercised for cash, namely the broker exercises the option and sells the stock all at once, basically cutting a check to the employee for the difference. This does not change the fact that the option exercise is an equity issuance by the company, likely paid out of treasury stock. Sometimes the broker will even withhold taxes from the cash exercise (42%)... sometimes you can talk them out of it.

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